By Sajit Vijayakumar, Chief Executive Officer, Infosys Finacle
Few countries have reimagined banking as profoundly as India. India’s Digital Public Infrastructure (DPI) has quietly but powerfully transformed financial access from a privilege into a reliable utility. Aadhaar gave a billion people a verifiable identity; UPI turned every smartphone into a payment terminal; Account Aggregator unlocked consent-driven data portability; e-KYC and DigiLocker collapsed onboarding friction; and OCEN opened credit rails for the smallest entrepreneurs. In FY 2024–25 alone, Aadhaar recorded over 2,707 crore authentication transactions while UPI handled 16.73 billion transactions in December 2024 amounting to ₹23.25 lakh crore,2 cementing India’s global leadership in real-time payments.
But India’s success story now poses a new strategic question: When identity, payments and data become ambient, what defines the next frontier of competitive advantage for banks?
With transaction volumes exploding, ecosystems becoming dense and interdependent, and cyber-regulation tightening, Indian banks face a non-negotiable mandate: recompose themselves into composable, AI-first institutions built for scale, intelligence, and embedded distribution.
From Digital-First to Composable & AI-First: Strategic Imperatives for Indian Banks
Banks globally have been on a multi-decade journey that can be understood as a digital continuum, evolving across the interconnected dimensions of business models, customer engagement, operations, product innovation, and technology foundations.
Business models are shifting fast. Embedded banking and platform-led distribution are moving from peripheral initiatives to core revenue engines, with 68% of bankers expecting embedded partnerships to generate at least a quarter of revenues by 20303. India, powered by DPI, UPI, Account Aggregator, OCEN, and open frameworks, is positioned to reach this milestone earlier integrating financial services deeply into agritech, MSME marketplaces, supply-chain ecosystems, and gig platforms.
Three models are emerging as the most strategic in this transition: digital-only propositions built on Aadhaar, e-KYC and UPI that enable low-cost, app-first engagement with youth, gig workers, freelancers, micro-entrepreneurs, NRIs and underserved segments. Secondly, embedded banking that is moving decisively beyond payments into contextual credit, savings, deposits, insurance and services within commerce, SaaS and enterprise platforms, including corporate banking journeys. And, marketplace and ecosystem orchestration, where banks evolve into platforms that combine financial products with value-added services such as analytics, loyalty and embedded commerce, monetising connectivity and recurring flows rather than relying primarily on interest margins.
Customer engagement is undergoing a similar inflection. As banks advance along the continuum, a vast majority of interactions will occur through third-party or embedded channels. India is already there in payments, where Google Pay and PhonePe command more than 80% of UPI transactions. The same shift is extending to lending, MSME SaaS-embedded credit, partner-led investments, and increasingly to digital deposit marketplaces, where customers can compare and place fixed deposits across multiple banks without using traditional channels. In parallel, the Account Aggregator framework has processed hundreds of millions of consent-based data requests as of early 2025, enabling credit access through non-bank interfaces.
Cost structures and product innovation are also evolving. Cost-to-income ratios are expected to compress from 40–50% to 30–40% as agentic AI and ecosystem distribution scale. Product development is shifting toward co-creation with partners and customers, accelerating release cycles and contextual offerings.
At the same time, operational resilience is being redefined. India’s banking and payments infrastructure now operate at massive scale across UPI, FASTag, RTGS/NEFT and embedded-finance flows, often under highly volatile conditions. RBI’s 2024 Guidance Note on Operational Risk Management and Resilience – aligned to BCBS principles – elevates resilience to a board-level mandate, emphasising preparedness, adaptability and continuous learning.
Meeting these expectations requires banks to shift towards cloud-native, distributed and event-driven architectures, supported by real-time monitoring, zero-trust security and AI-driven threat detection. In this environment, operational resilience is no longer a back-office function; it is a strategic enabler of trust, stability and sustainable scale.
Foundational technology is being rewired. Banks are moving from rules-based systems to AI-native decisioning in areas such as fraud detection, underwriting, liquidity optimisation and personalised engagement. With RBI’s FREE-AI framework setting clear expectations around trust, fairness, transparency, explainability and accountability, institutions must now move beyond fragmented pilots to enterprise-grade, governed AI. This involves unified data pipelines, privacy-by-design architectures, real-time monitoring and auditable decision systems that can withstand regulatory scrutiny while enabling business agility.
Over the next few years, the highest-impact applications of AI will be seen in MSME and retail credit underwriting, real-time AML and fraud detection, AI-driven treasury and liquidity management, intelligent service automation and hyper-personalised customer journeys. Together, these shifts signal an irreversible move toward composable and AI-first banking, where value creation stems from connectivity, intelligence, and adaptability over legacy scale.
Conclusion
India has achieved what few nations have dared. Building a digital banking ecosystem at population scale. Aadhaar, UPI, and consent-driven frameworks have set global benchmarks for inclusion and interoperability. But progress is not the destination; it’s the launchpad. The next era will not reward banks that are only digital-first, it will reward those that are adaptive, intelligent, composable, and ecosystem-native.
By 2030, financial services will operate as an invisible yet indispensable layer underpinning India’s growth ambitions. The differentiator will come to those who have engineered the organisational agility, architectural flexibility, ecosystem readiness, and AI-driven intelligence required to thrive in a high-scale, high-velocity, highly regulated environment.