8 of the biggest issues facing the banking industry today (2024)

From cybersecurity crises to potential mergers that would reshape the payments industry, the banking world is poised for a year of change and regulatory challenges.

A major shake-up in the payments world is underway with Capital One Financial's recent agreement to buy Discover Financial for $35.3 billion, or a 26.6% premium based on Discover's Feb. 16 closing price. The all-stock deal, announced in February, would create a credit card behemoth with its own payments network.

"Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies," Capital One CEO Richard Fairbank said in a news release.

If combined, the two companies would have a 19% share of the $1.3 trillion market in revolving consumer loans, according to Brian Foran, an analyst at Autonomous Research. JPMorgan Chase is currently No. 1 with a 16% market share.

The two companies expect the deal to close in late 2024 or early 2025, pending approvals from regulators and both companies' shareholders. Three Discover board members, who will be named later, would join Capital One's board as part of the deal.

Read more: Credit card issuers' APR margins hit record 14.3% in 2023, CFPB says

In the world of cybersecurity, a recent data breach at Infosys McCamish impacted more than 57,000 Bank of America customer accounts. The breach occurred on Nov. 3 — yet was not reported until 90 days after the incident on Feb. 2, raising concerns not only about why there was such a long delay, but also over who should take responsibility.

The unauthorized party — a ransomware group known as LockBit — accessed the name, address, date of birth, Social Security number and other account information of deferred compensation customers through Infosys McCamish's system, not Bank of America's, according to a letter Infosys McCamish sent to affected customers that was published by Maine's attorney general.

Many organizations require vendors to go through mandatory security audits to maintain a chain of trust, said Ray Kelly, a fellow at Synopsys Software Integrity Group, but the case still reflects poorly on Bank of America. In this instance, Infosys McCamish "certainly bears the weight of this breach," Kelly said, as its systems were attacked by the ransomware.

Regulators, however, take a different view of this type of third-party cybersecurity risk. Banks are responsible, according to the Federal Reserve's vice chair for supervision, Michael Barr, who said in January that banks need to fill the "gaps" in their efforts to manage these risks.

Read more: NIST updates cybersecurity framework, emphasizing governance

In Washington, D.C., the future of the Basel III endgame proposal remains uncertain after Treasury Secretary Janet Yellen declined to take a position on the contentious regulatory plan that would raise capital standards for the largest banks.

In lively discussions during a House Financial Services Committee hearing in February, lawmakers on both sides of the aisle were critical of the proposal. Rep. Bill Huizenga, R-Mich., chairman of the House Financial Services oversight subcommittee, pressed Yellen on her decision to avoid commenting on the specifics of Basel. In reply, Yellen said that she gives her thoughts on a regular basis to the heads of the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Fed. She said that she hasn't had a meeting with President Biden on the topic.

Catch up on our recent coverage of these and the other issues that banks are watching in 2024.