AI reshaping banking, NBFIs

The financial services industry stands at a decisive moment. Traditional models of banking and lending are being reshaped by rapid technological advances and shifting customer expectations. In this environment, artificial intelligence (AI) has emerged as the most transformative force. For banks and non-bank financial institutions (NBFIs), AI is no longer simply an innovative tool but a strategic necessity for growth, efficiency and survival.

Customer expectations have changed dramatically in recent years, influenced by the seamless digital experiences offered by companies outside the financial sector. Consumers no longer compare their banks only with other banks but with platforms such as Uber, Netflix, Foodpanda, Bkash or Pathao, which deliver personalisation, convenience and instant responses. To meet these expectations, banks and NBFIs are reimagining customer engagement by embedding AI at the heart of their operations. Intelligent systems can anticipate user needs, recommend tailored solutions and deliver seamless service across multiple channels.

AI is transforming banking into a more personalised and frictionless experience. Apps can analyse spending patterns to provide relevant suggestions, enable secure payments through biometric features and offer rewards based on lifestyle habits. They also help customers manage finances intelligently by prioritising payments, recommending savings and investment options and providing daily overviews with reminders. By integrating with other apps and delivering a consistent service across channels, AI makes banking more convenient, proactive and tailored to individual needs.

Beyond customer engagement, the strength of AI lies in its ability to enhance decision-making across an organisation. Banks and NBFIs are increasingly using machine learning to process vast datasets and generate insights that guide lending, risk management, fraud detection and collections. A loan that once required days of paperwork can now be approved within seconds by analysing cash flow data, behavioural patterns and external signals. For microfinance institutions and alternative lenders, AI offers a way to serve individuals and small businesses lacking traditional credit histories by using alternative data such as mobile usage or transaction records. These capabilities increase efficiency and expand financial inclusion by allowing institutions to reach underserved segments with confidence and accuracy.

Realising the full potential of AI requires modernising the technology infrastructure at the core of financial institutions. Legacy systems, designed for stability and compliance, often lack the flexibility for real-time AI applications. To overcome these challenges, banks are investing in scalable cloud-native infrastructure, open API frameworks and centralised data management systems that eliminate silos and provide a unified view of the customer. By upgrading these foundations, institutions can enable faster innovation, reliable risk monitoring and seamless external integrations. Many NBFIs, unburdened by legacy systems, are able to leapfrog directly into these modern architectures, giving them a natural advantage in building agile, AI-led operations.

Technology alone, however, is not enough. To become truly AI-first, financial institutions must transform their operating models and talent strategies. The traditional division between business and technology teams has to give way to cross-functional, agile groups embedding data scientists, AI engineers and product managers who handle customer journeys and product performance as part of daily operations. At the same time, institutions need to rethink their culture, promote collaboration, experimentation and continuous learning, and reskill existing staff for the demands of an AI-driven future.

The journey to becoming an AI-first financial institution is ambitious but increasingly essential. Financial institutions that embrace this transformation will be able to build deeper and more lasting relationships with their customers, expand their market share and achieve sustainable profitability in an industry reshaped by digital ecosystems. Those that delay risk being overtaken by fintech innovators, technology giants and new platforms embedding financial services into everyday life. AI is not just a tool for efficiency but the cornerstone of a new era in financial services, where intelligent, personalised and seamless experiences define value. For banks and NBFIs, the path forward lies in fully harnessing the power of AI to innovate, compete and thrive in the digital age.

The writer is a banker and economic analyst