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Top 10 Banking Trends and Challenges in 2024

Blog

December 15, 2023 | Jonathan Pryer

What to watch for in the year ahead

As we make the leap into a new year, the banking sector continues its transformation. From evolving lending practices to new competition, and changing fraud risks and compliance needs, banks are constantly adapting to a shifting landscape. We’re looking ahead to 10 trends and challenges to watch for in the coming year. 

  1. Increased Regulatory Scrutiny: With global financial regulations becoming more stringent, banks will also face increased compliance demands. Effectively adhering to these evolving regulations, especially in areas like Anti-Money Laundering (AML) and Know Your Customer (KYC), remains a top priority.
  2. AI and Machine Learning in Fraud Detection: Artificial Intelligence (AI) and Machine Learning (ML) are becoming indispensable in detecting and preventing fraud. Banks who are able to successfully leverage these technologies can better anticipate and mitigate fraud risks.
  3. Changing Landscape of Lending: The lending market is constantly shifting, with new types of financial services regularly emerging, including things like Banking as a Service (BaaS) and peer-to-peer lending platforms gaining traction. According to Acumen, the global P2P lending market size is set to grow to over $800 Billion USD by 2030, with a CAGR of 29.1%. 
  4. Digital Banking Adoption: Digital banking is no longer a luxury but a necessity. Over 90% of consumers view digital banking as an important factor in their choice of bank. Convenience, lower fees, ease-of-access and use, streamlining all of your financial services – the advantages are practically endless.
  5. Onboarding Innovations: Streamlining customer and merchant onboarding processes is crucial. Integrating advanced technologies (for example, biometric verification) can significantly reduce onboarding time and reduce friction in the customer experience.
  6. Data-Driven Decisions and Hyper-Personalization: Personalized banking services are becoming a key differentiator. “According to a study by McKinsey & Company, banks that successfully use customer analytics to improve customer experience can increase their customer satisfaction scores by 20% and their revenues by 15%.” Using advanced data analytics and a wider variety of data sources integrated into credit decisioning also enables more accurate risk assessment and the ability to (safely) say yes to more customers. 
  7. Sustainable and Ethical Banking Practices: Sustainability and ethical practices are increasingly influencing consumer choices. Banks adopting green policies and transparent operations are likely to gain customer trust and loyalty.
  8. Effective Collections Strategies: With economic uncertainties, effective collections strategies are vital. Employing empathetic and customer-centric approaches in collections can improve recovery rates and customer relationships, and using a holistic risk decisioning solution can help you identify the best treatment strategies and most effective communication channels. But it can also help your pre-collections strategy, with embedded intelligence enabling you to be proactive in predicting potential defaults and minimizing loss.
  9. Emergence of New Competitors: The banking sector is witnessing the continued growth of non-traditional players like fintechs and tech giants. Banks need to innovate continuously (and explore more inventive partnerships) to stay competitive in this evolving market.
  10. The Continued Rise of Buy Now, Pay Later: Last but certainly not least, our favorite industry-disruptor, BNPL, comes to play. While widely popular because of its simplicity and convenience, BNPL is also a way to tap into some of the more underserved market segments. Banks that can integrate BNPL into existing banking services can help ensure a more comprehensive (and competitive) financial solution to customers – and enable penetration into a wider customer base.  

2024 could be a pivotal junction for the banking industry – and the financial services industry as a whole –  where embracing change and innovating risk management strategies will be key to staying relevant and successful. Understanding these trends and adapting to the challenges at hand will be crucial for banks to thrive in this dynamic landscape.

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