Future-Proofing Banking: 5 Emerging Trends For 2024 and Beyond

In the evolving financial landscape, technology adoption is the cornerstone of a customer-centric approach, transforming how financial institutions operate, engage with clients, and navigate the intricacies of a rapidly changing global economy. As the traditional brick-and-mortar paradigm gives way to the tech-driven ecosystem, it becomes imperative for banking institutions to anticipate the emerging technology trends that will shape the sector in 2024. From quantum leaps in computing power to self-healing cybersecurity defenses and conversational AI finance advisors, here are five key trends that will empower the banking industry to transform customer experiences, uncover opportunities, and gain competitive advantage for growth.

What to Expect in 2024: Five Key Trends

Open Banking APIs Enable Secure Financial Data Sharing and Innovation

Open banking is a practice of securely sharing customer financial information electronically through APIs. It breaks down data silos between institutions and opens the door to more financial transparency, control, and flexibility for account holders. It allows customers to analyze spending habits across accounts, access a broader range of services from fintechs, easily switch between providers, and authorize specialized apps to initiate payments and transfers in a secure, regulated environment. Banks, in turn, benefit from reduced overhead in customer acquisition, product development, and meeting compliance standards. In 2024, more banking executives will look to invest in open banking capabilities for improved customer experiences, joining existing API-based platforms, standardized sharing protocols, and fostering cross-industry partnerships across payments, lending, and wealth management.

Automated Cybersecurity Bolsters Real-Time Threat Detection

As digital finance expands, the threat landscape for cyber attacks targeting banks and their customers is rising. Losses attributed to cybercrime are expected to reach over $10.5 trillion by 2025. With the evolving threat landscape, AI and machine learning are poised to be at the forefront of cybersecurity defense mechanisms. Automated tools can rapidly comb through millions of data points to identify intrusions or suspicious activities in real-time. Cloud-enabled platforms can enact protocols like shutting down breached endpoints, neutralizing threats with deception technology, and instantly enacting patches before attackers take advantage of vulnerabilities across entire networks. With startups like DarkTrace and TrapX Security scaling intelligent cybersecurity automation, leading banks are expected to fully embrace automated prevention, threat hunting, and incident response through 2024.

Distributed Ledger Technologies Enable Transparent, Resilient Banking

Distributed ledger technologies (DLTs) like blockchain and shared tamper-proof ledgers can help banks control their spiraling infrastructure costs, optimize capital requirements, prevent financial crimes, and operate with greater resilience to economic crises stemming from opaque systemic risk factors. Specific banking use cases benefiting from DLT adoption include cross-border payments, real-time settlements, complete transparency into fee structures, automatic tax and regulatory compliance, reduced reconciliation efforts, and embedded smart contracts to trigger instant secondary financial movements related to commercial transactions. With consortiums like R3 leading the way in bringing competitors together onto common DLT frameworks specifically for finance-related data sharing and transactions, major global banks like Citi, JPMorgan, and HSBC have invested in permissioned blockchain and DLT networks to enable improvements spanning efficiency, security, compliance, and cost reductions. As blockchain platforms scale from proofs of concept into live production systems across banking giants through 2024, consumers will gain quicker, more convenient access to global capital through seamless transaction flows.

AI-Driven Credit Decisioning Boosts Scalability For Financial Services

Advanced statistical models and machine learning techniques can integrate and analyze thousands of unique data points to assess customer risk, responsibility, and creditworthiness for customized lending amounts, terms, and pricing rates beyond traditional standardized credit score factors. Datasets evaluated by AI engines can extend beyond regular credit reports to contain elements ranging from bank account cash flow metrics, investment portfolio risk factors, insurance scores, payroll information, e-commerce transaction DNA, rewards program engagement levels, academic scores, and even social media patterns. By pulling insights from expansive datasets, AI credit-decisioning requires fewer supporting documents from applicants once initial identity verification meets compliance standards. As predictive models improve continuously through machine learning in 2024, AI-driven automation can reduce processing costs per lending application evaluation, enabling the inclusivity and scaling of financial services.

Embedded Services Drive Seamless Financial Capabilities

Embedded finance represents the convergence of fintech innovation and banking-as-a-service to drive immense success by meeting customers where they engage digitally. Rather than basic patent referral links to apply for financial offerings, embedded services allow partners across sectors like retail, gig platforms, eCommerce, travel, and healthcare to seamlessly provide tailored financial products within customer engagements and software environments. For banks, API-driven embedded services represent new customer acquisition channels, enable increased transaction volumes as more moments go digital, and foster loyalty for partners that integrate financial capabilities. For instance, customized point-of-sale installment loans, buy now pay later credit lines, account opening, or cross-border remittance functions into platforms where customers spend time, financial products become more convenient, frictionless, and personalized to individual situations. As open banking data sharing continues expanding in secure, regulated ways, embedded finance will bridge more touchpoints in 2024, enabling banks to generate insights from non-financial datasets to improve underwriting and personalization.

Gearing Up For the Future

As technology advancements and fintech disruptions redefine the financial landscape, Banks that balance pragmatic adoption to drive value for customers and businesses with transparent and responsible innovation will harness immense opportunities. While challenges exist around factors like quantum skill shortages, standardization, interoperability, and responsible technology development, partnering with technology leaders such as TTBS can help banking institutions focus on pragmatic technology adoption and integrations with flexible systems while ensuring data transparency, ethics and societal impact. Embracing these trends will enable institutions to go beyond transactions and establish ethical and resilient foundations for an interconnected, secure, and socially responsible banking future.