The financial landscape worldwide is transforming with the integration of Artificial Intelligence (AI) and Big Data simplifying operations with greater accuracy. The streamlining of AI in personal finance can help in tackling the issue of lower financial literacy levels. AI fosters financial management and planning by helping individuals make sound investment decisions, allowing businesses to forecast, and assisting banks to assess credit risks.
The idea of Artificial Intelligence (AI) taking over the world, once a plot of a science fiction movie, is now becoming a part of reality. The rapid evolution of generative AI has made human- machine interaction more seamless than ever, enabling real-time insights and decision making across industries.
The Role of AI in Modern Finance
The world is undergoing a complete transformation, with digital technologies enhancing connectivity and convenience at every step. The Digital Progress Report 2023 by the World Bank clearly states two trends that will shape the digital future: the role of digital public infrastructure and the transformative potential of artificial intelligence (AI)[1]. Finance is one of the leading sectors that has seamlessly adopted artificial intelligence (AI) at the forefront.
The financial landscape worldwide is transforming with the integration of AI and Big Data simplifying operations with greater accuracy. The role of AI in finance is not just limited to operational efficiency but extends to strategic financial planning and advisory. AI fosters financial management and planning by helping individuals make sound investment decisions, allowing businesses to forecast, and assisting banks to assess credit risks. According to a report by the Global Market Insights, the AI in Banking, Financial Services and Insurance (BFSI) market was valued at USD 26.2 billion in 2024 and is expected to witness a compound annual growth rate of 22 per cent between 2025 to 2034[2].
AI as a tool for Financial Empowerment
The streamlining of AI in personal finance can help in tackling the issue of lower financial literacy levels. Financial illiteracy remains a severe challenge in India, with a significant proportion of the population lacking basic financial knowledge, resulting in reckless financial behaviour. Financial literacy is the ability to attain knowledge and skills necessary to make sound financial decisions and ultimately secure financial stability. According to the Financial Literacy and Inclusion Survey 2019 conducted by the National Centre for Financial Education (NCFE)[3], India’s overall financial literacy level stands at 27 per cent, which is fairly lower than the global average financial literacy rate.
Financial education traditionally involves reading finance books and newsletters, attending seminars, and watching videos to manage, save, and invest money effectively. AI can integrate with traditional learning by providing customized and interactive learning experiences. It can educate users by tailoring information based on their understanding, needs, and prior knowledge.
Financial Literacy in a Digital Age
The large-scale digital transformation in the financial space driven by AI, blockchain, data analytics, the Internet of Things, and robotic process automation (RPA) has highlighted the need to reflect on the level of digital financial literacy. The Organization for Economic Cooperation and Development (OECD) defines digital financial literacy as “a combination of knowledge, skills, attitudes and behaviours necessary for individuals to be aware of and safely use digital financial services and digital technologies with a view to contributing to their financial well-being[4].” The OECD International Survey of Adult Financial Literacy 2023 states that about 29 per cent adults around the world meet the minimum benchmark of digital financial literacy4.
Balancing Promise with Precaution
Despite bolstering financial inclusion and literacy through its affordable and personalized services, AI has certain risks and challenges that can hamper innovation and growth. One of the major limitations associated with integrating AI in enhancing financial education is data security and privacy concerns. AI tools like ChatGPT have access to a lot of sensitive financial data as they offer customized financial advice to their users, posing a threat to financial security. In addition, AI can result in algorithmic biases in financial decision-making, leading to discriminatory outcomes affecting saving and investment decisions.
The risks of synthesizing AI in financial education can be mitigated by regulating AI at the international and financial sector levels. Policymakers and regulators are pivotal in developing ethical standards to ensure the responsible use of AI in financial decision-making. Governments worldwide, including China, the United States, and Europe, are devising strong regulatory frameworks to formalize the use of AI in the BFSI industry. In India, the Reserve Bank of India (RBI) has constituted a committee to formulate Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) to enable the reliable adoption of AI in the financial sector[5].
AI is a formidable tool for narrowing the digital gap and is revolutionizing the financial environment through decentralized finance. The future of AI in finance looks promising, with governing authorities working on building resilient regulatory frameworks and AI tools concentrating on building robust blockchain technology and cloud infrastructure.
About the Author
Harshita Mansharamani is a doctoral researcher in Economics at Christ University, Bangalore. Her research focuses on examining the impact of financial literacy on financial decision-making. She is particularly interested in how financial education influences individual financial behaviour. Her broader academic interests include promoting financial awareness among vulnerable groups and integrating behavioural science with financial literacy to enhance financial outcomes and policy relevance.
References
[1] World Bank. (2023). Digital progress and trends report 2023. World Bank. https://documents1.worldbank.org/curated/en/099031924192524293/pdf/P180107173682d0431bf651fded74199f10.pdf
[2] Global Market Insights. (2025, May). AI in BFSI market size – By component, by technology, by organization size, by deployment, by end use, growth forecast, 2025–2034. https://www.gminsights.com/industry-analysis/artificial-intelligence-ai-in-bfsi-market
[3] National Centre for Financial Education. (2019). Financial Literacy and Inclusion Survey 2019: Executive
Summary. https://ncfe.org.in/wp-content/uploads/2023/12/ExecSumm_.pdf
[4] OECD (2023), “OECD/INFE 2023 International Survey of Adult Financial Literacy”, OECD Business and
Finance Policy Papers, No. 39, OECD Publishing, Paris, https://doi.org/10.1787/56003a32-en.
[5] IndiaAI. (2024, December 26). RBI’s framework for responsible and ethical enablement: Towards ethical AI in finance. https://indiaai.gov.in/article/rbi-s-framework-for-responsible-and-ethical-enablement-towards-ethical-ai-in-finance
