End of Year Thoughts – Finance and Banking Themes and Trends for 2024

As we close out a very busy year in the City of London at Wimbledon Park Capital, I would like to offer an insightful overview of the key trends poised to drive these shifts over the coming year and beyond.

2024 promises to be a landmark year in banking and finance, marked by significant changes and transformations. The influence of AI will be pivotal, permeating every aspect of the sector—from revolutionizing customer service to reshaping financial management tools and streamlining back-office operations.

These advancements, when effectively harnessed, have the potential to deliver more efficient, innovative, and cost-effective solutions in banking, investment, and insurance. However, they also present challenges that must be addressed to ensure these changes are implemented safely and ethically.

Generative AI In Fintech

Fintech generally refers to technology that gives consumers more power over how they manage, spend and invest their money. The most visible application of generative AI will be chatbots, with customers increasingly communicating with banking apps and online money services in natural language. Bank of America, Wells Fargo, BlackRock and Citigroup are among the major financial services players that have already launched or announced initiatives around generative AI. Expect to see innovations such as personalized financial planning and bespoke investment strategies based on customer profiles and behavioural data, all thanks to generative models like those powering ChatGPT.

Sustainable Finance

More so than ever before, we expect the institutions we do business with to prioritize sustainability and ESG factors in their decision-making. In the financial services sector, this means supporting investment in green initiatives such as renewable energy, recycling and carbon footprint reduction. Sustainable financial products are emerging, allowing customers to ensure their money isn’t being used to cause harm to the environment or society while it is gathering interest in a bank vault.

Digital And Crypto Currencies

Digital currencies and crypto currencies are firmly back on the radar of financial services in 2024. Over 130 countries are reported to be investigating the use or adoption of central bank digital currencies (CBDCs), while Bitcoin’s recovery from its 2021 crash is attracting renewed interest from innovators and investors. Of course, outside of CBDCs, the crypto-space is still a wild west, so we can also expect further movement towards governance and regulation of those who do business there.

Customer Experience

In 2024, customer experience (CX) will be driven by the emergence of technology that enables every touch point of the customer journey to be analyzed to reduce friction and improve satisfaction. On top of that, new and immersive technologies like VR are starting to provide new, more engaging ways for us to interact and engage. With CX increasingly playing a major role in buying decisions, there’s clearly a direct connection between customer loyalty and business success, and more financial service businesses will prioritize leveraging this in 2024.

AI-Powered Insurance

Thanks to AI and its ability to spot patterns in data, we will see more insurers offering personalized products based on an assessment of an individual’s risk. In theory, a more accurate risk assessment will lead to fairer insurance and lower costs. However, the industry will face challenges around privacy and data protection, as well as the risks of AI bias.

Open Banking

Open Banking is based on the principle of allowing us to take control of our financial data and how it’s used. It makes it possible to securely share information through APIs with other applications, services or tools that can provide us with useful services. In 2024, it will be a key trend as we become more aware of the importance of understanding who has our data and what they’re doing with it, as it also encourages service providers to engage in competitive innovation.

Cyber-Security And Fraud Detection

The escalating frequency and complexity of cyber threats and the ongoing AI arms race between cyber criminals and organizations means cyber security will continue to be a key trend. Countering these threats requires strategy and ongoing investment in tools, infrastructure, and skills. This is why Gartner forecasts that worldwide spending on security and risk management will reach $215 billion in 2024 – an increase of 14.3 percent on 2023.

Process Automation

Automating manual and repetitive elements of back-office processes will continue to drive efficiency and transformation in 2024. Tasks such as on boarding new customers, processing routine transactions, document verification, KYC checks and compliance will increasingly be managed by AI.

Blockchain Banking

We haven’t heard too much about blockchain over the last year, as we’ve all had our heads turned by generative AI. However, distributed ledger technology is becoming increasingly commonplace in financial services. Researchers predict that spending will hit $19 billion in 2024, up from $4.5 billion in 2020. Aside from cryptocurrencies and digital currencies (see my points above), we are likely to see more use cases for blockchain around creating smart contracts, establishing trust, streamlining payments, and authenticating transactions.

Regtech

Regtech refers to the integration of technology into tools designed to help banks and insurers deal with compliance and regulation. It includes using tools like AI, blockchain or cloud computing to conduct compliance tasks. It will become more prominent in 2024 due to the growing complexity and volume of regulatory requirements in financial services, particularly regulations involving personal data and privacy.

These emerging trends in banking and financial services not only promise a transformative journey but also highlight the critical balance between innovation and responsibility, setting the stage for a future where finance is not only more efficient and customer-centric but also more ethical and inclusive.