Financial Services Outlook: 2024 Banking Predictions from VeriPark Leaders
The global banking and finance industry faces a transformative year in 2024, fueled by technological innovations, evolving customer needs, and increasing regulatory pressures. We asked our senior leadership team to share their insights into the trends that will rapidly re-shape banking and financial services in the year ahead.
At the top of everyone’s list is the way global institutions are accelerating the rollout of AI and starting to create best practices for using Generative AI. This extraordinary innovation entered 2023 in a burst of interest and experimentation and has already had a significant impact on global industry. However, McKinsey estimates that banking and finance could see the largest benefits, with a potential value of $200 billion to $340 billion a year, largely from increased productivity.
Read on to find out what we think these trends mean for our industry. We’ll consider the role of Microsoft Copilot in redefining the work of Relationship Managers, the rapid convergence of AI, transition to cloud and cybersecurity, and the growing business focus on SMEs.
Microsoft Copilot: Expect this to be the game-changer.
Product Director Business Banking
The launch of Microsoft Copilot in 2023 was itself a seismic event that has already started to redefine banking operations. Its ongoing transformative effects will be as radical for our industry as digitization and the Internet once were. The anticipated disappearance of arduous administrative tasks is now finally possible, with the potential to fundamentally alter how banks navigate workflows and regulations.
Microsoft Copilot's influence means the workload of Relationship Managers (RMs) is poised for a complete overhaul. This will not just be a modification. It will be a fundamental transformation that will revolutionize how individuals function within the finance sector.
Previously, RMs engaged in a multitude of tasks, from delving into policy documents and managing emails, to conducting comprehensive analyses and crafting responses. The emergence of Copilots, especially Microsoft's variant, is poised to revolutionize these processes. Open AI, which is a kind of "do it yourself Copilot", and Microsoft Copilot are monumental innovations that will potentially surprise banks with their effectiveness.
The effect will be like giving every RM a personal administrative assistant; one who can simplify credit analysis and policy interpretation. This will be a significant departure from the era of bots and rule engines. Copilots will intelligently analyze requests, align with policies, and present information, easing the RM's responsibilities significantly. Consequently, this transformation will propel Microsoft into a distinctive sphere, potentially elevating the popularity of Dynamics 365.
In fact, Microsoft Copilot could well be the disruptor that banks most underestimate until they witness its full capabilities. Its impact will as revolutionary as the introduction of desk top computers in offices - a transformation that will redefine how banks operate.
Digital trends redefining banking: Expect enhanced personalized services to satisfy evolving customer needs.
Kerim Alain Bertrand
Several digital trends are poised to reshape the banking industry in 2024, driven by a convergence of factors: evolving customer expectations, technological innovations, regulatory pressures, and environmental challenges nudging us towards sustainability.
Personalization and customer experience enhancements will be at the forefront of this evolution. Expect to see the rise of neo-banks and challenger banks that will upend traditional banking.
Furthermore, the extensive application of artificial intelligence (AI) and machine learning will revolutionize operational paradigms. The integration of blockchain and cryptocurrency is on the horizon, potentially reshaping how the world conducts financial transactions.
Simultaneously, the expansion of Banking as a Service (BaaS) and the emergence of open banking ecosystems will create new avenues for seamless financial interactions. These trends herald an exciting phase of transformation, defining the future of banking in 2024 and beyond.
Generative AI is reshaping finance: Expect a financial revolution.
Chief Strategy and Marketing Officer
We see 2024 as a defining moment in the way Generative AI will drive the evolution of the financial industry. It is already emerging as the next phase in the customer journey, (following Cognitive AI and Robotic Process Automation), promising swifter processing and catalyzing novel financial services.
The steadfast migration of financial executives towards AI, in line with Gartner's 2023 surveys, signals a rapid transformation that will disrupt numerous industry domains. Most notably, this disruption will enhance data analysis and insights, risk management, customer experience, regulatory compliance, employee productivity and fraud detection and prevention.
Microsoft Copilot, in particular, is poised to expand into a verticalized, industry-driven virtual assistance platform. This will facilitate faster, more accurate and more productive access to information and services for employees and customers.
We anticipate increased investments in AI R&D by our partners and technology vendors. This is likely to foster deeper collaboration with industry leaders to understand their challenges and co-create tailored solutions.
The ongoing development of Regulatory Compliance solutions, adhering to financial sector-specific regulations and stringent data security standards, will remain a focus. Additionally, comprehensive training and support will play a pivotal role in aiding customers to maximize AI-driven benefits and navigate challenges effectively.
In conclusion, AI-powered innovation will continue to disrupt the financial industry. Independent software vendors (ISVs) will play a pivotal role in empowering financial institutions to harness AI's full potential for growth, risk management, and customer satisfaction. Perhaps we should consider Speech AI as an indication of what is yet to come.
Banking's Phygital Revolution: Integrating Generative AI, Cloud, and Cybersecurity
Chief Customer Officer
Phygitalization (the merger of physical and digital experiences) will emerge as a critical strategy following post-Covid branch closures. Banks will integrate digital and human interactions at upgraded front-end branches, investing in the AI-powered fusion of front, middle, and back offices. This response to evolving customer expectations will emphasize personalized and hybrid service offerings for a seamless omnichannel experience.
Gen AI will reshape the banking value chain. It will enable hyper-personalized marketing content and bolster service chatbots for efficient, accurate responses to customer queries. It will also streamline operations, handling sensitive tasks like document interpretation and compliance reports.
The transition to Cloud will propel banking agility and scalability, empowering institutions to adapt swiftly and innovate while fortifying against potential disruptions.
Cybersecurity will undergo enhancements with tailored protocols and AI-powered fraud detection mechanisms to safeguard data integrity and enhance customer trust against evolving threats.
Metaverse banks already promise deeply engaging experiences, now digital-first neo-banks will champion efficiency and integrated services without traditional constraints.
Open banking is rapidly building bridges between financial institutions and non-banking entities. This will continue to foster innovations, like embedded banking, accelerate the rise of Banking as a Service (BaaS) and expand revenue streams.
Future of Finance 2024: Expect a multifaceted shift with AI insights, SME fintech, and instant decisions.
Sales Director, VeriPark UK
Insights and analytics will take center stage as banks gear up to offer comprehensive spending analysis, leveraging AI to amplify the depth and accuracy of these offerings.
Fintech solutions are poised to revolutionize the underserved SME market, addressing gaps in accessibility and services.
To help customers tackle the rising cost of living, financial institutions will introduce innovative strategies that emphasize financial well-being. This will include using AI to devise compelling savings services and tailor budget models for clients.
The trend of "buy now pay later" faces declining interest, making way for heightened attention on savings solutions that align more closely with customer preferences.
Furthermore, the use of extensive application processes is giving way to instant decision-making across various financial products and services, from mortgages and loans, to account openings. This will streamline and accelerate such processes, so enhancing the customer experience.
These converging trends signal a transformative period that will emphasize inclusivity, agility, and efficiency in the financial sector.
Empowering SMEs: Expect AI to help with unlocking the potential in more businesses.
Managing Director, MEA
First, banks will direct more of their attention towards SMEs than they have in the past decade. This heightened focus stems primarily from the shift in emphasis by various central banks toward under-served segments of society.
This segment has historically been small but is growing rapidly. Banks that recognize the opportunity in this segment will invest significantly in reshaping channels, journeys and experiences for it, not just in the coming year but for the decade ahead. We have already seen this revolution starting in the banks that we feature in our new ebook “Elevating SME banking beyond boundaries: Empowering SMEs with value-added services and personalization”.
This is likely to revolutionize the way that banks incubate fintechs. Many are already poised to invest in new technologies that will expand their services beyond conventional banking.
Second, banks will move aggressively towards consolidating segments, particularly to provide a unified customer experience. Currently, banks may regard a customer as retail for using their branded credit card, private for personal investments, corporate for being company director, and SME for being an entrepreneur. Such individuals who appear in multiple segments may receive a variety of customer experiences that are not consistent with each other or the brand. This service fragmentation seems somewhat ironic considering the ‘know your customer’ regulations.
Third, the strategic use of Generative AI will uncover inefficiencies within banking systems. Presently, banking professionals are burdened with tasks ranging from sifting policy documents and responding to emails, to conducting preliminary analysis, and crafting intricate responses and proposals for different client needs. Generative AI will uncover and then streamline these arduous responsibilities by automating the tedious reading and analysis of policies and emails. This will encourage a shift toward roles that make more strategic and impactful contributions in banking.
There will be no letup in the pace of innovation in 2024. The AI we see today will seem antiquated in a year’s time. Banks and financial services organizations are going to have to collaborate with the best-in-class service providers and software developers to stay ahead of the competition.
Find out how VeriPark can help your business use Generative AI and CoPilots to improve operational efficiency and customer experiences. Read our latest blog on the topic How is Generative AI improving efficiency and customer engagement in financial services?. Or contact us today to arrange a demo by completing the form below.