GFT: Where will digital banking take us as we approach 2024?

In this exclusive interview, we ask GFT UK’s Head of Banking, Shilpa Doreswamy, where digitalisation will take the banking ecosystem as we approach 2024. 

How much will digital transformation accelerate further in 2024? 

Digital transformation in banking is poised for continued growth throughout 2024, driven by evolving consumer behaviours and expectations around digital financial services. Key trends that will shape the pace of change include:

• The adoption of digital payment methods such as mobile wallets, contactless cards, and peer-to-peer platforms will continue to rise. We can also expect more traction for cryptocurrencies and central bank digital currencies as investments ramp up in payment infrastructures.
• Creation of hyper-personalised customer experiences through the use of AI and advanced data analytics to provide tailored financial advice, offers and customer support through digital platforms. Leveraging AI and machine learning for data-driven decision making will also become pivotal. Use cases around customer acquisition, personalised product recommendations, real-time fraud prevention and process optimisation will expand.
• Open banking ecosystems have allowed for collaboration between traditional banks and new players in the market, facilitating further innovation opportunities to develop more personalised and user-friendly customer experiences, apps and products. 
• Cybersecurity measures will be paramount with the growth of digital services. Banks are likely to invest heavily in consolidating systems, enhanced biometric authentication and other controls to ensure data and transaction safety.

In summary, those banks that are prioritising meeting customer demands for digital-first, personalised, seamless and secure financial experiences will set the pace of digital transformation in banking throughout 2024.

2023 has seen AI take some massive forward bounds. How will this speed up further in financial services in 2024 and what impact can employees expect?

In 2024, financial services organisations will need to grapple with the challenge of realising the full value of generative AI due to continued widespread use of legacy systems and the highly regulated environment.

A key challenge is likely to be the inadequate data governance and management capabilities required to fuel AI initiatives. Where there has been an unwillingness to make strategic investment in their data capability previously, executives will now have fresh motivations to drive them forwards to harness the power of AI.

This may create some internal tensions, due to expensive new AI teams absorbing budgets whilst existing data teams are tasked with enabling AI with limited resources.

Organisations that can quickly develop AI-ready data architectures, processes and teams will sprint ahead and realise the benefits of doing so in 2024. However, they will most likely struggle to capitalise on generative AI's potential due to data deficiencies holding back progress.

Legacy environments combined with data gaps and silos, will make applying cutting-edge AI difficult despite executive eagerness to see returns on AI investments. Structural data issues will need resolving to match the promise of generative AI with real-world implementation.

How much will open banking become more entrenched?

Open banking brings with it the opportunity to foster greater innovation, personalisation, and collaboration. As banks open up their APIs and customer data to third parties, we will see open banking become further entrenched across several dimensions:

• Open banking will enable superior payment experiences, with instant transfers, streamlined recurring payments and integrated peer-to-peer transactions becoming the norm.
• Aggregating financial data through a single platform will also empower customers with a comprehensive view of their finances that will support smart decision-making.
• Advanced fraud detection techniques will be enabled through open banking, leading to upgraded security and safety for the customer. In addition, enhanced credit scoring from open data will facilitate more customised lending offers.

As consumer expectations of banking shift, open APIs and data sharing will allow banks to deliver more innovative, customised and integrated experiences, the demand for which is currently on the rise. This will spur open banking adoption across core banking services and drive the industry towards a more collaborative and creative future.

Despite technological uptake, payments still need to be improved. How much will reducing payment friction be at the forefront of FI’s agendas in 2024?

A key focus will be continuing the growth of embedded finance, with ‘buy-now, pay-later’ and other seamless purchasing integrations leveraging open banking to become mainstream.

Reducing friction in payments will be a top priority for financial institutions in 2024, amid rising consumer expectations for faster, smoother transactions. Streamlining compliance through AI-powered fraud checks and data standardisation will also expand to further cut ‘false positives’, accelerate valid payments and ease friction. 

Modernising legacy systems long overdue for updates will finally gain momentum, decreasing errors and manual oversight. The adoption of payment-as-a-service solutions and bank/fintech collaboration will also accelerate legacy improvements.

For those who can afford to look further ahead, exploring central bank digital currencies and decentralised networks will allow forward-thinking institutions to pave the way for frictionless cross-border and currency-agnostic future payment rails.

Overall, reducing payments friction will be crucial for delivering the fast, integrated digital experiences that consumers demand. From back-end infrastructure revamps to transparent new payment types, expect payment friction elimination to top agendas across the financial sector in 2024 and beyond.

What other digital transformation trends are you expecting to see in 2024?

In the banking industry, digital transformation continues to evolve, with several unique trends gaining momentum. Banks will continue to invest and explore avenues to innovate and build on their tech landscape and strategies. 

Some of the key trends to watch for are the exploration of decentralised Finance (DeFi) platforms and blockchain technology, which have the potential to revolutionise secure transactions. There will also be an increased focus on financial inclusion, leveraging mobile and digital solutions to reach underserved populations. And whilst futuristic, the possibilities of quantum computing could be game-changing for risk management and calculations in the long run.

2024 will be a year of continued innovation, with banks taking a proactive and strategic approach to adopt quick wins from emerging technologies, as well as continuing to explore longer-term innovations that benefit both the institution and its customers.

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