Authors: Dr. S. Mohana Murali
Abstract: Artificial Intelligence (AI) has emerged as one of the most important technologies transforming the banking and financial services industry. The rapid expansion of internet banking, mobile banking, digital wallets, real-time payments and account-based payment systems has generated enormous volumes of financial and transactional data. AI and Machine Learning (ML) provide financial institutions with the ability to analyse this data, identify patterns, automate decisions and deliver personalised services. This research paper examines the role of Artificial Intelligence in digital banking and payment systems, with particular emphasis on fraud detection, cybersecurity, customer service, credit assessment, Know Your Customer (KYC), Anti-Money Laundering (AML), risk management, personalised banking, payment processing and operational efficiency. The paper also examines the Indian context, including the development of UPI and the increasing use of AI in India's banking and payment ecosystem. The study adopts a descriptive and analytical research methodology based on secondary sources, including reports and publications of the Reserve Bank of India (RBI), Bank for International Settlements (BIS), International Monetary Fund (IMF), World Bank and National Payments Corporation of India (NPCI). The study finds that AI can improve the speed, efficiency, security and personalisation of digital banking and payment services. However, AI also introduces challenges relating to data privacy, algorithmic bias, explainability, cybersecurity, model risk, third-party technology dependence and accountability. Therefore, responsible AI governance, human oversight, cybersecurity controls and appropriate regulatory frameworks are essential for sustainable adoption of AI in banking and payment systems.
