The start of 2024 brings forth many questions as to what we can expect in the year ahead, especially in the financial services industry, where technological advances have skyrocketed and added complexities to an already turbulent landscape. While high interest rates and inflation concerns are carrying over into the new year, financial services trends signal to prepare for major changes in real-time by staying up-to-date on all financial services-related matters, including in banking and capital markets sectors.

This coming year, emerging technologies, such as automation and efficiency, are expected to come to the forefront. While the Covid-19 pandemic is mostly behind us, the landscape of work in the financial services industry is still in a hybrid environment. Therefore, organizations have continued to invest in remote and in-person work, and this is continuing in 2024.

Generative AI is expected to be the most influential trend permeating the entire financial services sector of 2024. From reshaping the customer experience to bringing forth wealth management tools, the financial services sector will be at the helm of managing the lasting impact artificial intelligence (AI) will have on organizations and people. In this blog we’ll breakdown trends likely to come out of these major technological advancements plus other trends including sustainability, cybersecurity and the return of crypto.

Listen: The Art of AI featuring a Financial Industry perspective with Citigroup

Trend: Generative AI

One of the, if not the, biggest technological advancements made in 2023 was generative AI. The advancements made in tech since the pandemic have boomed and ultimately changed the financial sector. This is something we’re likely to see more of this year. Specifically, the influence on fintech and the application of generative AI on chatbots is expected to grow this year through banking technology, such as apps and other online money services, which could produce new revenue streams.

What generative AI has done is open a new world of innovations that can help personalize financial planning and investment management. One example of this is in insurance. Since AI has an ability to find trends in data, AI helps insurers create personalized products which could lead to more accurate risk assessments and ease insurance costs for individuals. This is one of the key financial services trends of the year and will very likely be the driving force of change throughout the industry.  

Listen: Banking Transformed – How Generative AI will revolutionize Financial Services

Trend: Hybrid cloud technology

New technology can be exciting, but it brings forth new challenges as well, especially when it comes to regulations and compliance. Tools such as cloud computing are likely to be more and more popular as we get further into the year and more organizations see the benefits of a having access to infrastructure, applications, servers and more on-demand via the internet. New technology and the growth of AI bring into question personal data and privacy concerns, which will ultimately change the regulatory requirements in financial services.

More organizations will likely be transitioning to hybrid cloud models for their workloads and to further manage and conduct compliance tasks. It’s important to recognize that hybrid cloud by default is different than hybrid cloud by design. Happening upon a hybrid cloud infrastructure doesn’t mean an organization is getting the greatest in efficiency, functionality or scalability.  Therefore, financial institutions need to keep an eye on digital transformations and the integrations needed to support growth and competitiveness in a curated hybrid cloud environment.

Learn more about hybrid cloud for financial services

Trend: Cybersecurity risk management

AI brings about more challenges, especially when it comes to cyber risks. There have been and will likely continue to be cyber threats that are only getting more and more complex as technological advancements continue. Mitigation efforts and having the proper risk management tools will be vitally important as threats increase. An investment in the tools and infrastructure to combat such threats is likely to occur in 2024. The need for increased fraud detection will also be important to watch in the coming year as more and more financial institutions try generative AI.

Trend: Sustainability

A key trend likely this year is a greater focus by financial institutions on sustainability efforts and ESG consideration. Organizations within the financial services industry will be nudged to support the investment in green initiatives more than ever before. Renewable resources, recycling and reducing the carbon footprint are among the initiatives organizations are expected to prioritize.

Separately, providers are more drawn towards partnerships with sustainable financial products as customers put more thought into where their money is being used.

Trend: Customer experience

One true benefit of AI-powered technology is the customer experience, or CX. Now, customer experience is also often referred to as customer experience management (CXM) as strategies and technologies to improve business results emerge. An example is watsonx Assistant, which uses natural language processing (NLP) to help with digital transformation and build AI-powered chatbots. New technology can analyze almost every detail of a customer’s interactions, which can enhance customer loyalty and increase satisfaction over time. Financial service providers are now capable of increasing functionality and leveling customer expectations thanks to these new technologies.

Explore how IBM watsonx Assistant helps transform digital banking experiences

Trend: Open banking

The premise of open banking is it provides secure access to a customer’s financial data from traditional banks and other financial institutions using application programming interfaces, also known as APIs.

The use of open banking is expected to increase as customers seek to take control of who has access to their data. APIs may likely become the preferred method to help banks connect technologies to their internal systems and streamline processes.

Trend: Digital currencies

Generative AI and the hype around it knocked cryptocurrencies out of the limelight, but crypto is expected to make its return in 2024. The financial services sector has seen a major shift to online banking methods and managing assets, like credit cards, all in an online setting.

Separately, blockchain is also likely to come back into the picture. The shared system of record will become more important to managing confidential information and transactions.

Embracing financial services trends with IBM Consulting

Financial institutions that used to compete based on back-office efficiencies are now competing based on front-office customer experiences. IBM Financial Services Consulting helps clients respond rather than react to this inversion of the traditional financial services industry business model.

Our expertise in modernizing digital core systems for banking has helped our clients realize cost-to-income (C/I) ratio improvements greater than 14% and total cost of operations (TCO) savings averaging 20-30%. IBM Consulting’s deep industry and technology expertise generates outcomes critical for healthy financial performance focused on three core client imperatives: growth, efficiency and compliance.

Essential to the modernization of financial services companies, our world-class IBM Payments Center provides end-to-end payment solutions to enable the agility, security and scalability needed in an ever-growing, partner-centric payment ecosystem.