Digital Banking Trends 2024: What banks should prepare for

The digital banking landscape is constantly evolving. While some trends such as cryptocurrencies and metaverse have lost momentum, 2023 has paved the way for new trends. Topics such as CBDCs, generative AI and Open Banking have played a significant role for the banking industry in 2023 and will remain on the radar next year.

For 2024, in addition to these ongoing trends, the focus for banks will be on topics such as Embedded Finance and ESG compliance. The emerging role of banks in Digital Identities, aligned with FIDO standards, deserves special attention. The upcoming PSD3 regulation will play a crucial role in shaping these trends, particularly in enhancing security and customer protection measures. These new players in the banking sector highlight the importance of staying up to date in order to remain competitive in the face of the influence of fintechs and neobanks.

Key Takeaways:

  1. AI is a driving force for personalisation and enhanced customer experience in banking.
  2. ESG compliance is the key to successful customer retention.
  3. Open Banking and Embedded Finance expand access to a wide range of financial services.
  4. Digital Identities and ID wallets increase security and trust in the world of digital finance.
  5. CBDCs are setting new benchmarks in digital currency and payment systems.

The use of generative AI and chatbots in the banking sector

The release of ChatGPT 3.0 at the end of November 2022 was a technological game changer. In 2023, the topic of artificial intelligence (AI) inevitably came to the fore. A study by The Economist³ shows that traditional banks have also joined the trend and are either using AI or planning to integrate it in the next three years. A study by Cofinpro AG and VÖB-Service GmbH highlights the increasing importance of AI for banks. 52% of the banks surveyed stated that they already work with machine learning.

Banks can benefit from numerous advantages through the use of generative AI. On the one hand, complex processes such as credit scoring, risk assessment, fraud detection and compliance management can be organised more efficiently. On the other hand, AI opens up new opportunities to personalise and improve the customer experience. AI can analyse the enormous amounts of data that banks already have at their disposal and provide users with individual recommendations and personalised services as well as financial products.

Generative AI solutions also help to make customer service more efficient and accessible through Conversational Banking. Chatbots process complex customer enquiries 24/7, which both increases customer satisfaction and reduces the workload for employees.

In 2024, banks are expected to invest more in AI technologies to provide a hyper-personalised banking experience and data-driven customer interactions.


ESG compliance in banking: sustainability, accessibility and inclusion

ESG (Environmental, Social, and Governance) compliance is becoming increasingly important in banking, as customers are attaching more and more importance to sustainable and inclusive financial solutions. In addition, accessibility has become a crucial aspect of ESG compliance. Under the EU Accessibility Act, banking services must be provided in an accessible way from 28 June 2025. This directive aims to improve accessibility for people with disabilities as well as older people and to ensure that banking services are inclusive and accessible to all.

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According to the Digital Banking Experience Report 2022¹⁰, 46% of Germans consider ESG criteria to be an important investment criterion, while 28% would use their bank's service to check the carbon footprint of their purchases. This trend can be observed in most European countries as well as in the USA.

Banks need to develop a holistic ESG strategy and implement it consistently. They should keep current and future regulations in mind and ensure that they fulfil them. Clearly communicating these strategies and offerings to customers is crucial for building trust. A key element of this is the integration of innovative solutions such as ToPay Green, which enables digital banking users to turn their transaction data into valuable insights for environmental action. With ToPay Green, customers can measure and understand the environmental impact of their purchases, which promotes environmentally conscious decision-making.

Currently, banks are first exploring the field of ESG compliance as the regulatory requirements are not entirely defined yet. However, according to Juniper Research, financial institutions are expected to utilise coordinated ESG strategies in 2024 to position themselves as the inclusive, green and sustainable choice.


Open Banking is revolutionising the financial landscape

While the concept of Open Banking has been around for a while, it has become a key component of modern finance in 2023. Open Banking allows third-party providers to access customer data through open APIs, enabling collaboration between banks and fintech companies. This collaboration gives customers access to a wide range of financial services via one single platform and is crucial for banks to adapt their core banking systems to the evolving market needs, as highlighted in the study by the IFZ Bank-IT Forum and Netcetera on modern core banking systems. It paves the way for banks to become more agile, participate in ecosystems, and offer embedded banking solutions to third-party partners.

In 2023, Open Banking payments reached a record high. According to the Open Banking Impact Report, 9.7 million payments were made in the UK in June - an increase of 88% on the previous year. These numbers continued to rise until August 2023, confirming the increasing acceptance and adoption of Open Banking.

Open Banking is causing the financial world to evolve into an open, customer-centric ecosystem. This ecosystem offers banks the opportunity to provide new services while ensuring high security standards. Banks are becoming modern service providers beyond pure financial services.


The use of Embedded Finance in the banking sector

Embedded Finance is transforming the banking sector by integrating financial services into non-financial platforms. This development enables banks to expand their services via digital ecosystems, thereby entering new markets and efficiently acquiring new customers.

Many banks are currently exploring the potential of Embedded Finance. However, according to a study by the Boston Consulting Group, only 27% of leading banks are significantly involved in collaborative ecosystems so far. The majority is still in the experimental or pilot phase.

By 2024, Embedded Finance is expected to increasingly shape the financial industry by enabling banks to make their financial services more accessible and personalised. Banks can act as general providers and embed white-labelled products in non-proprietary ecosystems or focus on dedicated market segments and tailor their services to specific platforms and customers. Embedded Finance promotes a dynamic, customer-centric financial landscape that benefits both consumers and businesses.


Secure authentication: Digital Identity and ID Wallets

Digital Identities enable secure and unique identification and authentication via digital channels, while protecting users' privacy and giving them control over their personal data. Especially in developing countries, Digital ID can promote inclusive growth. However, the introduction of Digital Identity also plays an important role for other countries. According to research by the McKinsey Global Institute, countries that introduce an efficient digital ID can unlock an economic value of 3 to 6% of GDP by 2030. This underlines the potential of Digital ID.

Juniper expects providers of Digital Identities to focus on developing solutions based on ID Wallets and expects accelerated adoption in 2024. Switzerland is already working intensively on an electronic identity. The e-ID is due to be introduced in 2026.


Central Bank Digital Currencies (CBDCs) - the future of digital payments

2023 has proven to be a crucial year for CBDCs. Numerous countries around the world have tested CBDCs in pilot projects, and in some cases CBDCs are already in use. The European Central Bank has entered the preparatory phase of its digital euro project after a two-year investigation phase.

According to a study by Juniper Research¹, transactions worth $213 billion will be processed via CBDCs by 2030, which underlines the enormous growth potential of CBDCs. For 2024, Juniper predicts the next development stage of CBDCs. We will see more specific use cases such as cross-border payments, B2B payments and financial inclusion enhanced by the use of CBDCs. This continued focus on CBDCs as a stable and reliable digital currency comes against the backdrop of the high volatility seen in decentralised cryptocurrencies. According to a study by Baur and Dimpfl², the volatility of Bitcoin is almost ten times higher than the volatility of the most important exchange rates.

Basically, CBDCs are not just a 2023 trend, but will continue to play a key role in the evolution of banking in 2024 and beyond.

How banks can leverage digital trends in 2024

The financial landscape is currently experiencing significant change, driven by technological advances. In 2024, trends such as Embedded Finance, Digital Identities, AI and ESG compliance are set to further transform the digital banking sector. These developments are crucial to meeting the needs and expectations of customers in an increasingly connected world. Financial institutions that adapt these innovations will be able to position themselves successfully in the digital age.

Netcetera is at the centre of the digital revolution as a strong partner for banks. Our modular digital banking platform prepares financial institutions for the challenges of digital transformation. With our solutions, banks not only master the challenges of digital change, but also pioneer new paths in banking. We tailor our solutions to customers' needs and the latest trends to ensure a secure, seamless and future-proof banking experience.

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