Kiran Jagannath, Head of FSI and Conglomerates at AWS India and South Asia, highlights the evolution of India’s financial services industry driven by digital transformation, the swift adoption of GenAI by BFSI players and a surge in client spending with this emerging technology.
Why are BFSI players—once cautious about adopting cloud—now readily embracing a transformative technology like AI?
Maybe five years ago, there was a little hesitation in adopting a public cloud, but not anymore. BFSI players like NBFCs, capital markets and insurers, have been adopting the cloud for longer than the banking ecosystem, largely due to the technical debt people carry. Outside of banking, many sub-segments, such as NBFCs and fintechs, largely don’t carry any tech debt because they were born in the new era of cloud and emerging technologies. As a result, it was easier for them to adopt cloud technology when it became available.
For banks, which have existed for much longer, there was a slight hesitation in adoption. They were initially unsure whether they would be allowed to adopt the cloud, although regulators have brought a lot more clarity since. Both RBI and SEBI publishing cloud adoption frameworks are signals that regulators are also encouraging the adoption of technologies for banks and all the customers in the sub-segments to drive better innovation, products, services and experiences for their customers.
As the country rapidly digitises, we see our customers increasingly adopting the cloud to deliver digital-first experiences. Because of the new technologies and architectures it offers, it is difficult to replicate the same capabilities in an on-prem environment. The ability to scale as businesses scale, as adoption increases, and how seamlessly this can be done on the cloud, are advantages that traditional on-prem environments cannot provide.
From an innovation perspective, the time to market, from ideation to implementation, is significantly reduced on the cloud. In a digital world, those who innovate will stay ahead of the competition. Cloud plays a crucial role in enabling this innovation.
The cloud also enables experimentation, which is excellent for driving innovation because the cost of failure has been brought down significantly since there is not much upfront investment.
GenAI is one of the biggest transformative moments because of what it can enable. The time of adoption and integration into existing processes has also rapidly shrunk. We are seeing that GenAI has a much faster adoption than even the cloud itself because of the advantage in terms of what it enables and better experiences.
It also drives better efficiencies, particularly in verticals like financial services, where there are many human processes and documentation involved in roles like financial analysts, underwriting and such. When there is a massive amount of data that needs to be processed, GenAI plays a big role in helping drive efficiencies by bringing the data together and summarising it so that people can look at higher-order activities.
Between the public and private sectors, which does AWS focus on more closely in India?
We are widely adopted across every sub-segment within financial services, including capital markets, NBFCs, insurers and banking.
The private sector has been leading the charge in cloud adoption. However, public sector banks have also realised that if they want to be innovative and stay ahead, they too need to leverage technologies like the cloud and GenAI.
Over the last 18 months, we have seen a lot more of the public sector banks talking to us to bring some of their innovations to the cloud as well. While the scale on which they are adopting is not yet on par with the private sector, looking ahead, each one of them will be similarly viewing these technologies. At the end of the day, banks differentiate themselves by offering the best innovations, products, services and experiences to their customers, so would not want to be left behind.
How has discretionary spending by BFSI clients evolved? Has it improved now that there’s more clarity post-US elections?
In India, before Covid, a big portion of IT spending was directed towards traditional channels. Digital was not the primary channel for customer engagement in India before the onset of Covid. However, with multiple lockdowns in place, traditional channels like bank branches were no longer viable for managing customer engagement. As a result, banks, insurers and other financial institutions had to divert a significant portion of their investments to beef up their spending on digital channels.
Now, we can safely say that customer behaviour has not reverted to pre-Covid patterns. Even today, digital channels continue to be the primary channels of engagement within financial services, having long overtaken traditional channels, which is why we continue seeing spending from banks, insurers and other players.
I don’t see this changing anytime soon. The reason customers spend on the cloud is resilience, innovation and scalability, which are not going away. With the onset of new technologies like GenAI, I believe this trend of investments in modern technologies is bound to continue to grow in India as well.
2024 was when there were many proof-of-concepts (POC). We need to understand any new technology first. GenAI has been reinventing itself every few months. What it was 18 months ago is not what it is today.
Are most of your POCs in 2024 now progressing into production projects?
2024 was the year of POCs. While some of them did go into production, this year, you will see more of these workloads moving into production with many of our customers. We were also trying to prove the ROI, as with any new technology, and learning the use cases, making sure that they were sustainable, and that there are returns vis-à-vis these investments. Last year was a year of learning, and this year, we will see a lot more projects going into production.
