Sadly, I don’t have any supernatural powers when it comes to predicting the future and I believe the same is true of my colleagues at Celent. Nevertheless, one of the highlights in our research calendar is our annual get-together to discuss the trends to watch in the year ahead.
This forms the basis of our Previsory report, in which we set out the themes and trends we expect to drive the technology and product development agenda for the industry. This includes some of the latest viewpoints from the Celent Technology Insight and Strategy Survey (CTISS), in which we survey 228 retail bank executives about their IT investment plans for 2023/24. Based on this research, here are three trends to watch in 2024.
Laying the foundations for greater agility is one of the standout technology themes of 2024. In the face of a challenging operating environment, many banks are focusing on how to be able to respond quickly to emerging product or customer-level opportunities. This reflects the broader cultural change underway in the industry. The growth of the fintech sector has undoubtedly catalysed fresh thinking among incumbents about how best to approach technology investments, as well as software development and delivering product innovation. It has also led to new perspectives over what a truly modern technology stack both looks like and can enable.
At a global level, 57% of the banks responding to our latest survey cited delivering greater speed and agility as a top three strategic priority for their technology investments in 2023/24. This is the single biggest theme for the industry overall, ahead of considerations such as regulatory compliance, legacy modernisation and increasing operational efficiency.
One standout theme within this is the growing focus on automation. While the concept of RPA is not new, there is a growing emphasis on “intelligent automation”, which brings together the principles of RPA alongside AI technologies such as NLP, and machine learning. The aim here is to unlock value in workflows such as account opening to enhance customer experiences and reduce operational costs. This is high on the agenda for banks in all regions and is the single most important technology investment priority for the industry overall in 2023/24.
Also important this year is the growing interest in low code tools and interfaces for product and other mission-critical applications. Capacity limitations in the technology function can result in product improvement projects failing to be approved, being de-scoped, or cancelled. In short, the opposite of agility. Across the industry, 41% report that they are exploring use cases or experimenting with low code, while a further 31% have this is on their 2023/24 roadmap.
Banks are steadily growing their investments in the open ecosystem (Open Banking, BaaS, and Embedded Finance), with 75% sharing they have a clear strategy to engage in this space in the year ahead. Indeed, the focus has already pivoted from theory to practice for many banks, with 60% reporting that they’re now generating commercial gains from their open ecosystem activities.
Looking more closely at open banking, the momentum in this area will continue to build. Many banks plan to grow their investments in this area, and further regulatory action will support the expansion of the broader ecosystem. Indeed, one of the big shifts in 2023 was the industry reaching a consensus over the need for regulators to be more active in reducing common barriers such as incomplete market coverage, inconsistencies in interpreting standards, and points of friction in the user experience. Also important is the recognition of the need for the better alignment of costs and incentives across the value chain.
In Embedded Finance, there is a growing understanding that succeeding in this space requires new thinking and new technology. Banks need to raise their game in managing partner relationships, particularly around compliance and risk, and should also explore a growing range of solutions aimed at helping scale embedded finance.
Unsurprisingly, Generative AI tops the list in terms of experimentation and is seen as having a big future impact. Over 41% of banks currently looking at use cases or otherwise testing this technology, while a further 31% have projects on their 2023/24 roadmap. The range of use cases in play is broad, but there are already banks in the market that are live with the use of Generative AI to support a range of internal workflows in areas such as the contact centre and customer-facing agents.
Time will tell if these predictions turn out to be accurate, but I hope to be invited back by the Paypers to review this again in early 2025!
This article was originally published in The Paypers` Global Payments and Fintech Trends Report 2024. The report compiles insights and expertise from leaders representing companies across the financial services spectrum and it delves into the latest innovations and trends in payments and fintech across key markets worldwide.
Kieran is a Principal Analyst in Celent’s Banking practice. His research focuses on the impact of technology-driven change in both the retail and corporate banking sectors, with an emphasis on the role that Open Banking, embedded finance, data and analytics, and cloud technologies have in transforming customer propositions and the long-term value chain in banking. An experienced analyst with close to 20 years in the industry, Kieran works closely with banks, vendors, and payment processors on their technology and business strategies.
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