BFSI players are increasing focus on discretionary spending, says Infosys’ Dennis Gada

Financial services is the largest vertical at Infosys. Since the beginning of this financial year, the BFSI sector in the US has grown strong. Despite Q3 being a seasonally weak quarter, we saw a good revival in the European business. The optimism in the economy, combined with the focus on large deals, and small to mid-sized deals, has helped. 

North America is our largest market and we do about 60 per cent of our business there. About 29 per cent comes from Europe and the remaining, from the rest of the world. We are also seeing growth in other emerging markets. In the last year, we saw the Middle East as a big focus area, with significant expansion and growth.

We have seen growth in Nordics on the back of technology innovation using AI. We have been working closely with some of our clients and continue to see growth in India and Southeast Asia. Apart from the traditional North American, and European clients, we are seeing growth in the Middle East and Nordic markets.

Within certain sectors, we focused more on commercial banking, payments, and asset and wealth management. These are subsectors within the larger industry where we can drive more end-to-end transformation using a combination of AI, cloud, and data and offerings around that. Our focus on Nordics also helped us grow. Following the discussion on language models, we were one of the first to launch a small language model (SLM) for banking during the last quarter. 

That is a bit ahead of the rest of the industry and helps us position ourselves strongly. Our Finacle business is also strong. We are seeing growth not just in India and the Middle East, but in various other Western markets like Australia, Europe, and the US.

We are seeing discretionary spending going up. With AI and automation, some of the ‘run the bank’ spends are getting more optimised, creating a funding pool to invest more in the change of discretionary work. This benefits us because we play on both sides — we are helping clients reduce the run costs, while also investing in the transformation side of the business.

It is still the beginning of the year, so it will evolve as we move forward. But we saw some discretionary spending come back in the US. On the back of the deals we have done and our market position, while the economy in Europe is still struggling, our BFSI practice has done better there compared to the rest of the industry.

The industry is also one of the largest spenders in terms of investments in technology and operations. Most banks are now aligned with the fact that they need to continue to invest for growth and cost efficiency.

We have seen slight optimism in how the sector will do in the last couple of quarters, especially since the beginning of this year. In the US, with the new administration, there is expected to be less regulation for financial services, and more M&A and IPOs. The overall sentiment amongst our large financial services clients is generally positive.

AI is in some ways the tip of the iceberg. To get its benefits, a lot more groundwork is required to modernise the data, core systems, and platforms. We are seeing investments go up in AI, but it’s not just directly in AI, instead, a lot of the foundational work to be done for AI. 

In the last three quarters of this financial year, we have seen significant growth in our business due to a combination of specific deals and our overall positioning of bringing technology and operations as an integrated play. AI is not just a technology solution but significantly impacts business and the operations of a financial services institution. Our integrated technology plus operations play is helping us gain a larger market share.

Banks have a huge exposure in terms of large client base, data sets, and sets of transactions processing, which also makes them more vulnerable in areas like fraud and cyber threats. It is a balance between leveraging new technology to solve challenges, while not being impacted.

A few areas where we see huge applicability of AI are the contact centre and customer care front. In general, banks feel the experience can be improved and the cost efficiency can be gained by having AI-based virtual assistance and different aspects of the whole contact centre can be automated to more self-service capabilities using AI. 

Another one is fraud detection and prevention. In this industry, especially payments with the volumes going up significantly and a lot of small value payments, cross-border payments create several avenues for potential fraud. With more digital banking activities, there is a potential for a higher degree of fraud-related issues in online banking and payments. 

AI provides tools to do real-time pattern analysis and early detection, identifying some suspicious behaviours and solving them. Most card companies, payment companies, and banking institutions are significantly leveraging AI technology to prevent fraud detection on a real-time basis and to improve the customer experience.

Financial institutions are using Gen AI to ensure document processing can be automated, credit decisions can be improved or accelerated, with the human in the loop to make some critical final decisions. A lot of the preparation work for loan approval or a credit review can be accelerated and automated using AI and Gen AI.

Across the spectrum. Large banks traditionally are faster adopters of new technology, because they have the investment dollars to do that. Within that, we see good adoption in both private and public sector banks.

We are also seeing some smaller and mid-sized banks catching up after realising they don’t want to be left behind. This can help them become more efficient in terms of cost and improve the experience. 

Fintechs or the micro-segment, which are always tech-driven, are early adopters, even before the larger financial institutions. Because AI started as a consumer technology, there is faster adoption in consumer and retail banking.

That is the main shift we are seeing. In the last few years, there has been a bit of death by POCs. There are thousands of POCs and banks that want to try out new things. Now, it’s about making AI adoption real. Everybody believes in the power of AI and the associated benefits. We are seeing a shift in the mindset from POCs to execution.

There is a lot of promise of the value it will generate. But banks want to see the real value, which will come only with implementation. We see a majority of our clients, compared to last year, wanting to implement in production. They are saying “Let’s not waste time and money to just do POCs. This is real and the benefits benefit will come only if it’s made in a production grid.” 

Infosys has an AI-first approach. We have the Topaz suite of offerings for AI, all of which are geared towards execution and shifting from the POC mode. 

While AI is benefiting us with the large deals, and the smaller and mid-sized deals, there are more small to mid-sized deals than historically because our clients want to accelerate the implementation of AI-led projects and technology. 

Simultaneously, the larger deals have become even more beneficial because we are embedding AI with our Topaz offerings. That strengthens our value proposition for clients. AI has helped us make large deals even more attractive for our clients, and at the same time, given us a boost with more small and mid-sized deals.