2024 Outlook: Trends in Financial Services Industry
January 12, 2024
2024 Outlook at a Glance
Increased demands for adaptability, innovation/technology, unique customer experiences and security.
Where We’ve Been and Where We’re Headed
2023 began with an intense period of uncertainty, led by the collapse of Silicon Valley Bank and the revelation of questionable financial decisions hiding in plain sight in some bank’s portfolios. As a result, some depositors exhibited a reasonable “flight to safety” as they moved deposits to Systemically Important Banks (SIBs). Nonetheless, interest rates stabilized toward the end of 2023, and the stock market rebounded.
As we kick off 2024, we approach the year with an optimistic viewpoint surrounding the top trends for financial services firms. This year will provide opportunities for improved service experiences and innovative technology:
- Leveraging Digital Technologies: Over the past few years, larger financial institutions’ adaptation of enhanced digital banking has led to both lowering costs and enabling a more customized customer service experience. As a result of the enhanced investment in digital experience, many financial services institutions (FSIs) have retreated into the one-on-one customer service experience. Although this move has led the larger FSIs to increase earnings, it has resulted in lower customer loyalty while creating an opportunity for institutions with a strong local presence to leverage technology while not compromising on personal customer service.
- Personalized Services and Customer Experience: Although banks and insurance companies have been leveraging data and analytics in all aspects of their businesses, there is still plenty of opportunity to expand on the promise of data analytics and artificial intelligence (AI) to tailor services to individual customer needs, such as offering customized investment portfolios, targeted financial advice and personalized product recommendations. Everyone deserves a personal banker. The industry can realize that vision through the right balance of relationship-based service and utilizing AI.
- Machine Learning, Artificial Intelligence and Generative AI: Although machine learning is not new to the marketplace, if leveraged correctly, AI and Generative AI will take it to the next level by enabling data analytics and faster decision-making processes. There are many areas where banks and insurance companies can and should utilize these technologies to enhance customer service, streamline operations, improve risk assessment, detect fraud and provide personalized financial services. In 2024, many forward-leaning FSIs will empower these opportunities with AI.
- Enhanced Cybersecurity Measures: The level and creativity of cyber breaches on financial institutions is not slowing down. Banks and insurance companies will continue to employ advanced security measures, such as biometric authentication and blockchain technology, to protect customer data and financial assets. As the bad actors’ capabilities and diligence continue to advance, companies falling behind insecurity and system technology investments and enhanced cybersecurity safeguards will be in the headlines this year.
- Loan Portfolio Optimization: Even if the interest rate increases are behind us in 2024, we are left with appreciably higher commercial lending rates than three years ago. This squeezes Main Street businesses’ operating margins as businesses pay higher interest expenses when their current loans adjust. We will see proactive lenders analyzing their commercial loan portfolios early in 2024 and begin working with their local business clients to ensure a smooth transition to higher rates over the next few years.
Helping Financial Services Companies Realize Growth and Opportunity
At Cherry Bekaert, our focus remains on strategic insights, adaptability, and technology integration to help clients navigate the evolving industry and economic landscape and foster sustainable growth. Our Financial Services professionals will examine accounting, risk, cybersecurity, and information technology (IT) topics further and analyze how financial institutions can best prepare themselves for these trends throughout 2024.
Additional Resources
Understanding Financial Planning & Analysis and How it Can Yield Better Decision-making – a CPE Webinar Recording
Regulatory Compliance Digest | October/November 2023
The Impact of a SOC 2 Report on Your Organization Value and Customer Relations
Top Risk Factors Facing the Insurance Industry in 2023
Seven Risk Management Activities to Safeguard Your Financial Institution Against Damaging Risk Exposures