– Monica Hovsepian, Global Industry Strategist for Financial Services at OpenText
The temperature has finally dropped, the sound of jingling bells is almost in the air, and it’s time for us to reflect on the year that was and look forward to the year ahead.
2023 has been a rollercoaster of a year. There have been a great many challenges, from the continuing cost of living crisis and high inflation to global conflicts, catastrophic weather events and the precipitous rise of artificial intelligence. For the financial services and insurance (FSI) industry, the pressure is on.
Strategic focus has been pulled in different directions to solve new and evolving problems. But the news isn’t all bad. Just as we saw with the pandemic in recent years, challenging conditions force adaptation, and 2023 has seen FSIs adapt further to meet the changing demands of today’s customers. The challenges the industry has faced this year have seen us push forward into a new era for banking and insurance.
So, with 2024 approaching, here are my predictions for how that might unfold.
- Digital transformation continues
This might well have been a staple of predictions lists for well over a decade now, but the feeling within FSIs is that digital transformation is only continuing to accelerate. AI will become more widely adopted, as will machine learning (ML) and automation, enabling FSIs to enhance customer experiences through personalisation, but also optimise internal processes and workflows, driving operational efficiency and ultimately better business outcomes.
- Cyber threats on the rise
Ransomware attacks on FSIs have increased from 55% in 2022 to 64% in 2023, which is nearly double the 34% reported in 2021 – a result of the growing sophistication of technology used by bad actors. All industries are prone to this, but financial services is one of the most impacted sectors and FSIs will be looking first to prevent data breaches at all, but also to minimise the impact of those that do occur. So, in 2024 we can expect to see high levels of investment in robust cybersecurity technology, including the development of advanced threat detection and prevention tools.
- Payments evolving
Mobile payments and digital currencies will spur a continued shift away from cash and card transactions, but it is social commerce that will likely have a more seismic impact in the coming year. The use of social media platforms like TikTok and Instagram to promote and sell products and services saw global social commerce sales hit $492 billion in 2021, a figure that’s expected to nearly triple to $1.25trillion by 2025. This is a more interactive and convenient shopping experience than traditional commerce. It’s a massive trend which isn’t going anywhere anytime soon, and in 2024 we’ll see FSIs evolving and leveraging social commerce as a key part of customer-centric strategies.
- The personalisation imperative
I’ve touched on this a little already with regards to digital transformation, but personalisation is a trend in and of itself. It’s particularly important for Gen Z and Millennial customers, and the advances we’re seeing in data analytics and AI will enable FSIs to further tailor their products and services to individual customer needs, using ever-more granular insights. From customised investment advice to personalised insurance solutions, the focus will be on delivering highly targeted and relevant offerings.
- Sustainable strategies
The aforementioned weather events will continue, and we’ll see increased scrutiny around ESG issues, driving the demand for sustainable investments. This isn’t a regional issue, either. Customers and businesses alike believe in the importance of promoting sustainable behaviour through product offerings, with 71% of Germans, 80% of Austrians and 81% of Swiss consumers in agreement on the issue. Transparency over ESG performance is likely to become more important, and FSIs will start to further integrate ESG considerations into their investment strategies and offer more options for socially responsible investments.
- Greater collaboration, enabled by open banking
Quicker and easier access to capital loans, including personalised options, are key considerations for more than eight in 10 small businesses, as per a recent report by Mastercard. This trend will see open banking initiatives gain further traction in 2024, enabling greater collaboration between traditional FSIs and fintech firms. Facilitating this fusion of traditional models with agile disruptors will result in more innovative services for customers.
- Regulation reigns
As ever, FSIs will continue to face regulatory scrutiny and the need to ensure compliance across multiple jurisdictions. Here, I expect we’ll see FSIs trying to strike a fine balance between innovation and compliance – delivering new products while ensuring consumer protection, data privacy and financial stability. Technology will be key to that – once again, AI and automation will come into play as they assist FSIs in processing and storing data correctly.
Summing it all up
AI and analytics and sustainability will likely remain the hot topics, but ultimately FSIs will be looking to deliver personalised, engaging customer experiences. They can do that by leveraging technology to push forward with the evolution of payments as well as empowering employees with the tools they need to deliver excellence. Meanwhile, on the back-end, investment in cybersecurity will be key in ensuring that FSIs can continue to operate and innovate safely.
It’ll be exciting to see how these 7 trends play out over the course of 2024 as the financial services industry continues its transformation.