This study examines the adoption of AI-based services in the banking, financial services, and insurance (BFSI) sector, focusing on challenges in customer co-production processes. Existing literature indicates that while AI offers competitive advantages in quality, service, and cost, adoption remains hindered by customer perceptions and engagement. The present study explores how customer perceptions and engagement influence the functionality of AI and, hence, its overall adoption. In order to meet the objective, the study adopted a cross-sectional descriptive research design where a survey of 400 customers was conducted across Tier-1 (Bengaluru) and Tier-2 (Gurugram) cities. Both of them are renowned as IT hubs in India, and therefore, serve as trendsetters in shaping the perceptual trend for the adoption of innovative technology across India. The path analysis highlights the significance of customer traits—self-efficacy, self-consciousness, and need for interaction—along with platform functionality, specifically perceived usefulness, in enhancing customer engagement and driving AI adoption. The findings provide strategic insights for businesses and researchers by defining the nuances of alignment aimed at optimizing AI-driven services adoption.
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