The retail banking sector is undergoing rapid transformation, driven by technological advancements, evolving consumer expectations, and regulatory changes. As we move into 2024, several key trends are set to shape the industry. This article delves into these trends, providing insights and statistics to highlight their significance.
Digital Transformation
The digital transformation of retail banking is not a new trend, but its importance continues to grow. Banks such as Liv, are investing heavily in digital platforms to enhance customer experiences and streamline operations. According to a report by Deloitte, over 80% of banks plan to increase their investments in digital technology in 2024.
Key areas of focus include mobile banking apps, online banking portals, and chatbots powered by artificial intelligence (AI). These technologies enable banks to provide 24/7 service, reducing the need for physical branch visits. Furthermore, AI-driven analytics help banks personalize their offerings, tailoring products and services to individual customer needs.
Open Banking
Open banking is revolutionizing the financial services industry by allowing third-party developers to build applications and services around financial institutions. This trend is facilitated by regulations like the Revised Payment Services Directive (PSD2) in Europe, which mandates that banks open their payment services and customer data to third-party providers (with customer consent).
A study by Accenture predicts that open banking could increase bank revenues by up to 20% by 2024. This increase is driven by the ability to offer more personalized and innovative services, enhancing customer loyalty and attracting new customers.
Cybersecurity
As banks become more digital, cybersecurity has become a top priority. The increasing frequency and sophistication of cyberattacks pose significant risks to financial institutions. According to Cybersecurity Ventures, cybercrime is expected to cost the world $10.5 trillion annually by 2025, highlighting the critical need for robust cybersecurity measures.
Banks are investing in advanced authentication methods, such as biometrics, to secure customer accounts. Multi-factor authentication (MFA) and encryption are also becoming standard practices to protect sensitive data.
Customer Experience
In the competitive banking landscape, customer experience is a key differentiator. Banks are striving to provide seamless, omnichannel experiences that allow customers to interact with them through various touchpoints, including mobile apps, websites, and physical branches.
A survey by PwC found that 73% of customers consider customer experience a crucial factor in their banking decisions. Banks are leveraging data-driven insights to anticipate customer needs and deliver proactive services. Personalization, convenience, and speed are the hallmarks of the modern banking experience.
Sustainability
Sustainability is increasingly becoming a priority for banks, driven by growing consumer demand for environmentally responsible practices and regulatory pressure. Banks are integrating sustainability into their operations and product offerings, such as green finance products and sustainable investment options.
According to the Global Sustainable Investment Alliance, sustainable investment assets reached $35.3 trillion in 2020, and this number is expected to continue growing. Banks are seizing this opportunity by offering green bonds, eco-friendly mortgages, and other sustainable financial products.
Regulatory Compliance
Regulatory compliance remains a significant challenge for banks, as regulations continue to evolve. Data privacy laws, such as the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States, require banks to implement stringent data protection measures.
Anti-money laundering (AML) regulations are also becoming more rigorous, necessitating robust compliance frameworks. According to a report by LexisNexis, the global cost of financial crime compliance is expected to exceed $180.9 billion by 2024.
Embedded Finance
Embedded finance refers to the integration of financial services into non-financial platforms and applications. This trend is gaining traction as more companies seek to offer seamless financial services directly within their ecosystems.
For example, e-commerce platforms are embedding payment and lending services to enhance the customer shopping experience. A report by Lightyear Capital estimates that the embedded finance market could reach $7 trillion in value by 2030, highlighting its potential to reshape the financial services landscape.
Financial Inclusion
Financial inclusion remains a critical goal for the banking industry, particularly in developing regions. Innovative digital solutions are being deployed to reach underbanked and unbanked populations. Mobile banking, digital wallets, and microfinance platforms are making financial services more accessible.
The World Bank estimates that 1.7 billion adults remain unbanked globally. However, the rise of mobile banking is closing this gap. In Sub-Saharan Africa, for example, mobile money accounts have surpassed traditional bank accounts, driven by the proliferation of mobile phones.
Statistics Highlighting Key Trends
Digital Transformation
- Over 80% of banks plan to increase their investments in digital technology in 2024 (Deloitte).
- The global mobile banking market is expected to grow at a compound annual growth rate (CAGR) of 12.2% from 2021 to 2028 (Grand View Research).
Open Banking
- Open banking could increase bank revenues by up to 20% by 2024 (Accenture).
- The number of open banking users in Europe is projected to reach 63.8 million by 2024 (Statista).
Cybersecurity
- Cybercrime is expected to cost the world $10.5 trillion annually by 2025 (Cybersecurity Ventures).
- The global cybersecurity market is projected to reach $366.10 billion by 2028, growing at a CAGR of 12% from 2021 to 2028 (Fortune Business Insights).
Customer Experience
- 73% of customers consider customer experience a crucial factor in their banking decisions (PwC).
- Banks that excel in customer experience see a 2x increase in customer satisfaction and a 1.9x increase in customer retention (Forrester).
Sustainability
- Sustainable investment assets reached $35.3 trillion in 2020 (Global Sustainable Investment Alliance).
- The green bond market is expected to exceed $1 trillion in annual issuance by 2023 (Climate Bonds Initiative).
Regulatory Compliance
- The global cost of financial crime compliance is expected to exceed $180.9 billion by 2024 (LexisNexis).
- Banks are spending an average of 4% of their annual revenue on compliance (Thomson Reuters).
Embedded Finance
- The embedded finance market could reach $7 trillion in value by 2030 (Lightyear Capital).
- 50% of non-financial companies plan to offer embedded financial services by 2025 (Finextra).
Financial Inclusion
- 1.7 billion adults remain unbanked globally (World Bank).
- Mobile money accounts have surpassed traditional bank accounts in Sub-Saharan Africa (GSMA).
Conclusion
As we look ahead to 2024, the retail banking sector is poised for significant transformation. Digital technology, open banking, cybersecurity, and customer experience will continue to be critical areas of focus. Sustainability, regulatory compliance, embedded finance, and financial inclusion are also shaping the future of banking. By staying ahead of these trends, banks can not only enhance their competitive edge but also better serve their customers in an increasingly digital and interconnected world.
Surfer, foodie, record lover, Swiss design-head and ADC member. Performing at the sweet spot between simplicity and elegance to create not just a logo, but a feeling. Let’s chat.
