The Biggest Banking And Financial Services Trends For 2024

2024 Banking and Finance Trends: The Dawn of AI and Sustainability

2024 promises to be a landmark year in banking and finance, marked by significant changes and transformative innovations. The influence of AI will be pivotal, permeating every aspect of the sector—from revolutionizing customer service to reshaping financial management tools and streamlining back-office operations. This article offers an insightful overview of the key trends poised to drive these shifts over the coming year and beyond. These advancements, when effectively harnessed, have the potential to deliver more efficient, innovative, and cost-effective solutions in banking, investment, and insurance. However, they also present challenges that must be addressed to ensure these changes are implemented safely and ethically.

Generative AI in Fintech

Fintech generally refers to technology that empowers consumers to manage, spend, and invest their money more effectively. In 2024, the most visible application of generative AI will be chatbots, enabling customers to interact with banking apps and online money services using natural language. Major financial services players like Bank of America, Wells Fargo, BlackRock, and Citigroup have already launched or announced initiatives around generative AI. Expect innovations such as personalized financial planning and bespoke investment strategies, all powered by advanced AI models like those behind ChatGPT.

Sustainable Finance

In 2024, there is a growing expectation for financial institutions to prioritize sustainability and ESG (Environmental, Social, and Governance) factors in their decision-making. This means supporting investments in green initiatives like renewable energy, recycling, and carbon footprint reduction. Emerging sustainable financial products allow customers to ensure their money supports environmental and societal well-being while earning interest in a bank vault.

Digital and Crypto Currencies

Digital currencies and cryptocurrencies are firmly back on the radar of financial services in 2024. Over 130 countries are exploring the use or adoption of central bank digital currencies (CBDCs), while Bitcoin’s recovery from its 2021 crash is attracting renewed interest from innovators and investors. While the crypto-space remains a wild west outside of CBDCs, we can anticipate further movements toward governance and regulation.

Enhancing Customer Experience (CX)

In 2024, customer experience (CX) will be driven by technology enabling every touchpoint of the customer journey to be analyzed for reducing friction and improving satisfaction. New immersive technologies like VR are providing more engaging ways for interaction. With CX increasingly influencing buying decisions, financial service businesses will prioritize leveraging this to enhance customer loyalty and business success.

AI-Powered Insurance

AI’s ability to detect patterns in data will lead to more insurers offering personalized products based on individual risk assessments in 2024. Ideally, more accurate risk assessments will result in fairer insurance and lower costs. However, the industry must tackle challenges around privacy, data protection, and AI bias.

Open Banking

Open Banking, which allows consumers to control their financial data and its usage, will be a key trend in 2024. It enables secure data sharing through APIs with other applications, services, or tools that provide useful services. As awareness of data control grows, service providers will be encouraged to engage in competitive innovation.

Cybersecurity and Fraud Detection

The increasing frequency and complexity of cyber threats and the ongoing AI arms race between cyber criminals and organizations mean cybersecurity will continue to be a crucial trend. Effective strategies and ongoing investments in tools, infrastructure, and skills are vital. Gartner forecasts that worldwide spending on security and risk management will reach $215 billion in 2024, a 14.3 percent increase from 2023.

Process Automation

Automation of manual and repetitive back-office processes will continue driving efficiency and transformation in 2024. Tasks such as onboarding new customers, processing routine transactions, document verification, KYC checks, and compliance will increasingly be managed by AI.

Blockchain Banking

While blockchain technology has taken a back seat to generative AI over the past year, distributed ledger technology is becoming increasingly common in financial services. Researchers predict spending will hit $19 billion in 2024, up from $4.5 billion in 2020. Beyond cryptocurrencies and digital currencies, blockchain will be used for creating smart contracts, establishing trust, streamlining payments, and authenticating transactions.

Regtech

Regtech, the integration of technology into compliance and regulation tools for banks and insurers, will become more prominent in 2024. Utilizing AI, blockchain, and cloud computing for compliance tasks will be essential due to the growing complexity and volume of regulatory requirements, especially those involving personal data and privacy.

The Bottom Line

These emerging trends in banking and financial services promise a transformative journey, emphasizing the critical balance between innovation and responsibility. The future of finance will be more efficient, customer-centric, ethical, and inclusive, setting the stage for a new era in the industry.