India BFSI report highlights AI and workforce shifts

In an era marked by AI disruption, increasing regulatory demands, and growing pressure to achieve more with fewer resources, the back office in the banking, financial services, and insurance (BFSI) sector is no longer seen as merely a support function. It is increasingly viewed as a central driver of organisational resilience, trust, and growth. A recent report titled 'The Zero Office: Reinventing the Banking Back Office as a Growth Engine,' published by Iron Mountain in collaboration with HFS Research, surveyed over 500 senior executives across the US, UK, Canada, France, India, Brazil, and Australia. The report highlights how BFSI organisations are modernising their back-office functions at scale through automation, predictive compliance, and modular workflow systems.

In the Indian context, the findings indicate a significant shift towards AI-driven operations. Half of the respondents strongly agreed that the traditional back office would cease to exist within three years, while 57% believed AI agents would soon autonomously manage over 75% of routine processes. Moreover, 37% anticipated large-scale transformation within the next one to two years. Adoption of enabling technologies is already underway: 58% reported enterprise-wide deployment of modular APIs and SaaS workflows; 41% are developing strategic plans for agent-based, end-to-end workflows; 33% are scaling automation; and pilot projects in document intelligence (32%) and generative AI (35%) are gaining traction.

Business drivers and challenges 

The main drivers of this transformation include cost reduction, productivity improvements, and enhanced information security through digital controls, alongside a broader push for organisational agility and flexibility. Despite this momentum, challenges persist. Skills gaps and workforce readiness (31%) and data quality issues (18%) are cited as significant barriers to fully digital operations. In addition, integration with vendors, regulators, and partners is seen as essential, with 62% of respondents emphasising the importance of effective ecosystem orchestration.

To manage the risks associated with AI adoption, organisations are enhancing governance mechanisms, including the use of explainability and auditability tools. Nearly half (47%) also reported incorporating human-in-the-loop oversight. Compliance systems are evolving, with 35% of organisations already operating fully predictive, real-time compliance models and another 35% reporting substantial progress toward this goal. In vendor management, 52% are exploring rationalisation strategies to simplify back-office operations and reduce complexity.

Governance, compliance, and vendor strategy 

Workforce transformation is also a critical focus. According to the survey, 41% of respondents expect a shift in employee roles from transactional tasks to strategic decision-making. At the same time, 35% identified the need for reskilling and upskilling. However, workforce preparedness remains limited: only 23% consider their staff fully ready for digital transformation, while 45% report being partially prepared and in need of extensive training.

Early outcomes from AI initiatives are beginning to materialise. For example, 28% of organisations report improvements in customer experience due to enhanced document intelligence, and 39% cite moderate success in extracting insights from previously fragmented data. Looking ahead, 23% of respondents plan to invest between USD 10 million and USD 25 million in digital back-office transformation over the next two years, while 21% expect to allocate over USD 50 million. Furthermore, 32% anticipate a return on investment of 10% to 25% from their back-office transformation efforts over the next three years.