The banking sector is continuously evolving, influenced heavily by advancements in technology, changes in regulations and changing consumer needs. Looking forward to 2024, several significant trends and advancements are set to mold the industry’s future. Developments such as the increasing prevalence of artificial intelligence and the renewed interest in cryptocurrencies are set to transform the familiar faces in banking.
GenAI enhanced apps – inevitably, we’ll see the next generation of chatbots in banking hit the market in 2024. However – most of them will be “interim,” not really reasoning or able to provide the most accurate financial advice. Their primary focus will be on ensuring customer support conversations are more natural (and perhaps more likely to lead to positive resolutions). For true advice, deep insights and conversations designed to drive positive financial outcomes to become a reality, we first need both general GenAI and also fintech-specific regulations.
Big tech/big retail trying banking again – Due to its larger market size and the availability of capital and talent, it’s no surprise that the US is a key driver of financial innovation. As we are about to see a 1033-driven open banking wave, many tech giants are looking at how best to expand their businesses and capitalize even more on the now captive audiences. Apple, for example, launched AIS in the UK – clearly testing the waters in terms of viability – and others are also venturing into this field too. But in 2024, another organization will undoubtedly try to do it and in a more meaningful way than the Apple-GS card.
Renewed enthusiasm in crypto– with so much money at stake and the expected hype surrounding regulation, cryptocurrencies will once again see a slight resurgence – hopefully in a much less chaotic way than previously.
Banking investments into tech and data – the growing interest in generative AI and the promise of optimization, reduction in menial tasks and bureaucracy will make banks follow easy wins. Operations will be slimmed down, streamlined, supported with AI and then hit a wall. Why? Because there’s only so much that can be achieved without serious investment into the data infrastructure. Money spent on operations will end up being used to make sense of – and consolidate – data to enable more advanced AI solutions. Remember, AI is only as powerful as the data it is fed and trained on.
Improved customer-centricity and hyper-personalization– With AI, more spend on data and more focused organizations, we are finally getting to the point where it is commercially feasible to get to the level of analytics that supports true hyper personalization. Not rule based, not eyeballed by an advisor – but rather automated, accurate hyper-personalization that’s deployable at scale and able to both meet the needs of customers and empower them to achieve their financial goals.
Offshoring retreat – a lot of the tasks that banks have been happily moving offshore are now at risk of being automated. As people are moved to more productive and creative tasks, a much closer cooperation between traditional banking siloes will be needed. Signs of this have been already seen in the past, but this time it might be a significant change in where the work is done.
Data regulation-driven innovation – arguably, for the amount of investment in open banking providers there hasn’t been enough return. With only payments generating somewhat decent revenue, it’s difficult to see this cycle repeating. However, as regulations are clarified and get closer to going live, there will be a sustained increase in the stream of ideas on how to capitalize on them.
The end of BNPL is not in sight – “Buy Now, Pay Later” providers are enjoying a mixed period. The regulators are taking a closer look at their operations, profitability is not always there and challenges are mounting. However, unlike high cost short term borrowing, BNPL is sufficiently embedded in the retail ecosystem and therefore more likely to survive. While it can be argued that BNPL doesn’t often lead to good customer outcomes, it seems to have enough influence to be treated with care. Simply put, no regulator wants to be branded as the organization slowing down the economy in these difficult times.
More nimble lending – but still tight – banks are continuously tightening their lending operations, especially in the US but this isn’t sustainable. With open banking’s arrival, there is slight discontent amongst credit bureaus as the threat of big tech looms. Perhaps this will entice some of the big players to borrow strategies from the FinTech playbook and work to diversify their portfolio while also improving their ability to manage risk. And more data and AI solutions can help.
GenAI goes wrong – someone somewhere will push GenAI too far or launch it with insufficient guardrails, resulting in a mistake which will receive a lot of negative attention. AI Detractors will use this as yet another argument against adoption but in reality, it will be a result of yet another failed (or rushed IT project). Hopefully, however, this incident will not become a trend.
As we continue to navigate the ever changing landscape of banking in 2024, US banks must adopt the new and changing trends to remain relevant and meet the needs of customers. While challenges may be presented, the future of banking holds tremendous promise for innovation and industry advancements.
About the author:
Jakub Piotrowski is an experienced fintech leader with R&D, commercial and product experience, serving as a VP of Product at Bud.
A transaction and data intelligence platform for the financial services industry, Bud Financial (“Bud”) enables its clients to simplify financial decisions by transforming transactional data into rich customer insights. For half a decade, Bud has been a trailblazer in its development and application of AI, machine learning, and natural language processing in banking and financial services.
With over 50 billion transactions processed in half a decade, Bud’s categorization, aggregation, analytics, deep AI and ML capabilities unlock a suite of actionable insights for our clients. Bud empowers financial institutions to supercharge marketing efforts, refine customer segmentation, assess and manage risk, deliver smart PFM features and even optimize processes using AI.
