BURBANK, Calif. – Financial institutions are accelerating generative AI adoption at an unprecedented pace, according to a new report from Celent that was commissioned by Zest AI.
The “Generative AI in Retail Lending” survey, conducted in August 2025, polled 106 U.S. banks, credit unions, and consumer finance companies and found that 83% of lenders plan to increase their consumer lending GenAI IT budgets in 2026, with 41% anticipating increases exceeding 5%, according to the company.
“Most significantly, two-thirds (67%) of lenders have already completed or will implement GenAI strategies by 2026 – a faster adoption rate than previous lending technology innovations, including AI/ML, online lending, mobile lending, and statistical regression-based automated underwriting,” the report states.
The Race to Responsible GenAI
The researchers wrote that with rising interest rates, intense regulatory scrutiny, and competition from digital-first lenders, financial institutions are turning to GenAI to enhance customer experience (21%) and reduce expenses and improve operational efficiency (20%).
What Was Revealed
Zest AI said the Celent report revealed several notable insights about how lenders are approaching GenAI adoption, including:
- Consumer lending divisions are catching up to other divisions across retail banks: Only 6% of consumer lending divisions have a GenAI strategy today, but 36% are developing one for 2025 – putting them on track to close the gap with the broader retail bank, where 15% have already implemented GenAI and another 32% plan to do so by year-end.
- Overcoming barriers: Security and risk concerns remain the biggest hurdle to GenAI adoption, with 19% citing them as their top concern and another 20% ranking them second. Competing priorities followed as the next major challenge, noted by 15% of respondents.
- Broader AI ecosystem growth: Beyond GenAI, 58% of lenders have Robotic Process Automation in production, 39% use AI/ML for loan decisioning, and Agentic AI is on the rise – 8% are already using it and 28% are planning deployment.
“Generative AI is being adopted faster in lending than any previous AI technology wave we’ve tracked,” Craig Focardi, principal analyst at Celent, said in a statement. “What’s striking is how quickly financial institutions are moving from pilots to production. The urgency to compete on both efficiency and customer experience is turning GenAI from a curiosity into a core capability.”
Three Key Areas
The Celent survey also highlighted a significant competitive opportunity, with 36% of lenders viewing themselves as early adopters of GenAI, according to Zest AI.
Respondents identified three key areas where GenAI delivers the most competitive differentiation:
- Employee copilots that serve as AI assistants for loan officers, processors, and underwriters to query policies and documents conversationally
- Compliance and regulatory reporting that automates documentation and flags potential violations
- Business intelligence enhancements that provide advanced analytics and reporting capabilities.
From Experimentation to Transformation
Seventy percent of lenders are adopting or planning to adopt GenAI for analytics and reporting dashboards – a faster adoption rate than most consumer lending use cases, the report found.
“However, this rapid adoption is outpacing the development of AI legislation, creating potential compliance risks for institutions that haven’t prioritized responsible AI development. It’s crucial for lenders to choose tools built with transparency, fairness, and ethical practices from the ground up – qualities that will become regulatory requirements, not just best practices,” the company said.
The company further stated that Zest AI’s LuLu, the leading generative AI lending intelligence platform built for financial institutions, converts that adoption into measurable impact, enabling institutions to consolidate up to 50% of their reporting tools, reduce analysis time and staffing by 80%, and accelerate decision-making by as much as 90%.
The Takeaway
Zest AI said the findings mark a decisive shift from experimentation to execution.
“The next frontier for lenders is about applying GenAI strategically across the business to drive measurable impact,” according to the report. “Success will depend on solutions that fit seamlessly into existing systems, solve real operational challenges, and scale securely. The institutions modernizing now – across risk, compliance, customer engagement, and efficiency – will set the new standard for responsible, intelligent lending.”
The complete Celent report, “Generative AI in Retail Lending,” is available here.
