Is the future of banking digital?
Digital technology is transforming the banking industry by improving customer experience, increasing operational efficiency, and reducing costs. Artificial intelligence, blockchain, mobile banking, cybersecurity, big data analytics, and augmented reality are among the key trends shaping the future of banking.
"In future, probably banking may cease to be a separate service. Instead, banking would be embedded in all the products and services which consumers are expected to avail. Embedded finance is the integration of financial services or tools within the products or services of a non-financial organisation.
Like digital, the Age of AI is likely to have a transformative impact on the industry, affecting roles in virtually every part of the bank. Not only is the rapid adoption of gen AI the most important trend for banks in 2024—it's also shaping the other nine trends.
The future of banking appears to be one of complete accessibility and inclusivity. Peer-to-peer payments will be smooth regardless of where people bank, making it commonplace to send money to pals, recover shared expenses, or even just split a bill.
Many experts claim that this powerful technology will shape the future of banking. By 2030, AI will save more than $1 trillion for banks and financial institutions, motivating the latter to invest in smart fintech technology.
One of the biggest threats to banking and finance is social engineering. People are often the most vulnerable link in the security chain – they can be tricked into giving over sensitive details and credentials. This can equally affect a bank's employees or its customers.
Gen Z attitudes toward money and finances are sometimes aligned with and sometimes starkly different from those of older generations. Research suggests that Gen Z trusts traditional banks more to secure their data and needs digital services to be exceptional to retain their customers.
Key Findings of the Study
15% of banks plan to reduce their technology spending in 2024—the largest percentage in the history of What's Going On In Banking. 23% of banks and 27% of credit unions say they'll never be done with their digital transformation strategies. (Cornerstone applauds these institutions.)
The “big four banks” in the United States are JPMorgan Chase, Bank of America, Wells Fargo, and Citibank. These banks are not only the largest in the United States, but also rank among the top banks worldwide by market capitalization, with JPMorgan Chase being the most valuable bank in the world.
Wells Fargo said Jan. 12 that net interest income for 2024 could be 7% to 9% lower than 2023's $52.4 billion. The bank's stock is down 4.9% this year. JPMorgan Chase, meanwhile, forecast 2024 net interest income of $90 billion, topping consensus estimates for $86.5 billion.
Will banking become obsolete?
It remains unclear whether traditional banking will become extinct soon; however, what is certain is that its role will continue to evolve if it is going to survive in this ever-changing landscape of finance.
Experts say if the U.S. moved forward with creating a digital dollar, today's banks would be a thing of the past.
The Financial Brand analyzed the number of FDIC-insured banks and bank branches in the U.S. since 1935. The trends paint an alarming picture for the future of banking. In the next 20 years, half the banks around today will be gone, leaving fewer than 2,000 banks in the US by the year 2042.
Bank Tellers
Instead, generative AI will either automate or augment work in different ways depending on the roles and tasks. About 60% of the routine tasks performed by bank tellers, whose jobs primarily involve collecting and processing data, could be supported by generative AI, Accenture found.
AI will change how businesses operate and can transform investment banking, but it won't replace bankers soon. AI may simplify tasks and improve decision-making, but investment banking relies on human perception and connections. AI may eliminate some jobs but generate others. Thus, a complete replacement is impossible.
AI could improve the lives of investment bankers by taking on some tedious tasks. It could also make the field harder to break into and alter the skills required for entry. Deutsche Bank is testing tools that could reduce some junior banker tasks to seconds from days.
- First Republic Bank (FRC) . Above average liquidity risk and high capital risk.
- Huntington Bancshares (HBAN) . Above average capital risk.
- KeyCorp (KEY) . Above average capital risk.
- Comerica (CMA) . ...
- Truist Financial (TFC) . ...
- Cullen/Frost Bankers (CFR) . ...
- Zions Bancorporation (ZION) .
Recently, a report posted on the Social Science Research Network found that 186 banks in the United States are at risk of failure or collapse due to rising interest rates and a high proportion of uninsured deposits.
Most deposits in banks are insured dollar-for-dollar by the Federal Deposit Insurance Corp. This insurance covers your principal and any interest you're owed through the date of your bank's default up to $250,000 in combined total balances.
Gen Zers face greater obstacles to financial success
Not only are their wages lower than their parents' earnings when they were in their 20s and 30s, but they are also carrying larger student loan balances.
What is the future of banking in 2030?
Financial institutions are embracing new technologies and investing heavily in digital transformation initiatives. Automation and artificial intelligence are replacing human thinking and urging institutions to revisit their talent landscape and the skills required to stay ahead of the curve.
For Millennials, this begins with designing a quality user experience. They want financial products and services that are more streamlined and intuitive. Designing mobile banking applications isn't as simple providing users with a way of checking the balance of their accounts.
The banking industry is in a much healthier place now than it was after the financial crisis of 2008. Total global assets climbed to $154,211 in 2022, up 3.79 percent YoY from 148,583 in 2021, according to The Banker's Top 1000 World Banks Ranking for 2022.
Banks will double down on tech investments in 2024
Catherine Leffert , reporter for American Banker, dives into what Arizent's research showed are the top tech priorities for financial institutions in 2024, from AI and cybersecurity to the ongoing commitment to mobile apps.
Innovations in digital banking, such as AI-powered budgeting tools and mobile payment platforms, are transforming the banking landscape. Some digital banks are also using AI to enhance customer experience and increase productivity.
