AI can cut BFSI costs by 40%, unlock 400 million customers in India: BCG

Artificial Intelligence (AI) could significantly reshape the economics of India’s banking and financial services sector, with the technology capable of reducing cost-to-serve by 30-40%, improving productivity by 40-60% and making more than 400 million additional customers economically addressable, according to a Boston Consulting Group (BCG) report released at the Global Fintech Fest (GFF) 2026.

The report, Balance: Thriving in the Age of AI, said Indian financial institutions are entering the AI era from a position of strength. Indian banks recorded a 14.9% return on equity (RoE) in FY25, compared with a 10.3% global average, while their return on assets stood at 1.3% against 0.8% for global peers. However, real productivity gains in India’s financial sector have remained at around 1% annually over the past 15 years.

Agentic banks could unlock 100 bps RoA uplift

BCG estimates that an AI-native, or “agentic”, bank could unlock approximately 100 basis points of RoA uplift, with the gains shared between financial institutions and customers. Such a model could deliver nearly 2x assets per employee while operating at a 25-30% cost-to-income ratio.

The report identifies multiple levers behind the potential improvement, including AI-led productivity gains across mid-office, operations and technology functions, lower credit costs through AI-enabled underwriting and collections, and optimisation of physical infrastructure. It estimates a 10-20% potential uplift in cross-selling, while productivity gains could generate 38-41 basis points through lower manpower costs.

AI could also expand access to segments that remain difficult or costly to serve. BCG said alternative data, including transaction, GST and behavioural information, could help assess thin-file borrowers, while AI agents and digital-first journeys could make small-ticket customers and remote geographies more economically viable.

AI funding surges as adoption gathers pace

The report comes amid a sharp increase in global AI investment. AI’s share of global equity funding climbed from 15% in 2022 to 79% in Q1 2026, with AI funding reaching around $226 billion during the quarter. Foundation models and platforms accounted for approximately 65% of AI equity funding in 2026 year-to-date, compared with around 4% in 2022.

BCG’s survey of 50+ BFSI leaders and fintech CXOs found that 90% had drafted or begun executing an AI strategy, up from around 60% last year. However, only one in 10 had embedded the strategy across functions. Around 90% of Indian CXOs were already seeing process-efficiency gains, while 40% reported revenue uplift, up from 20% a year earlier.

More than 80% of leaders identified AI/GenAI as a top technology priority, while two in three planned to increase spending by more than 15% in the coming years. At the same time, around 60% cited fraud and operational risk as key challenges, while half pointed to the rapid pace of technological change. ROI uncertainty and data and infrastructure readiness also remain major barriers to scaling AI deployment.

The BCG report therefore calls for financial institutions to balance growth and innovation, safety, and ethos, alongside stronger AI governance, cybersecurity, workforce reskilling and measurement of returns on AI investments.