Digital banking trends: get ready for 2024

Digital business models will shape the future of the banking industry. Digitalization is already leading to changes in customer behavior and preferences for many traditional financial services. Digital transformation has also triggered a new wave of competition among traditional service providers. Banks are under increasing pressure to transition to becoming 'digital first' organizations in order to remain competitive.

In 2024, we will see many banks morph into pure technology companies that offer digital solutions by leveraging their extensive customer base and large distribution channels.  

What digital banking technology trends will shape the future of digital transformation in banking? Here are our predictions:

1. More consumers will prefer digital channels over contact methods

More and more consumers prioritize digital solutions when choosing their financial provider. Not only because they want to see which products they offer, but also because they prefer to use digital channels (e.g., online/mobile banking) over contact channels (e.g., in-branch or by phone).

This digital banking trend will continue gaining speed in the foreseeable future, leading to many banks closing entire segments of their branch networks as their "digital maturity” grows.  

2. Banking is becoming an experience-oriented industry

In the future, customer experience is expected to be a key differentiator for financial services providers both in terms of brand and for attracting and retaining customers.

Many banks prioritize customer experience during their digital transformation, ensuring the solutions they design will meet all customer needs in terms of convenience, security, comfort, and engagement.

Customers are already expecting more personalized offers, including the use of their feedback and preferences to build a service that offers them even more convenience. In 2024, the ability to anticipate customer needs and provide great experiences will differentiate banks from their rivals.

Advanced analytics applied to customer experience expands service quality while reducing costs. Soon, advanced analytics will improve banks' knowledge of their customers so much that they will have the ability not only to customize offers but also to anticipate needs and boost service quality.

Banks cannot afford to be left behind in this digital banking trend. They need to transform themselves into customer experience-driven institutions that can inspire customers to stay loyal and reward them with their business.

3. Open banking amps up the competitive pressures

While open API banking is still in its early stages, it promises to transform banking as we know it. Open APIs allow banks to share data with third party service providers, known as "fintechs." These apps are making transactions easier, faster and more secure through digital platforms.  

Open Banking APIs have already been adopted by some pioneering US and European banks, which have seen impressive results. As the boundaries between banking and other financial services providers continue to blur, APIs will become an effective tool for banks to create new opportunities in cross-selling products or transactions.

Open APIs are expected to facilitate data sharing between financial institutions, third-party service providers, and customers. The resulting integration could result in faster innovation and better customer experiences for banks and their customers.

However, security will be a major challenge for open APIs, as financial institutions need to ensure that they can provide the necessary protection for customer data without slowing down the API workflow. For example, adding time-consuming manual verification steps during the API process could necessitate additional security measures to prevent hacking.

In 2024, open APIs will likely still be the preferred choice for banks and third-party providers. However, developers may also see a benefit in focusing on closed or hybrid APIs as a way of protecting their own data from being exposed by external parties. Closer collaboration between financial institutions and developers is expected to help both sides find the best approach for integrating their technologies

4. AI will make banking smarter with chatbots and virtual assistants

In 2024, we will see many banks morph into pure technology companies that offer digital solutions by leveraging their extensive customer base and large distribution channels. Even in areas such as fraud detection and compliance, banks aren't able to stand up to pure technology companies that have access to advanced analytics and can crunch huge quantities of data.

In 2024, natural language processing will be the norm for customer interaction. The rise of chatbots and virtual assistants is already making waves across industries, but it's their ability to adapt that makes them really valuable in banking.  

Banks should look at leveraging this technology to provide an exceptional customer experience. They can provide customers with automated answers to FAQs, reduce call center volume and free up staff time for more valuable tasks. By 2024, these technologies will become the norm in banking apps across most devices, including smartphones and tablets.

Today there are around 10 banks that have launched their chatbots already. In China, banking chatbots have been seeing a huge uptake as many banks are using them to conduct their day-to-day transactions.

In India, HDFC Bank piloted a virtual assistant for its online platform that helps the bank keep pace with customer expectations and preferences. It was seen as an effort to enhance digital experiences for customers. In Latin America, Spanish bank BBVA's virtual assistant has been a massive hit with the younger demographic.

5. Digital transformation will lead to a new wave of competition

The digital transformation of traditional financial services providers has led to the arrival of a number of new players that offer solutions such as robo-advisors, peer-to-peer (P2P) lending platforms and digital wealth management tools. These initiatives have been boosted by the open banking APIs that allow customers to seamlessly manage more than one account through digital self-service channels.

Fintech companies were among the first to introduce digital innovation in many areas such as payments, lending and money transfers. Many of these startups have now become major competitors with banks as they expand their services and customer bases.  

Banks are already partnering with fintech companies to bolster their own digital transformation initiatives and keep up with startups that are successfully disrupting the banking industry.

6. More people will feel comfortable banking on their own

The banking industry is becoming increasingly customer-centric. Consumers are looking for more personalized experiences with the ability to do more on their own.

As digital transformation progresses, many self-service offerings (e.g., mobile account opening) will be available at a bank branch or ATM near you, enabling customers to open accounts quickly and easily without having to visit the branch.

The rise of digital banking is changing the face of retail banking as we know it today. It's leading to a better customer experience through enhanced self-service capabilities, faster account opening, more secure transactions and wider transactional accessibility.

The resulting increase in customer engagement has helped banks generate new revenue streams through cross-selling of financial products. Digital transformation is all about making banking convenient for customers to help them achieve their goals in an effortless way.

In 2024, automated processes are expected across the board to transform service quality, with self-service tools powered by advanced analytics helping customers make faster and better-informed decisions.

7. Focus on Big Data and analytics

With big data, banks will be able to put customer behavior at the very center of their business models. They can provide more personalized services and improve sales by making the most out of predictive analytics.

In the future, successful digital transformation will rest upon how much a bank can learn from its customers. Analytics will become essential in customer acquisition efforts as well as market segmentation and cross-selling. 

As a result, banks will have better intelligence about consumer behaviors and spending patterns, which can help them develop targeted products and services.

By 2024, expect to see more "closed-loop" solutions powered by fast and intuitive data collection. This will allow banks to achieve a 360-degree view of their customers' needs, providing them with contextually relevant information about discounts or personalized offers.

8. Banking apps are becoming smart digital assistants for customers.

In 2024, there will be a shift from using banking apps as mere self-service tools to customer relationship management platforms that anticipate the consumer's needs and provide customized advice based on their financial situation.

The banking app will become a 'smart digital assistant' that can 'understand' the consumer's needs and preferences based on their financial behavior over time. For example, if you always transfer money to your savings account on payday but forget to top up your payment card with funds for the coming month, the smart app will be able- to predict that you will need money for your card soon.

The smart assistant takes proactive actions by communicating with the customer and suggesting what they might want to do before they even realize it themselves.

9. Blockchain is here to stay, but it needs time to mature

There are many areas where blockchain technology has potential for operations and customer experience.

In 2024, blockchain technology will be adopted in many areas of financial services beyond just simple transactions and money transfers.

Blockchain for KYC and due diligence

We will see the increased use of blockchain technology for KYC and customer due diligence. In 2024, it is expected that the widespread adoption of digital identities will result in financial institutions shifting their KYC and customer due diligence efforts to decentralized platforms.

These platforms are expected to store customer data on distributed ledgers, enabling (1) more effective identity verification during know-your-customer (KYC) checks, (2) lower costs for data storage, and (3) improved data-security practices.

Issuance, trading, and settlement of securities

In 2024, it is expected that blockchain technology will be used for the issuance, trading, and settlement of securities. New securities regulations will facilitate this, allowing for tokenized assets to be used in traditional financial markets.

Blockchain-based transaction processing

The development of blockchain-based transaction processing platforms. In 2024, it is expected that there will be more blockchain-based transaction processing platforms available to the market. However, blockchain-based transaction processing platforms will be viewed as complementary to existing settlement systems rather than as replacements.

The growing use of blockchain-based digital currencies.

In 2024, it is expected that there will be an increase in the number of players trying to enter the market, resulting in more regulatory collaboration and standardization efforts. The collaboration will be aimed at creating a regulatory framework that enables blockchain-based digital currencies to coexist with more traditional forms of money issued by central banks.

10. Banks deepen their customer relationships through AI and chatbots

AI-driven chatbots will be able to handle many different types of requests. For example, a chatbot could be programmed to access a user's financial data and suggest products that might suit them, such as upgrading their current credit card or opening a new savings account.

AI is not just limited to chatbots. Banks are also exploring other AI applications, including virtual assistants that can handle customer requests through voice or text-based conversations and 'digital twins' - simulations of physical bank branches that customers cannot physically enter.

In 2024, there will likely be widespread adoption of AI technologies in finance. The majority of financial institutions will have developed mature plans for implementing the technology into their organizations, and many will have already begun testing various applications.

11. No-code/low-code development platforms for faster time to market

Slow-moving development projects are no longer accepted. The banking industry is experiencing a trend toward faster time to market, with no-code/low-code development platforms making it possible for banks to develop digital products quickly and efficiently.

In 2024, we expect to see widespread adoption of no-code and low-code development platforms in banking for several reasons:

(1) banks will need to significantly speed up the time it takes for them to roll out digital products and services;

(2) a massive increase in third-party fintech firms offering pre-built digital solutions that can be easily integrated with core banking systems;

(3) a shortage of skilled employees who specialize in application development.

No-code/low-code platforms have matured enough to support the development of a wide range of fintech solutions. They also offer banks and other organizations an 'easy' way to develop new digital products and services without having to fork out significant amounts of money on high-cost application specialists.

These are the11 digital banking trends that will most likely affect the way banking is done in 2024. In the next five years, customers will be able to access different types of banking services with significantly less friction than ever before. The customer experience will be completely different from what is being offered today.