From multigenerational bank accounts to banks improving their ESG offerings, 2025 is going to be a truly transformative year as new regulations and business models disrupt the UK banking ecosystem
SaaScada, a cloud-native core banking platform, today released its predictions for 2025, offering insights for the financial services industry.
Steve Round, Co-Founder, expects the following core trends will shape the financial industry in 2025:
- Multi-Generational banking will support families and bolster banks’ balance sheets
Multigenerational households are on the rise in the UK, and next year banks will rush to capitalise on this growing market and reap the rewards of a rare win-win situation. Multigenerational banking offers a huge opportunity for banks to retain, and expand, their existing customer base in a more cost-effective way than traditional, costly new business acquisition.
By lending to younger generations while taking care of savings for the older generations, banks can strike the balance between their growth and profitability – growing balance sheets and keeping net interest margins healthy with a single product. However, to do this effectively, banks must have access to real-time, accurate customer data so they can offer hyper-personalised services that meet the complex needs of a multigenerational customer base.
- Banks will finally begin to understand that ESG isn’t a department, but a way of doing business
In the vast majority of organisations, ESG exists in a vacuum, as a separate team or in the form of CSR initiatives. In 2025, as the industry tries to tackle rampant climate breakdown, banks will start asking themselves: why shouldn’t every product have an ESG element baked in? Even if it comes at the “cost” of a fraction of a percentage point of reduced interest on a banking product to incentivise customers, the benefits of these products will far outweigh their costs.
What’s more, banks don’t need to try to do everything environmentally-friendly all at once. Sometimes grey – making a small move in the right direction – is better than green, especially when perfection is a barrier to progress. Banks can no longer afford to bury their heads in the sand when it comes to values-driven banking. We need to transform mindsets across the industry to support any green innovation. ESG-friendly products aren’t all or nothing, and the media – as well as other banks – must support efforts to drive green banking products forward, even if they don’t cover every base at the same time.
Nelson Wootton, CEO and Co-Founder:
- DORA will push banks to (finally) focus on speed-to-report
As ever more stringent regulatory and reporting requirements push banks to the edge, DORA will be the catalyst banks need to modernise their core systems and overhaul their outdated reporting processes. Long gone are the six-week reporting windows banks are used to, with 24 hour reporting the new norm.
One crucial aspect of DORA for banks is the need to report on 3rd party risk to ensure resilience. Ensuring compliance will be a time-consuming process as banks must vet every technology vendor that plays a part in delivering their banking services, to ensure that their infrastructure remains robust – and fully compliant.
In this new regulatory landscape, those banks – and other financial entities – who don’t move with the times will be buried under increasingly demanding regulations. So, while compliance may hit short-term profits, it is vital for banks to secure their long-term viability. What’s more, while instant reporting may pose financial institutions an additional burden in the short term, the ability to access real-time insights on banking activity also gives banks the tools they need to make more informed decisions and create personalised offerings to secure an increased share of their customers’ wallet.
- Cloud banking will breach the final taboo by making ‘Core Banking as a Service’ a reality
In 2025, the way core banking systems are delivered and consumed is going to change dramatically. Soon, you will be able to spin and swap core banking just as you would your CRM – something that would have been unthinkable 10 years ago, given the critical role core banking plays in the finance world. The move to ‘as a service’ core banking consumption models will signal a major watershed moment for cloud banking – offering banks and fintechs a much more flexible, cost effective and data-driven core to build solutions on.
Core banking systems are the beating heat of finance. Core banking infrastructure enables all the back-end magic that helps banks to process transactions, providing the system of record that ensures that books are balanced, reports are accurate, and the ledger is healthy. But there’s no margin for error in the core. This has made it difficult for core banking to be delivered ‘as a service’ as so many other areas of businesses today are. But we are finally approaching the tipping point. By the end of 2025, early adopters will gain a significant lead on the competition as they move to a “Core Banking as a Service” model.
The move to a CBaaS model will be a game-changer, and unlock huge opportunities for fintechs and challenger banks looking to disrupt the established order. CBaaS gives organisations a self-service way to rapidly build best-in-class banking products, while de-risking the implementation process, and using real-time data to reduce compliance risk and ensure transparency and confidence. All of this combines to create flexible, highly adaptable FS organisations who can meet customer needs as they arise, and carve out their competitive niche.
