The start of 2024 brings uncertainty in financial services due to rapid technological advancements, high interest rates, inflation, and the need for real-time adaptation in banking and capital markets
The start of 2024 raises many doubts about what to expect in the coming year, particularly in the financial services business, where technology advancements have exploded, adding complexities to an already chaotic scene. While high interest rates and inflation concerns continue into the new year, financial services trends indicate that it is critical to prepare for big changes in real time by remaining current on all financial services-related problems, especially those affecting the banking and capital markets sectors.
Embracing technological advancements
Hyperautomation uses robotic process automation (RPA) and AI to automate complex business processes from start to finish. Banks can automate rule-based and repetitive processes, including document processing, customer onboarding, and data entry. Automating certain procedures can help banks increase operational effectiveness and free up staff to work on higher-value products.
Adoption of sustainable finance
Banks are increasingly adopting sustainable finance primarily due to shifting consumer preferences, particularly among younger generations who prioritise environmental and social responsibility. This demand presents an opportunity for banks to differentiate themselves in the market and attract a larger customer base. Additionally, integrating sustainability considerations into their operations helps banks mitigate financial risks associated with climate change and other ESG factors. Regulatory pressures and evolving standards further drive banks to comply with sustainability reporting requirements and stay ahead of potential penalties. Embracing sustainable finance also enhances a bank's reputation, fosters customer trust, and attracts investors, ultimately leading to long-term business success. Furthermore, by prioritising sustainability, banks may access capital more easily, attract investment at favourable terms, and benefit from lower funding costs, improving overall profitability.
Increased regulatory compliance
Banks are facing tougher regulations, which means they have to spend more money to comply with the rules. Over the past eight years, the cost of meeting these regulations has shot up by over 60%. This leaves banks with little money to spare for other things. Despite these high compliance costs, other economic factors, like interest rates and slow revenue growth, are squeezing banks even more. However, banks are finding ways to cope. They're focusing on efficiency, using technology to streamline processes, and exploring new revenue streams to offset the impact of these challenges.
Fintech collaboration
As we move into 2024 and beyond, this partnership has both flourished and blurred traditional boundaries, presenting new opportunities and challenges for the financial industry. The relationship between banks and fintech has become more dynamic. Banks now seek fintech partners that can provide agile solutions, enabling them to launch products and services rapidly to meet evolving customer demands.
Fintech neobanks operate digitally, providing basic banking services without any physical branches. These digital financial companies are taking cues from traditional big banks and offering fewer fees and more transparency as compared to traditional banks. These fintech startups are transforming the way people bank, save, and spend.
The following are examples of this.
Current
With the digital banking services offered by Current, customers can use their mobile devices to access resources for cryptocurrency trading, saving, and credit development.
Cash app
The Cash App platform allows users to pay taxes and invest in stocks. It is essentially fee-free and allows users to almost completely avoid using traditional banking services.
Capital One
Through Capital One, users may pay with credit cards, monitor account balances, view available credit, and check transactions.
Ultimately, the future direction of this collaboration hinges on the ability of banks and fintech to navigate the shifting landscape, embrace emerging technologies, and prioritise customer-centricity in their offerings.