The banking and financial services industry is undergoing a rapid and radical transformation in 2024. Driven by technological innovations, regulatory changes, consumer preferences, and environmental challenges, the industry is facing multiple fundamental shifts that will reshape its future. In this article, we will explore some of the biggest trends that are dominating the banking and financial services sector in 2024, and how they are impacting the way banks operate and serve their customers.
Open Banking: The Rise of a New Ecosystem
One of the most prominent trends in the banking and financial services industry is open banking, which refers to the sharing of financial data and services among different parties through APIs. Open banking enables customers to access a wider range of products and services from different providers, such as fintechs, neobanks, and big techs, while giving them more control over their financial data and choices. Open banking also creates new opportunities for collaboration and innovation among the various players in the financial ecosystem, as well as new challenges for regulation and security.
According to a report by Deloitte, open banking is expected to grow significantly in 2024, as more countries adopt regulatory frameworks to support it, such as the Revised Payment Services Directive (PSD2) in Europe, the Consumer Data Right (CDR) in Australia, and the Open Banking Nigeria initiative in Africa. The report also predicts that open banking will generate $9 billion in revenue for banks and $12 billion for third-party providers by 2024, as well as create value for customers through lower fees, better rates, and more personalized services.
Generative AI: The Next Frontier of Innovation
Another major trend that is shaping the banking and financial services industry in 2024 is generative AI, which refers to the use of artificial intelligence to create new and original content, such as images, text, audio, and video. Generative AI has the potential to revolutionize the way banks and financial institutions generate, analyze, and communicate data, as well as enhance their creativity and innovation capabilities.
For instance, generative AI can help banks and financial institutions to create realistic and engaging customer experiences, such as virtual assistants, chatbots, and avatars, that can interact with customers in natural language and provide personalized and relevant information and advice. Generative AI can also help banks and financial institutions to generate new insights and solutions from large and complex data sets, such as financial reports, market trends, and customer behavior, that can improve their decision making and performance.
According to a report by Exadel, generative AI is one of the top banking industry trends for 2024, as more banks and financial institutions adopt and experiment with this technology to enhance their products and services, as well as to gain a competitive edge in the market. The report also highlights some of the challenges and risks associated with generative AI, such as ethical, legal, and social implications, as well as the need for human oversight and verification.
Embedded Finance: The Integration of Finance and Commerce
A third trend that is transforming the banking and financial services industry in 2024 is embedded finance, which refers to the integration of financial services into non-financial platforms and applications, such as e-commerce, social media, and gaming. Embedded finance enables customers to access and use financial services seamlessly and conveniently, without having to switch between different platforms and applications, or to interact with traditional financial institutions. Embedded finance also enables non-financial platforms and applications to offer value-added services to their customers, such as payments, lending, insurance, and investing, while generating new revenue streams and customer loyalty.
According to a report by CB Insights, embedded finance is expected to grow exponentially in 2024, as more non-financial platforms and applications partner with fintechs, neobanks, and big techs to offer embedded financial services to their customers, as well as to leverage their data and network effects to create new financial products and markets. The report also identifies some of the key drivers and enablers of embedded finance, such as the rise of digital platforms, the proliferation of APIs, the adoption of cloud computing, and the emergence of new business models and regulations.
Decarbonization: The Green Transition of Finance
A fourth trend that is influencing the banking and financial services industry in 2024 is decarbonization, which refers to the reduction of greenhouse gas emissions and the transition to a low-carbon economy. Decarbonization is driven by the growing awareness and urgency of the climate crisis, as well as the increasing pressure and demand from regulators, investors, customers, and society at large, for banks and financial institutions to align their activities and portfolios with the goals of the Paris Agreement and the UN Sustainable Development Goals.
According to a report by Bankingly, decarbonization is one of the key financial trends for 2024, as more banks and financial institutions adopt and implement strategies and initiatives to measure, disclose, and reduce their carbon footprint, as well as to support and finance green and sustainable projects and businesses. The report also highlights some of the benefits and opportunities of decarbonization for banks and financial institutions, such as enhancing their reputation and trust, attracting and retaining customers and talent, improving their risk management and resilience, and creating new markets and revenue streams.
The banking and financial services industry is undergoing a profound and unprecedented transformation in 2024, as it faces multiple disruptive forces that are reshaping its foundational architecture and value proposition. The trends discussed in this article are some of the most significant and impactful ones that are dominating the industry in 2024, and they represent both challenges and opportunities for banks and financial institutions to adapt and thrive in the new era of finance. The future of banking and financial services is uncertain, but it is also exciting and promising, as it offers the potential for greater innovation, inclusion, and impact.
