7 Important Finance Trends 2024
From Crypto to DeFi: The Rapid Evolution of Finance
The world of finance is evolving at a breakneck pace, with cryptocurrency and decentralized finance (DeFi) leading the charge. Financial services such as banking, insurance, and money management are striving to keep up with these changes. This dynamic shift is driven by technological advancements and a renewed customer focus. Here’s a look at the current and emerging trends set to revolutionize the financial landscape in the coming months.
1. The Financial Services Industry Embraces Blockchain
Blockchain technology, once synonymous with cryptocurrency, is now integrating with existing financial systems. By using blockchain, banks can conduct transactions more efficiently and securely. This technology is also enhancing peer-to-peer lending, an industry projected to grow by up to $150 billion by 2025. In 2024, more banks are transitioning to cloud-based banking with blockchain playing a pivotal role.
HSBC and Wells Fargo use blockchain to settle forex trades, while PayPal, Mastercard, and JP Morgan enable blockchain payments. Notably, AXA uses blockchain to automate insurance payouts for flight delays, showcasing blockchain’s versatility beyond banking.
2. The Rise of Personal Finance Apps
The pandemic saw a 90% increase in personal finance app downloads. Apps like Mint, Prism, and EveryDollar offer comprehensive money management and investment opportunities in stocks and crypto. The adoption of open banking in the US, enhancing app security, is likely to increase user numbers further. Square’s Cash App remains the most popular, featuring a rewards system that boosts customer loyalty.
3. Professional Money Management by RIAs
Registered Investment Advisers (RIAs), regulated by the SEC, offer a client-focused model that prioritizes client interests. This fiduciary duty contrasts with typical broker-dealers and is gaining traction. By the end of 2020, RIAs managed $110 trillion from over 60 million clients in the US, a significant increase from $20 trillion at the start of the century. This growth suggests more Americans are turning to professional money management.
4. Loyalty Programs Drive Repeat Business
Loyalty programs are becoming essential in the financial services industry. According to a 2021 survey, 80% of millennials and 68% of non-millennials would join a premium loyalty program from their favorite brands. Repeat customers spend 33% more than new ones, and loyalty programs are a strategic way for banks to compete with companies like PayPal and Buy Now, Pay Later services. CitiBank’s “ThankYou” rewards program exemplifies this trend, offering points for using mobile apps or ATMs.
5. Banks Embrace Cloud Technology
The pandemic accelerated banks’ move to the cloud, meeting the rising demand for digital services. Market research company IDC estimates global spending on cloud services will surpass $1.3 trillion by 2025. Major players like JPMorgan Chase and Arvest Bank are converting their systems to cloud-native platforms. Cloud banking is seen as the future, with companies like MANTL helping traditional banks expand digitally and automate back-office functions.
Artificial intelligence (AI) enhances cloud services by providing chatbots, analyzing transactions, and monitoring suspicious activity. This integration makes AI more accessible and appealing for banks.
6. Banks Move Past Overdraft Fees
Overdraft fees, totaling $15.47 billion in 2019, are increasingly being eliminated or reduced. Banks like Ally Financial and Capital One have scrapped these fees entirely. Others, like Bank of America, offer features like Balance Connect to avoid overdraft fees, while PNC’s Low Cash Mode allows transaction reordering to prevent overdrafts. JPMorgan Chase provides early access to paychecks to help customers avoid fees. This shift is driven by consumer demand and regulatory pressure from agencies like the CFPB.
7. Increased Crypto Adoption by Non-Tech People
Cryptocurrency’s market capitalization reached $2.79 trillion by November 2021. Venture capitalist firms invested over $27 billion in crypto that year. Regulatory oversight, such as the bill signed by President Joe Biden requiring crypto exchanges to report to the IRS, indicates crypto’s growing legitimacy and popularity. The first Bitcoin ETF on the New York Stock Exchange allows traders to invest in crypto-related companies, making the volatile market more accessible.
Conclusion
These trends highlight the rapid evolution of the financial sector, driven by technology and a customer-centric approach. As blockchain, AI, and cloud technology reshape the landscape, financial services must innovate to stay competitive. By embracing these trends, the industry can offer more efficient, secure, and personalized solutions, setting the stage for a more dynamic and inclusive financial future.