In January 2023, we predicted a slight slowdown in the global economy which will continue through 2024 where banks’ ability to generate income and manage costs will be tested in new ways. As per Deloitte’s article, the net interest margin will be declining for most banks globally in 2024, hence they will be prioritizing non-interest income, such as consumer-focused fees in 2024 to make up for the shortfall.
Despite this trend being carried forward, banks and other financial institutions in India had been adept at overcoming these challenges. In FY 23, all Indian banks reported profits, even reaching historic highs, making them a favored investment opportunity for both domestic and foreign investors alike as stated by Economic Times in their article here.
As per Forbes, there is a direct connection between customer loyalty and business success, hence customer experience will play a major role in buying decisions in 2024. In a recent survey, 72% of global wealth management clients plan to partner with fintechs, broker-dealers, and custodians to modernize tech infrastructure, freeing up resources to enhance client experience.
Given below are top three trends that have impacted and will continue to influence banks and other financial institutions globally in 2024 :-
1.Cloud Migration & Adoption
a. Past Trends & Impact on BFS Institutions :
Financial organizations have increasingly recognized the benefits of cloud migration. Consequently, their focus has shifted towards identifying the most suitable technology from the array of solutions available, leading to a comprehensive embrace of the cloud and its capabilities. McKinsey explores the pillars a financial institution needs to keep into consideration while shifting to a cloud-based architecture in this article. The exponential pace of new technologies, and the confluence of multiple trends, are influencing how banks operate and serve customer needs
This presented financial institutions with the opportunity to enhance agility, decrease expenses, and shift away from capital expenditures. Cloud migration eliminates the requirement for substantial upfront investments in physical infrastructure. Instead, financial institutions can pay for computing resources on a pay-as-you-go basis, thereby optimizing costs. This flexibility allows banks and financial institutions to scale their IT resources based on demand, addressing the challenges of fluctuating workloads. Additionally, cloud deployments provide financial institutions with advanced security features, improved data accessibility, and a quicker time to market while effectively managing compliance as explored in this article by Economic Times.
b. Going Forward:
As per McKinsey’s report, for banks to have a competitive edge in the market, they need to start treating their cloud-based solution providers (CSPs) as long-term partners rather than just vendors. Moving to a cloud-based infra isn’t just a one-time IT initiative, but a business-backed long term venture where tech and business teams work together to build an ecosystem with a number of cloud based services. Currently, we have been observing a gradual shift from on-premise data centers towards using a data lake on the cloud with multiple API-based microservices being available for the users’ disposal. Banks can leverage the most out of cloud as it is extremely scalable, agile and gives users complete control across distinct customer journeys.Private banks and NBFCs have predominantly adopted cloud-based technology, with some public sector banks also joining this trend.
According to Fortune reports, approximately 85% of banks globally have yet to fully migrate to the cloud. This indicates that there is still an opportunity to gain a competitive advantage by initiating cloud migration at this juncture.
2. Application Of Machine Learning & Generative AI
a. Past Trends & Impact on BFS Institutions :
The banking industry has witnessed a growing prevalence of artificial intelligence and machine learning trends over the past several years. These trends bring forth numerous key benefits to the banking sector, encompassing advanced analytics, disposition-driven automation, process optimization, and various other advantages.Banks and other financial institutions have discovered multiple applications of generative AI across various use cases, including customer-service chatbots, the creation of custom product offerings, fraud detection, risk prevention, and the automation of other repetitive, disposition-driven tasks. A few sample use-case of AI in sales is given below :-
A research done by Stanford and MIT found that the introduction of a generative AI assistant boosted productivity by 13.8% for any business.
b. Going Forward:
As AI continues to evolve, we can anticipate even more sophisticated applications that will further transform the industry. The primary challenge AI faces at the moment is related to unstructured data; if information isn’t organized in an optimized manner, it becomes challenging for any solution or algorithm utilizing AI to process it and provide meaningful insights across multiple lines of business. According to Forrester research, fewer than 10% of organizations are considered advanced in their use of data. It would take at least a few more years of preparation to structure this data and get generative AI models ready to start offering more benefits to organizations and gaining broader acceptance.Whether through increased personalization in financial services, early and more accurate risk detection, or streamlined back-office operations, AI is poised to maintain its prominent role in shaping the future of banking.
3. Customer Expectations & The Humanization of Tech
a. Past Trends & Impact on BFS Institutions :
We observed that more than two-thirds of Millennials and Gen Z globally are utilizing digital channels for banking. With the emergence of this younger customer demographic, the expectation for financial institutions to incorporate technology into their banking solutions has increased significantly. According to McKinsey’s article, a majority of customers have indicated their willingness to engage with their Relationship Managers through digital channels for consultations in the SEA market.The rapid growth of Neobanks and the adoption trends of technology by young customers have prompted most Banks and Financial Institutions to transition from an online-also to an online-first model. Banks and Financial Institutions have initiated significant investments in integrated digital products, employing a unified interface to meet the evolving expectations of the upcoming generation of Bank and Financial Service users.
b. Going Forward:
In the era where technology pervades the banking sphere, the question arises:Where does the role of human intervention fit in?This is a million-dollar question that banks and other financial institutions will need to address in the years to come. Hyper-personalization, encompassing both digital and human offerings, will be key in demonstrating customer lifetime value and improving CSAT. But banks will likely struggle to customize products and services due to legacy systems and their inability to curate tailored experiences using customer data as per Deloitte. To meet these ever-growing expectations, banking advisors need to be equipped with tools capable of intelligent tasks at their fingertips which would enhance mobility and empower their sales teams in the long run.Retail banks will need to find newer ways to forge deeper customer relationships and instill a greater sense of financial empowerment by bringing about service oriented tech. By utilizing a combination of physical and digital channels, banks can gain insights from conversations between advisors and customers. This will not only provide advanced analytics but will also provide actionable insights, hence enabling advisors to meet targets and respond to changes in customer preferences in real time.
Vymo is a cloud-based sales engagement platform which helps improve the productivity and effectiveness of sales teams in banking and financial institutions. It helps improve their operations cross-functionally between different lines of businesses by giving sales advisors visibility on all customer and business related details on a single pane of glass. Vymo also utilizes intelligent ML & AI models to assist in various banking operations such as allocating leads, suggesting next-best-actions, predicting agent attrition, curating product offerings and more.
Vymo empowers sales representatives by providing actionable insights which helps them with seamless task execution and allows them to respond to the evolving customer needs in real-time. Vymo is enabling the tech change for 2024 by equipping sales reps with the visibility and capabilities they need to excel in the dynamic landscape of banking services.
