The Future of Digital Banking: Key Trends and Predictions for 2024

Find popular digital banking trends in this blog post by Compare Banks.

Updated: December 30, 2023
Matt Crabtree

Written By

Matt Crabtree

 

Over the last two decades, fintech (a portmanteau of “finance” and “technology”) has emerged and completely transformed the financial services sector. The countless breakthroughs, like Monzo, that have defined a generation have provided the gasoline for this vibrant industry.

The banking business has changed drastically as new digital technologies have been introduced. Banking has become more efficient and easy for clients because of the proliferation of digital banking, which allows them to do their business from any location at any time.

Due to the widespread availability of digital tools, online banking is rapidly becoming the norm. This article explores the current state of banking and its potential future state via the lens of digital banking.

Future of Digital Banking: Top Trends and Predictions for 2024 — Overview of Basics

The banking industry is changing due to a confluence of long-standing trends and cutting-edge innovations.

Low interest rates over the previous 17 years have been like a Big Bang.

They broke the foundational premise of the sector, which held that deposit levels determined loan availability. Banks have had access to money that is basically worthless for all this time.

Without that source of income, banks had to alter their emphasis from meeting all of their clients' financial requirements to focusing on certain items that may still produce fees. At the same time, fintech pioneers emerged, flush with low-cost funding and prioritising expansion above profit.

Now that interest rates are rising again, the financial product universe is returning to its usual orbit.

The top banks already know they need to move faster on transformation if they want to stay competitive and discover new revenue opportunities. Accenture has identified five significant sources of change that have shaped and given momentum to the trends that are expected to have the biggest effect on banking in the next year.

Today, we discuss key themes that are shaping the banking sector in 2024 starting with an overview of the basics:

1. Mobile Banking

Customers' preference for mobile banking to do banking tasks has increased over the last several years. Due to its portability and simplicity, mobile banking has quickly gained popularity. 

According to Statista, there will be 1.75 billion people using mobile banking worldwide by the year 2024. As mobile banking services grow in popularity, banks that are sluggish to implement them risk losing clients to competitors who do.

2. Chatbots and AI Technology

The banking business is being revolutionised by the use of AI and chatbots to provide consumers with more individualised services. Since they are available 24/7 and can answer most questions immediately, chatbots have quickly become an integral element of the customer care industry.

3. Payment Security in the Age of Biometric Authentication

On the other hand, AI is being put to use to provide shoppers with tailored suggestions and analysis of their past purchases. PwC predicts that by 2022, 77% of banks will have used AI. This figure is up from 16% in 2018.

4. Online Banking Accessibility

The concept of “open banking”, in which third-party providers may access bank customers' data via open application programming interfaces, is gaining traction. By working together with fintech companies, banks may provide their consumers with easy access to a wide range of financial products and services like accounting software. 

Open banking could potentially revolutionise the banking system by giving clients easier access to several types of financial products and services.

5. Blockchain and Digital Currencies

As a result of the rise of blockchain technology and digital currencies, users now have an option to use conventional financial institutions. Ethereum, Bitcoin, and Litecoin are examples of decentralised digital currencies.

To counter this, blockchain ensures all transactions are both public and private. These innovations may significantly alter the banking sector by decreasing transaction times and costs while increasing safety.

The Prognosis for the Banking Sector: Top Trends and Predictions for 2024 — Key UX Trends

The impact of technology in modernising the banking sector cannot be overstated.

The financial industry is anticipated to evolve in response to the following developments.

1. Banks that Use Digital-Only

There is a new kind of financial institution emerging, and it exclusively operates online. Digital-only banks are able to provide cheaper financial services because of the lack of physical branches.

There has been a rise in the popularity of online-only banks, especially among tech-savvy millennials.

2. Individualised Banking & Augmented Reality (AR)

Personalised banking is quickly becoming the standard in the banking business as clients seek more individualised services.

With the use of algorithms for AI and ML, financial institutions will be able to analyse consumer data and tailor their services to each client. Consequently, financial institutions will be able to better meet the needs of their clientele and earn their loyalty as a result.

Augmented reality's potential to revolutionise the banking industry lies in its ability to provide customers with more engaging ways to use financial services. Customers can examine their accounts, make transactions, and communicate with bank employees all in a virtual setting thanks to augmented reality technology.

3. Use of Voice Banking

Voice banking is another development that might have an impact on the industry in the future, especially if voice assistants like Google Assistant and Alexa gain popularity. Customers now have the option of using voice commands to complete financial transactions, expanding the availability and ease of banking services.

4. Cybersecurity

Cybersecurity is becoming more vital as the use of online banking continues to expand. Financial institutions must implement state-of-the-art cybersecurity safeguards to secure consumer information and ward off hacking attempts.

Biometric identification, AI, and machine learning are just some of the cutting-edge technologies that will be utilised to detect and prevent fraud.

Key Digital Banking Trends: Top Trends and Predictions for 2024 — Biggest Digital Changes

Seeing as digital-only banking is terraforming the landscape, let’s hone in on some of the biggest changes we expect digitally.

1. Banking customers would rather use digital services.

Consumers will choose contactless digitalisation in banking. Customers' interest in traditional banking methods may eventually wane as new digital banking practises gain popularity. Although the number of physical banks is expected to decline eventually, they will still be widely used in the year 2024.

2. How customers feel about their banking experience will determine its success.

Already, developments in digital banking have shown how important emphasis on the client experience is in nudging financial service companies towards higher levels of customer retention. Products and services that provide user-friendly apps that meet users' demands with little human interaction and a single window of access will be most effective. 

Banks strive ceaselessly to improve the quality of their service by listening to their customers.

In 2024, banks will have gained more expertise with sophisticated analytics, individualised product development, customer demand forecasting, and operational cost cutting. In order to increase revenues, businesses should place a larger emphasis on client loyalty and retention.

3. The growth of online banking channels.

Open API banking provides access to data for third-party fintech as neo banks expand their presence in the Indian financial sector. Safe and convenient payment processing is now available through speedier apps.

These open banking applications are now upselling items and facilitating transactions at the level of the smallest vendors. Integrating data shows they care about their customers and move quickly to implement new ideas. 

There will be more opportunities for hacking if automatic variation and other tools are introduced. The API preference, however, has paved the way for a consumer convenience game-changer. In order to prevent sensitive information from being leaked to other parties, developers will use the most up-to-date and effective security procedures.

4. Banking's digitization was boosted by AI.

Many financial institutions are putting a premium on digital solutions as we approach the last quarter of 2022 in an effort to broaden their client base. Banks are turning to pure technology firms in the hopes that improved management of specialist data analytics would protect them from future fraud and infringement.

Chatbots and virtual assistants are replacing call centres because they can communicate with customers in their preferred language and provide more comprehensive answers to frequently asked questions. To better serve their clients, certain financial institutions have begun using chatbots. 

The younger generation seems used to chatbots, suggesting that this technology will become more prevalent in digital banking trends. Chatbots will be able to access a user's financial information in addition to answering questions about banking services.

As a result, an AI application might play a more pivotal role in consumer interactions by recommending items tailored to the individual's needs. Voice payments in banking will collaborate with consumers like virtual assistants, simulating the bank's physical and digital capabilities to provide superior service. 

Thus, it is anticipated that by 2023, artificial intelligence will play a more significant role in the digitization of banking.

5. Digital banking from fintech companies has revealed fresh rivals.

In order to compete with new entrants in the financial sector, banks will need to ramp up their operations. Self-service account management is bolstered by open API, which is made possible by fintech solutions including P2P platforms, those that provide Robo-advisors, and digital wealth management tools. 

Various digital payment solutions served as a catalyst for the rise of fintech, digital banking solutions, which are now direct rivals. Financial institutions are collaborating with fintech digital banks to provide innovative new banking services.

6. BNPL

BNPL’s quick development over the last two years has been quite noteworthy. Through BNPL's services, consumers have more leeway in spending their money on online purchases and instantaneous credit. Online customers now have the option to purchase now and pay for it in instalments thanks to the immediate payment tool. 

During the COVID-19 era, BNPL apps dominated the credit offering market. Customers were also snared by NBFC lenders that specialised in small-ticket loans. Short-term lending products for BNPLs will be subject to tighter rules in the future, limiting the expansion of quick loan disbursement to this sector.

7. Digital Banking Units

The 75 Digital Banking Units (DBU) plan would bring banking services to the very edge of the map. India is well on its way to a progressive banking system that consolidates the digital ecosystem by enabling better, more frictionless banking for all citizens thanks to the country's embrace of increased financial inclusion.

The government is prepared to expand its digital banking projects that reach rural areas and unify its digital finance in the future.

8. Big Data and Analytics

Banks have come to appreciate big data for its potential to shed light on client habits and enable individualised service through predictive analytics. Implementing the insights gained through analytics is crucial to the development of banking's digital future.

While intuitive data collecting will make a notable presence, further research into the motivations of customers is necessary for any real commercial conversion to occur.

9. Greater need for blockchain technology.

Blockchain banking will make financial transactions accessible to more people.

Blockchain will facilitate Know Your Customer (KYC) and due diligence processes that necessitate verification, contract execution, tracing, and data protection by making it impossible to alter or delete the stored data, thereby increasing task completion without intermediaries and relieving the pressure and role of traditional banks. 

The blockchain technology-based cryptocurrency that banks will accept will be standardised and subject to regulation. The digital money that emerges as an alternative digital choice for users may be traded, exchanged, lent, and borrowed. 

10. Banking as a Metaverse opportunity.

The advent of metaverse technology is the next revolutionary step in the evolution of digital banking. What exactly does it mean?

A virtual customer service agent may help you apply for a loan or get access to your safe deposit box without ever having to leave your home. The read-write method of constructing security, which mobile banking apps have rendered obsolete, is likely to make a comeback in the Metaverse.

Blockchain isn't simply important for NFTs and cryptocurrencies; it has wide-ranging financial uses. When used together, the Metaverse and Blockchain may usher in a whole new era of commerce. The integration of AI and VR into the Metaverse will help banks better serve their customers and prepare their personnel for the future.

11. Little to no coding.

No-code and low-code platforms are examples of the kind of cutting-edge technology required for customer-centric solutions. The technology allows for the construction of user-friendly programmes to be completed in days rather than months, making platforms more readily available and straightforward to use. 

To better satisfy their digitization responsibilities, banks no longer need to depend on third parties according to LCNC. These provide an extraordinary performance improvement, ten times quicker than before, and are optimised for user-friendliness.

When compared to the months it may take to construct an application using low-level code, it provides for speedy application development and deployment.

The Future of Banking: Should Banks Pivot to Cryptocurrency in 2024?

For ages, banks have played a crucial role in every economy.

They've helped people and organisations with their money via lending, borrowing, and investing. But as cryptocurrency use grows, it's becoming obvious that banks will need to switch their focus to crypto to remain competitive.

Both the global landscape and the banking system are evolving at breakneck speeds. Bitcoin and Ethereum, two examples of cryptocurrencies, have gained widespread attention as viable substitutes for government-issued currency.

Faster transactions, reduced costs, and more anonymity are just a few of the benefits of digital currencies compared to traditional fiat currencies. Consequently, a growing number of parties are looking to cryptocurrency to meet their financial obligations.

1. Integrating Digital Currency Wallets

Wallets for cryptocurrencies are a potential pivot point for traditional institutions. Customers may keep their cryptocurrency assets safe in a digital wallet.

Financial institutions may improve the safety of cryptocurrency storage by using their current security infrastructure. Financial institutions may improve their customer service and attract new clients by facilitating Bitcoin wallets.

2. Crypto Trading

Coin trading services provided by banks are another option. Customers may use these exchanges to purchase and sell cryptocurrency in return for fiat currency.

Banks may make it easier for their clients to buy and sell cryptocurrencies by establishing their own cryptocurrency exchanges. Banks may profit from this by charging transaction fees for using their Bitcoin exchanges.

3. Crypto Loans

Banks may also make the transition to cryptocurrencies by beginning to lend out the asset itself. Customers may use their cryptocurrency holdings as security for these loans.

Offering Bitcoin loans is a method for banks to provide their clients with additional options when it comes to taking out loans. By keeping the borrower's bitcoin as collateral, banks may reduce their exposure to risk.

What's Holding Back the Transition to Cryptocurrency?

When making the switch to cryptocurrency, conventional and online banking institutions face similar obstacles. Keeping up with all the rules and regulations is a major obstacle.

Banks that want to provide cryptocurrency services must do it in accordance with current legislation since cryptocurrencies are still mostly unregulated. Banks need to go through this procedure in order to protect their name and stay out of legal trouble, but it may be difficult and time-consuming.

Cybersecurity is an additional difficulty. Since hackers often aim for cryptocurrency exchanges, financial institutions must guarantee the safety of their cryptocurrency services. The cost to financial institutions of investing heavily in cybersecurity technology and employees may be substantial.

Market Value and Geopolitics

Despite the industry's meteoric ascent, fintechs saw their market value fall by more than half on average in 2022.

However, we expect this decline to be just a temporary setback in the sector's otherwise bright future since the underlying growth drivers inside the industry have not altered.

The financial services sector as a whole is huge, very lucrative, and plagued by problems in innovation and customer service. Despite rapid advances in technology, more than half of the world's population still does not have access to banking services.

The financial technology industry is expected to generate $1.5 trillion in yearly revenue by 2030, accounting for about 25% of all banking values globally. This is a significant increase from its present 2% share of global financial services income.

Asia-Pacific (APAC) is expected to be the biggest market, with 42% of all sales, thanks in large part to the work done by fintechs to increase financial inclusion in rising Asia India, (China, and Southeast Asia).

The biggest fintech market in the world, North America, will continue to follow Asia-Pacific as an important centre of innovation. Strong growth will be sustained in Europe and Latin America thanks to accommodating authorities, but Africa may skip forward to a new financial ecosystem because to the continent's lack of dated infrastructure.

B2B2X and B2B to lead?

We anticipate that business-to-business (serving small enterprises) and business-to-any-user (B2B2X) will take the helm from payments in the next period. Small and medium-sized businesses (SMEs) throughout the globe have yearly unmet credit requirements of almost $5 trillion, giving fintechs offering B2b plenty of potential to disrupt.

The importance of B2B2X (including embedded finance), which already accounts for a quarter of revenue for fintech revenues, which should grow as a result of the rising demand for fintech solutions brought on by the proliferation of financial services offered by businesses across industries.

In developed markets, spread businesses (like lending platforms and neobanks) will face the greatest resistance because low-cost, stable deposit sources will be needed to lower their expenses (like by banking licence acquisition).

Emerging Market Segments 

In contrast, as developing economies (related: best EM funds) work to increase financial inclusion, disrupter, full-stack companies are projected to remain on top.

Insurance and wealth management are two examples of large, underpenetrated markets where disrupter models will continue to be challenged, but where B2B2X (enablers) may take huge chances. Of course, there are dangers associated with this optimism for expansion, including reputational, regulatory, and economic ones.

Next Steps for Stakeholders

Therefore, everyone involved has to grab the opportunity now. To foster a cooperative, secure, and accessible financial environment, regulators must take the initiative and set the tone.

Among the numerous possible courses of action are the development of digital public-goods infrastructure (like India's Unified Payments Interface) and the creation of a route to intermediate financial licences (like the UK's e-money licence).

The incumbents should collaborate with fintechs to speed up their own digital transformations and meet customers' rising demands. 

In order to survive the current “fintech winter”, it may be necessary for fintechs to tighten their belts and go on the offensive. As fintech prices have corrected, some investors are opting to develop long-term holdings inside the industry.

Leading Digital Banking Trends and the Future of Banking: The Verdict 

The banking business is facing a period of rapid change and innovation, fueled by the spread of digital technology. Some examples of digital banking developments that are influencing the sector include mobile banking, AI and chatbots, open banking, and cryptocurrencies.

In the future years, the banking sector will be shaped by personalised banking, augmented reality, voice banking, and cybersecurity. Banks that are hesitant to embrace new technologies risk losing clients who seek more accessible and cutting-edge services from their financial institutions.

Current digital banking trends show that digitization in banking is set to play an increasingly important role. Customers who want to be aware of digitalization in banking should consider how various technologies might improve their interactions with financial institutions. 

  • Will it improve the shopping experience and encourage customers to return if they are given the opportunity to pay in instalments? 
  • Can small companies save money with fintech's digital banking services? 

If you want to know why you should be a part of the massive changes coming to banking over the next five years, look no further than the answers to these questions.

See our top UK business accounts.

Related Guides:

Future of digital banking: Top trends and predictions for 2023 — FAQs

Which threats do financial institutions face the most in 2023?

So, how can banks cope with higher interest rates?

What can financial institutions do to defend their reputations?

What challenges do banks face as they move towards a net-zero policy?

Why is updating the core banking infrastructure beneficial?

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