You might think of banking as a staid, relatively slow-moving industry. But the truth is that banking is continuously evolving, driven by technological advancements and changing customer expectations. As we move through 2024, several key trends are shaping the landscape of financial services, from AI-powered chatbots to enhanced digital platforms to the continued influence of neobanks. Let’s take a closer look at five top trends.
1. Digital Transformation and Open Banking
Online banking is so prevalent today that it can be hard to believe there was a time (not all that long ago) when the only way to manage your bank account was to visit a branch in person. Moving forward, you can expect continued digital transformation and an even better, more streamlined user experience.
In 2024, mobile banking apps, online portals, and chatbots offered by banks will make it even easier for you to access services anytime, anywhere. At the same time, the open banking model is expected to grow. Open banking is based on the philosophy that you, the customer, are in control of your financial information (not the bank), and it is revolutionizing the way financial services are delivered.
Using APIs (application programming interfaces), open banking enables third-party developers to securely access your banking information, allowing you to use a variety of apps and services to manage your finances. This includes budgeting apps that let you view and manage multiple accounts from different banks in a single interface. The open banking market is a millennial banking trend that is expected to experience robust growth in 2024 and beyond, driven by the need for efficient data sharing.
2. AI and Machine Learning in Financial Services
Artificial intelligence (AI) and machine learning are impacting just about every area of life, and the financial services industry is no exception. While it may be too soon to know exactly how AI for banking will work, there are a few AI trends that we are already seeing.
Banks are increasingly using AI-driven analytics to improve customer service. Chatbots and virtual assistants powered by AI are now able to provide instant, accurate responses to inquiries. These tools can handle a wide range of tasks, from answering common questions to assisting with transactions. This frees up human customer service agents to focus on more complex issues.
AI and machine learning are also making banking more secure. These smart technologies can detect fraudulent activities with greater accuracy than traditional methods. By monitoring activity on accounts and picking up on any anomalies, AI can help banks respond swiftly to threats and prevent or minimize any financial losses.
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3. Sustainable and Green Banking Initiatives
As environmental concerns become increasingly important, banks are adopting sustainable practices and promoting green banking initiatives.
One way they are doing this is by offering more sustainable investment products. This allows customers to invest in companies and projects that prioritize environmental and social responsibility. At the same time, banks themselves are financing sustainable projects, such as renewable energy developments and eco-friendly infrastructure. By providing loans and grants to support these initiatives, banks are playing an important role in combating climate change.
In addition, many banks are implementing green practices to reduce their own carbon footprint. This includes adopting energy-efficient technologies, reducing paper usage, and promoting remote work and online banking to reduce carbon emissions. Some banks are also setting targets to achieve carbon neutrality and are publicly reporting their progress.
4. Cybersecurity and Data Privacy Advancements
The banking and financial industry has always had a strong focus on security and privacy. But improved online bank security is another one of the top banking industry trends for 2024 and something that is likely to continue to play a big part in the coming years.
Banks are investing heavily in advanced security technologies to protect customer data and prevent cyberattacks. This includes the use of biometrics, multi-factor authentication, and encryption — all of which make online transactions safer and more secure. As mentioned above, AI and machine learning are also being used to detect and respond to security threats in real time.
Banks are also focusing on educating customers about cybersecurity risks and best practices. By raising awareness and providing resources, banks can help customers protect themselves from phishing attacks, identity theft, and other forms of bank fraud and cybercrime.
5. The Rise of Neobanks and Challenger Banks
Neobanks and challenger banks are digital-first financial companies that have significantly disrupted the banking industry in recent years and will likely continue to do so in 2024, and beyond.
What exactly are they? Neobanks are fintech companies that partner with chartered banks to offer banking services to the public. These partnerships allow neobanks to offer insured deposit accounts and other regulated banking services without having a bank charter themselves. They operate online-only and leverage technology to provide a streamlined and user-friendly banking experience.
Challenger banks, on the other hand, are chartered banks that operate almost exclusively online. While they may have some physical locations, they are focused on “challenging” the traditional banking model and offering customers a state-of-the-art digital banking experience.
For both neobanks and challenger banks, not having any (or many) physical branches reduces overhead and allows them to offer competitive rates and low, or no, fees. In addition, both models offer a departure from banking norms by emphasizing user experience, transparency, and accessibility. This gives customers an appealing alternative to traditional banks that won’t be going away anytime soon.
The Takeaway
The banking industry continues to evolve to meet the needs of its customers. Some of the top banking industry trends for 2024 include advancements in digital banking, AI-assisted customer service, seamless integration of financial services (thanks to open banking), and a continued focus on cybersecurity and privacy.
At the same time, the rise of neobanks and challenger banks is reshaping the competitive landscape, pushing traditional banks to innovate and improve their services. As these trends continue to evolve, the banking industry will likely become more customer-focused, efficient, and secure.
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FAQ
How will blockchain technology impact banking in 2024?
In 2024, blockchain technology is expected to impact banking by enhancing security, efficiency, and transparency. With blockchain technology, every transaction is encrypted and linked to the prior one, forming a chain of data blocks. Its decentralized ledger (record of transactions) can help reduce fraud, streamline payments, and improve identity verification. As more banks adopt this technology, they will be able to offer more reliable, efficient, and secure services to their customers.
What role will personalization play in banking trends?
One of the biggest industry trends for 2024 is increasing personalization. In many ways, banks are returning to their small town roots where the local banker knew each of their customers by name and could provide personalized service. These days, however, large banks are doing this with the help of data analytics and artificial intelligence (AI). These technologies allow banks to offer financial products and services tailored to an individual customer’s behaviors, needs, and preferences.
Are traditional banks keeping up with fintech innovations?
Yes, traditional banks are increasingly keeping up with fintech innovations by adopting new technologies and forming partnerships with fintech companies. Many banks are investing in digital transformation and implementing artificial intelligence (AI), machine learning, and blockchain to enhance services and operations. Many are also developing their digital platforms and apps to compete with neobanks and challenger banks. While some traditional banks lag, competitive pressure and changes in customer expectations are driving significant changes.
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SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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