Industries

Predictions for the financial services industry in 2024

The word ‘rollercoaster’ best sums up 2023.

We’ve experienced economic, geopolitical, technological, and societal challenges over recent months with the ongoing cost-of-living crisis, high interest rates, inflation, global conflicts, catastrophic weather events, the rise in artificial intelligence such as ChatGPT, to name only a few. All of these elements have put pressure on the financial services industry (FSIs), pulling its focus in different (and often complex) directions to solve problems that didn’t exist a year ago. 

But with it brings an air of optimism as FSIs start to adapt their way of working to meet the changing needs and demands of today’s modern customer. Yes, it is challenging – but it is also exciting as we enter a new era of banking and insurance.  

As we move into 2024, below are my seven predictions for the year ahead: 

Continued emphasis on digital transformation

To-date, 69% of FSI leaders claim that digitalization initiatives are accelerating, and expected to transform the industry by 2026, as the financial services industry continues its journey towards digital modernization. With the increased adoption of AI, machine learning, and automation, FSIs can not only enhance the overall customer experience, but also optimize processes and workflows and drive operational efficiency for better business outcomes.   

Rising importance of cybersecurity

Cyber breaches are becoming increasingly sophisticated. In fact, ransomware attacks on financial services increased from 55% in 2022 to 64% in 2023. The USA has been labelled as one of the four top countries affected. With the goal of minimizing (and ideally preventing) future attacks as financial institutions become increasingly digital, protecting against cyber threats will be a top priority. We expect to see a high level of investments in robust cybersecurity measures, and the development of advanced threat detection and prevention technologies will be crucial. 

Evolution of payments

In 2021, global social commerce sales reached $492 billion – a figure that is expected to nearly triple by 2025 to $1.2 trillion. With the rise of mobile payments and digital currencies, there will be a continued shift away from traditional cash and card transactions. However, that’s not all. Social commerce – the use of social media platforms such as TikTok, Facebook, Pinterest and Instagram to promote and sell (including the checkout process) products and services – has already started to revolutionize the shopping experience again. Social commerce is more interactive than traditional ecommerce, for example, and this gives FSIs a wealth of new opportunities to boost its customer-centric strategy. This new social evolution of digital commerce is one trend that financial organizations simply can’t afford to miss out on – and one that won’t be going anywhere, anytime soon. 

Personalized financial services

Moving into 2024, personalization is key, and this is particularly important when it comes to targeting and retaining a Millennial and Generation Z customer base. Advances in data analytics and AI will enable financial institutions to offer personalized services tailored to individual customer needs, accurately and efficiently. From customized investment advice to personalized insurance solutions, the focus will be on delivering highly targeted and relevant offerings. 

Sustainable and ESG investing

Increasing awareness and concern about environmental, social, and governance (ESG) issues will drive the demand for sustainable investing. This isn’t a regional issue. It’s global. In fact, 71% of Germans, 80% of Austrians and 81% of Swiss believe that insurance companies should promote sustainable behaviors within their products, with transparency notably gaining an increased level of importance. The vast number of consumers expect insurance companies to ‘walk the talk’ by putting words into action, including embedding aspects of sustainability more strongly in their products. Financial institutions will start to further integrate ESG considerations into their investment strategies and offer more options for socially responsible investments. 

Open banking and collaboration

More than eight in 10 small business owners are looking for faster and easier access to capital loans and 81% are looking for personalized loans tailored to suit their business, a recent report by Mastercard claimed. Moving into 2024, this trend is unlikely to change as open banking initiatives start to gain traction, leading to increased collaboration between traditional financial institutions and fintech companies to provide the solutions consumers and business owners require. This partnership between traditional FSIs and its younger, more agile sibling within fintech will result in innovative products and services, enabling customers to have better control over their financial data. 

Regulation and compliance

Unsurprisingly, the financial services industry will face continued regulatory scrutiny and compliance requirements to ensure consumer protection, data privacy, and maintain financial stability. And striking the right balance between innovation and regulation will be crucial. 

Continued digital transformation initiatives, empowering employees with the tools and systems to deliver exceptional customer experiences, ESG, securing the organization from threat factors, implementing AI and analytics, delivering personalized engagements and evolving and modernizing payments will be the differentiating factors for the financial services industry in 2024. 

Learn more about how OpenText solutions can help, banking and insurance organizations improve customer experiences and win business. 

Monica Hovsepian

Monica Hovsepian is the Global Industry Strategist for Financial Services at OpenText. With more than two decades of financial industry experience, Monica has become a trusted subject matter expert in the Financial Services Industry, having worked with numerous large and international banks in North America, Europe and Asia.

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