Financial Institutions Race to Adopt Generative AI in Lending, with 83% Boosting Budgets in 2026

New Celent research shows GenAI outpacing past lending tech revolutions in speed and scale of adoption

BURBANK, Calif., Nov. 13, 2025 - A new industry report from Celent, commissioned by Zest AI, reveals that financial institutions are accelerating generative AI adoption at an unprecedented pace – findings that reinforce Zest AI’s strategic focus on lending intelligence solutions that balance speed, transparency, and regulatory compliance.

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%. 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 Race to Responsible GenAI

Faced 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%). The Celent report revealed several notable insights about how lenders are approaching GenAI adoption:

• 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,” said Craig Focardi, Principal Analyst at Celent. “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.”

The Competitive Opportunity

The Celent survey also highlighted a significant competitive opportunity, with 36% of lenders viewing themselves as early adopters of GenAI. 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; and 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. 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. 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%. Together, these gains allow lenders to compete on speed and efficiency without sacrificing the transparency and compliance that regulators demand.

The Takeaway 

Celent’s 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. 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. Zest AI’s suite of AI tools, from automated underwriting to LuLu for strategic lending intelligence and Zest Protect for fraud detection, is designed and built for this critical juncture – helping lenders innovate with confidence and compete at scale.

“We’re seeing a genuine inflection point in how lenders think about AI,” said Mike de Vere, CEO of Zest AI. “The conversation has moved beyond experimentation to practical, measurable transformation. What matters now is applying generative AI responsibly and in ways that truly support lenders, customers, and regulators alike.”

The complete Celent report, "Generative AI in Retail Lending," is available here. 

About Zest AI

Founded in 2009, Zest AI is a leader in financial technology with a mission to modernize lending and strengthen the financial system. The company is transforming the $17 trillion US consumer credit market by delivering AI technology that helps lenders identify creditworthy borrowers overlooked by legacy credit methods, while leveling the playing field for financial institutions of all sizes to harness AI. With over 600 active AI models and 50+ issued and pending patents, Zest AI is providing financial institutions with a comprehensive suite of solutions spanning underwriting, fraud detection, lending intelligence, and more to make smarter lending decisions that power growth and profitability. Learn more at Zest AI and connect on LinkedIn.