Human-in-the-loop approach needed for AI to work effectively, say experts at BFSI Summit

“Not all products can be fully digitized end-to-end. For example, with loans, part of the process may be digitized, but other aspects, like documentation, still require assistance. Sometimes, customers may drop off during the transaction because they are unsure of how to proceed,” said Vidya Krishnan, deputy managing director (IT) at State Bank of India.

According to Krishnan, there will always be a blend of physical and digital elements. While AI will play a crucial role, challenges will continue to arise and need to be addressed continuously. “This requires a collaborative effort, especially as we work within interconnected platforms. Therefore, it becomes a collective movement,” she added.

Anjani Rathore, chief digital officer at HDFC Bank, spoke about the challenge of balancing customer experience, data privacy, and security when implementing AI. 

“In terms of the challenges we face, there is a constant balancing act between customer experience, data intimacy, and security. The simpler we make things for customers, the easier it becomes for fraudsters to exploit vulnerabilities. The question is: how do we ensure safety?” Rathore noted.

He further explained, “As we use more data, it becomes increasingly crucial to protect privacy with the appropriate safeguards. It’s always a delicate balance between user experience, data privacy, and security, and this is something we continually navigate.”

The Reserve Bank of India’s (RBI) October 2024 study revealed that private sector banks are leading the way in adopting AI, particularly in areas like fraud detection, customer segmentation, and chat automation.

The study also highlighted how the asset size and financial health of private banks have influenced their ability to implement AI-driven solutions. These banks have outpaced their public-sector counterparts in AI adoption due to their greater investment capacity and economies of scale.

However, the RBI cautioned about the potential risks associated with excessive reliance on AI, such as market concentration and systemic vulnerabilities. According to the RBI, heavy reliance on AI can lead to concentration risks, especially when a small number of tech providers dominate the market. The RBI also warned that increased use of AI makes banks more susceptible to cyberattacks and data breaches.

Experts at the summit stressed the human-in-the-loop approach for AI to work effectively and safely.

Krishnan, from SBI, highlighted the significance of human intervention in banking services and said while AI can automate many tasks, certain processes, like loan documentation, still require human oversight. 

“There are very few products that can be fully digitalized end-to-end. Some parts of the product can be digitized, but others, such as documentation, still require human help,” she noted.

Krishnan also discussed how AI is integrated into Proactive Risk Monitoring (PRM) systems, where AI detects potential fraud, but it’s a human agent who verifies the transaction’s authenticity. “AI can detect an anomaly, but it is a human who contacts the customer to confirm if the transaction is genuine,” Krishnan added. This human-in-the-loop system ensures both efficiency and security in banking services.

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Anjani Rathore echoed this view, emphasizing that while AI is revolutionizing banking, it cannot handle all exceptions or complex decisions. He cited video KYC as an example, where technology allows remote verification, but human intervention is still necessary when issues arise. “We need humans to manage exceptions because technology cannot handle everything end-to-end,” Rathore said. He stressed the role of humans in resolving challenges that AI-driven processes may encounter.

According to BFSI industry leaders, hybrid model of AI and human involvement also extends to customer support. While AI can handle simple queries, more complex issues still require human intervention. This combination of AI’s speed and efficiency with the empathy and problem-solving skills of humans provides a well-rounded customer experience.

Experts at the summit also discussed the significant investments being made by the sector in digital infrastructure.

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According to a study by Gartner in June 2024, India’s BFSI sector is set to invest $13.2 billion in information technology in 2024, reflecting a 12.2% increase from 2023. This investment is expected to drive technological advancements and improve digital services across the sector.

Puneet Gupta, managing director & vice president at Netapp India/SAARC, noted that the BFSI sector is one of the largest spenders on IT, with a substantial portion of India’s IT industry growth driven by financial services. 

“The element of tech in banks and the whole industry will go up dramatically over the next few years,” Gupta added. He predicted that as the industry continues to adopt advanced technology, the importance of tech companies and fintechs will grow, driving much of the business forward in the coming years.

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