The world of finance is changing fast. With a projected 3.6 million people worldwide using digital banking by the end of 2024, and 94% engaging in mobile banking every month, it is no longer just an option but a must for financial institutions to keep up with the rapidly evolving technology to thrive.
In this article, we look at the top 10 trends for 2024 that will shape financial institutions in the USA.
Changing consumer demands will be a driving force in shaping the priorities of banks and financial institutions in 2024. Consumers now expect immediate gratification at every level of service. This trend will prompt financial institutions to strive for services with minimal entry barriers, emphasizing accessibility, choice, reliability, and availability.
ISO 20022, a global messaging standard reshaping the financial services landscape, is scheduled for migration into the U.S. Fedwire Funds Service by March 2025.
ISO 20022 is planned to structure payment data, automate functions, and enhance fraud prevention. This transition is a significant departure from decades-old messaging formats and banks will be urged to adopt it in 2024.
The challenge will be the complex migration of data, where up to 2,000 different fields and elements must be considered. Despite the obstacles, ISO 20022 adoption is being viewed as a catalyst for banks to reassess their systems and streamline their operations by adopting a unified messaging format across multiple platforms.
Open banking, although not a new trend, is becoming more popular. 2024 will see more application programming interfaces (APIs) become available. This trend is pushing companies to be more creative in this area. For instance, Apple Pay recently introduced its open-banking solution, showing a stronger commitment to improving customer experiences and making payments smoother.
AI will play a significant role in 2024, helping to drive efficiency in banking operations such as process automation and even credit scoring. It will help with tasks like creating computer code and making personalized experiences for users through sophisticated chatbots. It is expected to be used to help fraud detection and risk management as well as help improve investment strategies.
Traditional payment methods may see a decline with the growth of alternative payment methods such as FedNow, eCash, and digital wallets set to increase in popularity as financial institutions seek to cater to diverse consumer needs. This shift reflects the ongoing efforts to provide more inclusive and user-friendly payment options.
In 2024, banks and financial institutions are expected to respond to the increasing consumer awareness of environmental and social issues. The financial sector will be urged to move beyond simple promises and take meaningful measures to contribute to the fight against the climate crisis. Consumer expectations will drive a commitment to environmental, social, and governance (ESG) agendas.
Central Bank Digital Currencies (CBDCs) are anticipated to be a key aspect of banking in 2024. Unlike cryptocurrencies like Bitcoin, CBDCs are digital currencies regulated by central banks. They aim to combine the stability of traditional finance with the advantages of modern digital tech, making payments smoother, reducing costs, and increasing financial access.
Cyber threats are getting more advanced, especially with a notable increase in ransomware attacks on financial services from 55% in 2022 to 64% in 2023, with the USA among the top four affected countries. As financial institutions shift towards digital operations, preventing and minimizing future attacks is a top priority. Expect increased investments in strong cybersecurity measures and the development of advanced technologies for detecting and preventing threats.
2024 will continue to see more and more people moving away from using cash and checks for payments. The shift is happening because digital payment options are seen as easier and more secure. In our digital world, consumers’ behaviors and preferences are changing, further contributing to this trend. While digital payment options have many advantages, there are still obstacles to overcome before completely replacing cash and checks. Apart from the expenses associated with credit card payments, a significant challenge is making sure that digital options are accessible to everyone, regardless of income or technical knowledge. Privacy and security concerns may also make some individuals reluctant to transition to digital payments.
Looking further ahead, quantum computing emerges as a potential game changer in the financial industry. The ability to perform computations faster than current technologies presents exciting possibilities and challenges. Quantum computing, combined with other advancing technologies such as AI and robotics, offers a glimpse into a future that holds the potential for massive transformation, albeit with concerns about security and ethical considerations. Careful consideration and strategic planning will be essential to maximize its benefits and mitigate potential risks.
Embracing technological advancements in 2024 isn't just a choice but a strategic necessity. Whether it's enhancing security measures, streamlining operations, or building seamless user experiences, understanding and using new banking technologies are the keys to a secure, efficient, and user-friendly financial experience. Get in touch to see how we can help.