How Would the Finance Domain Evolve in 2025

As per estimates from the Reserve Bank of India (RBI), the global digital economy accounts for almost 20% of global GDP. For India, it is currently almost 10% of GDP, which is projected to reach 20% by 2026. Over the next three years, generative AI could increase global GDP by $7–10 trillion, with large language models expected to boost employee productivity by 8% to 36%. Generative AI alone is anticipated to contribute $359–438 billion to India’s GDP by 2029–30. This will significantly impact various sectors through cost savings, risk mitigation, and improved returns.

The finance domain is set to undergo a transformation driven by advancements in Generative AI (Gen AI), Machine Learning (ML), Robotic Process Automation (RPA), and Quantum Computing (QC). These technologies will lead to the emergence of innovative financial products and enhanced controls, particularly in fraud prevention and compliance within a more stringent regulatory ecosystem.

Sustainability initiatives will also advance, supported by climate-conscious banking services such as green loans, green savings accounts, carbon offset programs, and eco-friendly cards. Eco-friendly cards, for instance, utilize recycled plastic to reduce carbon footprints. On the sustainability reporting front, expect greater transparency in ESG processes with more comprehensive reporting formats and detailed disclosures. There will be stronger alignment with Sustainable Development Goals (SDGs) and increased impact investment in areas like clean water and renewable energy.

While FinTech has promised low-cost and speedy services, its rapid development has often outpaced the implementation of robust regulatory mechanisms comparable to those of traditional banks. The second phase of FinTech development will focus on improving regulatory frameworks and leveraging RegTech (regulatory technology). Fraud detection will become more effective with the integration of Gen AI and QC.

Atul Tripathi, a data scientist and former consultant to the PMO, highlights Gen AI’s potential in addressing fraud through mule accounts (fake accounts used for fraudulent transactions). Gen AI and QC will empower banks to detect such accounts, strengthen compliance, and safeguard the system. By analyzing transactional networks and related patterns, Gen AI will make it easier to detect fraud, even in cases where multiple layers are used to disguise transactions. Technologies like Natural Language Processing (NLP) and image recognition will streamline customer onboarding, further reducing the risk of cyber fraud.

The Role of Generative AI

The auditing process will also evolve, with routine audit procedures being automated through RPA and Gen AI. Predictive risk modeling will be used to manage risks, including fraud, by monitoring live transactional streams, detecting unusual data patterns, and identifying anomalies. This proactive approach will help identify potential risks before they materialize. Furthermore, Gen AI will be increasingly utilized for improving internal controls, mitigating risks, tracking performance metrics, and monitoring financial dashboards.

As the use of advanced financial tools grows, so too will the need for significant upskilling of human resources to manage and implement these techniques effectively.

The integration of technology into knowledge management (KM) processes will enhance their efficiency and effectiveness. For instance, in service industries like aviation and healthcare, AI and deep learning models will enable prefabricated responses to customer complaints and queries, eliminating the need to “reinvent the wheel.” In the BFSI sector, customer satisfaction will be improved using deep learning models, while routine banking services and wealth management will increasingly be managed through RPAs and embedded finance solutions. With embedded finance accessible via mobile apps and offering quick turnaround times, increased financial literacy will drive a surge in adoption.

To conclude, while AI may not deliver immediate ROI, it will lay the groundwork for significant benefits in the years to come. However, businesses must carefully consider the extent of AI application and its potential impacts. As Steve Jobs aptly said:

“Technology alone is not enough. It’s technology married with the liberal arts, married with the humanities, that yields us the results that make our hearts sing.”

By CA. Prof. Kirti Sharma, Associate Professor - Accounting & Finance, Great Lakes Institute of Management, Gurgaon