Around this time each year, the fintech (financial technology) world polishes its crystal ball, casts its eyes down and attempts to describe the next great revolution that will define the 12 months ahead. The temptation is to push far in one direction or the other — play it safe or go wild and reach for the outlandish. Banks on Mars by August!
While we can promise there won’t be any Martian cash machines in this article, here’s what we think will be the biggest trends in banking and financial technology over the next year and beyond.
Evolution, not revolution
The biggest trends in 2024 may not involve explosive new arrivals — more on that later — but will likely be continued evolutions of trends touted in 2023 that perhaps didn’t reach their potential.
First, embedded payments. Fintech companies will continue to expand new embedded payment solutions — not just evolving payment gateways or solutions such as digital wallets but pushing for greater levels of integration of payment services into traditionally nonfinancial-services platforms. The benefits of embedded payments have long been touted — bringing together financial products with features such as loyalty schemes to offer greater added value to consumers — and this will become more pronounced in 2024.
Another area that will continue to develop in 2024 will be decentralized finance. Around this time last year, decentralized finance, specifically NFTs (non-fungible tokens), was viewed with excitement, with big improvements in 2023 expected. And while there has been significant adoption in this space, there have also been some stiff headwinds, such as increased regulation. In 2024, it will be no surprise to see companies get to grips with the new regulatory requirements and continue to build on this rich promise.
And it would be remiss to leave out open banking. While it’s not a new trend, it is building real momentum. It will be exciting as more APIs (application programming interfaces) become available and companies develop new solutions in 2024. We’ve just seen Apple Pay roll out its open-banking solution, for example, and organizations will continue to do more in this space to enhance customer experiences and reduce friction in the payment ecosystem.
And while these trends will continue to develop and shape banking and fintech over the next year, there is still one rather large elephant in the room: artificial intelligence (AI).
AI will create efficiency — and risk — for fintechs.
While most predictions are based on industry insights and perhaps a little guesswork, sometimes a tool, trend or technology arrives that nobody could ever have seen coming.
In 2022, AI was on the radar of every industry (and had been used in payments for many years), but ChatGPT’s arrival suddenly pushed a blossoming trend into full flower. It wasn’t just ChatGPT’s ability to help with a child’s homework that made it so monumental. It was taking AI — a tool that was once too expensive or complex for anyone other than data scientists — and making it accessible to anyone.
In 2024, we’ll continue to see fintech organizations use new ChatGPT (large language) models to drive productivity, whether in code generation, writing corporate materials or more. The cost savings could see profitability built back into business services — adopting increasingly sophisticated chatbots, for example, to give consumers more personalized experiences.
In payments, AI can help streamline the payment flow or quickly establish the most accessible or useful payment option for a particular consumer and present it to him or her. With this in mind, I expect the payment experience to become almost invisible to many consumers in 2024.
Increased collaboration between financial companies in 2024
AI will also make security even more of a priority for banking and fintech organizations in 2024. After all, increasingly advanced technology is now being placed in the hands of far more people. Those who were potential cyber-risks but lacked the expertise to breach a business now have immediate access to tools that can bypass early biometrics.
And while AI can help security teams battle these intrusions — for example, using natural language processing (NLP) to feed models with different data sets to counter bad actors — more is required. This is why we expect greater collaboration between financial companies in 2024 as they work together to improve cyber-risk mitigation.
This is a healthy step for the industry, provided businesses can share data in a way that is legal and aimed toward a positive purpose. Collaboration could help the industry reduce risks and evolve anti-fraud, anti-money laundering (AML) and cybersecurity measures.
If one financial organization gains intelligence on a cyber group, for example, this could be shared with other companies to protect against bad-money movements. But to see these benefits, there must be an evolution in the thinking around data governance. This is a challenge with which the industry will grapple in 2024.
Delivering greater access to everyone, everywhere
While the shifting sands of technology will drive trends in 2024, changing consumer demands will arguably be the greatest factor shaping banking and fintech in the year ahead.
It’s well understood that consumer demands have changed. With mobile devices giving consumers the world at the tip of their fingers, banks and financial organizations must cater to immediate demands and deliver instant gratification. This will see banks and financial institutions continue to strive to deliver services with the lowest entry barriers.
In addition, financial organizations will need to meet consumer demands for greater accessibility. How do you enable remittances and cross-border payments for underbanked populations, for example? How do you make digital payments and financial services accessible to everyone?
This means delivering more choices along with reliability, security, and availability. This is why we may see traditional payment methods such as debit and credit cards stop being the norm and witness the growth of alternative payment methods that cater to everyone, everywhere, such as eCash and digital wallets.
Finally, in 2024 and beyond, it will become increasingly difficult for banks and fintech companies to ignore the social and environmental demands of consumers, who are becoming better educated on how businesses support ESG (environmental, social, and governance) agendas and will pressure the services they use to drive meaningful change.
As a result, banks and fintechs will need to stop simply talking about change and act on it, delivering meaningful measures to contribute to the fight against the climate crisis.
A quantum leap
While it’s useful to look ahead through the next 12 months, it’s also important to glance further ahead and consider what could define the fintech industry over the next few years. This is where quantum computing comes in.
The ability to perform computations exponentially faster than ever before is a truly exciting (and slightly frightening) possibility. Whether employing it to crack cipher codes or bad actors using it to disrupt ecosystems that have been stable for years, quantum computing could be the next great shift in the fintech landscape.
Combined with other burgeoning technologies, such as AI and robotics, quantum computing offers a glimpse of a future that could be more exciting than we can imagine.