We explore five key trends that are set to define India’s banking landscape in 2025.
As India sets its sights on achieving its gross domestic product goal of $7 trillion by 2030, the banking sector is positioned to be a key driver of economic growth.1 Boosted by strong regulatory measures aimed at strengthening banking infrastructure, coupled with technological advancements and a rapidly evolving customer landscape, the banking industry is transforming at an unprecedented pace.
The demand for speed, personalization, and security is reshaping how consumers interact with banks. This shift towards hyper-personalization has led to the rise of real-time payments and digital wallets, which are directly linked to increasing consumerism, easier access to credit, and a steady inflow of foreign investments. These trends set the stage for a more seamless and intuitive banking experience.
Over the past 25 years, digital transformation has fundamentally reshaped the financial sector, with artificial intelligence (AI) and machine learning (ML) coming to the fore in recent years. The rise of GenAI marks the next wave of innovation and disruption, unlocking opportunities for growth, operational efficiency, and customer-centric innovation within the guardrails of compliance, data privacy, and systemic resilience.
Indian banks are increasingly integrating GenAI to improve customer engagement and operational efficiency. For instance, chatbots and virtual assistants are now multilingual, providing real-time, personalized support to customers across India’s diverse demographic landscape. Advanced fraud detection systems powered by AI and ML are used to enhance compliance by identifying anomalies and preventing fraudulent activities in real-time. Similarly, AI-driven credit risk models are improving the accuracy of lending decisions, while virtual financial consultants are helping banks optimize insights, streamline processes, and deliver tailored financial solutions.
Additionally, data-driven decision making has become integral for financial institutions, empowering them to predict customer needs and enhance service delivery. Relationship managers and branch staff are now supported by Gen-AI powered interfaces, enabling them to resolve complex customer queries efficiently and elevate the overall service experience. Collectively, these innovations are driving a paradigm shift in the Indian banking sector.
Indian banks are investing heavily in IT infrastructure and proprietary models while adhering to the Reserve Bank of India’s regulatory frameworks, such as data localization, customer consent management, and risk mitigation. Many institutions are adopting a hybrid approach – building in-house data science teams to customize AI-driven solutions using existing open-source models. This ensures that AI innovations align with the unique requirements of Indian banking while maintaining compliance and operational control.
“The strategic vision for Indian banks is clear: leverage GenAI responsibly to enhance financial inclusion, improve risk management, and offer intuitive, secure, and accessible banking services,” says Gaurav Mehra, Partner and APAC Head of Transformation. “With robust guardrails – covering data privacy, ethical AI use, and compliance – the integration of GenAI signals a future where technology does not just augment banking operations but redefines customer relationships. This transformation aligns perfectly with India's broader goals of sustainable economic growth and digital empowerment, making GenAI a pivotal force in the evolution of Indian banking.”
Open banking presents a unique collaborative growth opportunity for Indian banks and fintechs. By securely sharing customer financial data – with consent – banks can monetize their APIs to deliver personalized services, unlocking new revenue streams and enhancing operational efficiency.
Open banking has also been instrumental in the growth and popularity of Buy Now Pay Later (BNPL) services that enable consumers to split payments into smaller, interest-free installments, making expensive purchases more affordable at point of sale. In 2021, the BNPL customer base in India was five million for online retail and two million for offline retail. This is projected to surge to 30 million online and 22 million offline by 2026.2 Beyond BNPL, other impactful use cases of open banking include peer-to-peer transfers, overdraft solutions, loyalty programs, and debt recovery.
A key enabler of this transformation is account aggregation, supported by the Reserve Bank of India’s Account Aggregator (AA) framework.3 While aggregators simplify data consolidation, banks bring a deeper understanding of customer behavior, enabling them to develop innovative products and services that go beyond aggregation. In payments, open banking could revolutionize India’s thriving digital ecosystem by enabling seamless cross-bank transactions, consolidated account views, and faster fund transfers.
“Drawing from models like ONDC (Open Network for Digital Commerce), open banking promises to democratize access to financial services, benefiting businesses and individuals alike,” says Madhav Malhotra, Partner, India Market. “However, it faces significant challenges, including data privacy concerns, data localization requirements, and cross-border applications. Addressing these challenges will require a robust regulatory framework to ensure secure data sharing and protect consumer interests, as well as a strong focus on enhancing banks’ infrastructure to support open banking initiatives.”
Wealth management is emerging as a critical pillar of India’s banking services, spanning offerings like investment management, estate planning, tax advisory, and retirement planning. This is driven by the evolving wealth spectrum, which ranges from affluent and HENRY (High Earning, Not Rich Yet) clients to HNW (High Net Worth) and UHNW (Ultra High Net Worth) individuals.
Indian banks are increasingly focused on engaging clients at the early stages of affluence, building long-term relationships to become the banker of choice as they ascend the wealth ladder. India’s wealth market is poised for significant growth, with the country expected to have 16 lakh HNW individuals by 2027.4 Capturing and retaining clients across this wealth spectrum presents both challenges and opportunities for banks:
“By combining traditional wealth management expertise with digital strategies, Indian banks can not only address current challenges but also create a future-ready model that appeals to both existing and emerging clients,” says Dipanjan Naha, Partner, and Head India Market. “This approach ensures that wealth management becomes a vibrant, engaging, and profitable segment in the competitive Indian banking landscape.”
Banking-as-a-Service (BaaS) is reshaping the financial ecosystem by enabling banks, fintechs and NBFCs to deliver tailored banking experiences to diverse customer segments. At the forefront of this service are banks, which leverage their regulatory and operational expertise to create new revenue streams and expand their customer base. By leveraging APIs, banks can provide services such as payments, loans, and bank accounts to fintechs and NBFCs, who then deliver these to customers under their own brands, effectively extending the reach of their banking services.
BaaS is also driving the emergence of banking apps designed for specific customer segments, offering customized solutions for unique needs. For example, apps targeting SME entrepreneurs may provide tailored credit options and expense management tools, while those for gig economy workers might focus on real-time payments and savings plans. India’s BaaS market is projected to grow at a robust 13.2% CAGR from 2024 and 2030, climbing from $12.67 billion in 2023 to nearly $30.19 billion.5
The power of BaaS lies in partnerships between banks, fintechs, and NBFCs, each bringing their strengths to the ecosystem, ensuring that the regulatory and operational expertise of banks is combined with the innovation of technology-driven companies:
“To further strengthen the BaaS ecosystem, gamification presents a unique opportunity to increase customer engagement and satisfaction,” says Dipanjan Naha, Partner and Head India Market. “For example, banks and NBFCs can implement rewards-based programs for timely loan repayments, savings milestones, or transaction volume. Small businesses could unlock achievement badges for meeting financial goals, encouraging loyalty and retention.”
With evolving customer profiles and preferences, Indian banks must look beyond transactional banking to transform their branches into dynamic spaces that foster deeper and more meaningful relationships. By leveraging their physical presence, banks can create social hubs that cater to modern customer expectations and redefine the traditional branch experience.
To achieve this, banks need to focus on making their interactions with customers in branches more personalized and experiential, and fully integrated with each bank’s digital channels. Modern bank branches can evolve into multifunctional spaces where customers can interact, network, learn, and grow together as a community. Hosting in-person gatherings, workshops, and entrepreneurial meetups can attract younger audiences, such as Gen Z and the startup ecosystem. This in turn can help branches promote higher-value services such as wealth management, reinforcing their role as trusted partners in the customer’s financial journey.
“While across the Western world we are seeing a shrinkage of the branch footprint, across India and Asia more broadly it is still expanding. The role of the branch will however evolve from being transactional to more experiential, and hence represents a unique opportunity for banks,” says Gaurav Mehra, Partner and APAC Head of Transformation. “By integrating hyper-personalization, experiential interfaces and a community driven approach supported by next-gen technologies, banks can elevate their branch experience interactions and creating a new powerhouse of revenue generation and customer loyalty.”
References
1 Economic Times
2 Statista
3 Department of Financial Services
4 Hindustan Times, Economic Times
5 Stellar Market Research
6 Business Standard
