Banking in 2025: What to expect?
Introduction
The world is changing and changing fast. While there are geopolitical implications worldwide from ongoing wars, new leadership changes, climate change, and changing trade equations, there are winds of change in the overall economic activity, with economists predicting an overall slowdown in growth across economies. Now only time will tell the impact. But all of these have implications for financial services organizations. Case in point being the increasing focus that groups are having on ESG. This is likely to come to the fore in 2025 and the years ahead, with financial services organizations looking at ESG and its impact not just in their context but also its impact on their ecosystem, both upstream and downstream.
Now, being specific to 2025, what are some of the areas of heightened activity that we are likely to see?
Experience, Experience, and Experience
Personalization has been talked about for some time now, and there has been significant effort on this front. But have they fetched the results that customers expect? While there have been advances in AI and ML, the fact remains that financial institutions struggle to make true meaning out of the data that’s available to them. Also, experience is largely getting attributed to the digital experience one has. Isn’t the in-branch experience equally important? How knowledgeable is the teller about the customer getting addressed? How pleasing has the experience been, and how much time did the customer have to spend at the branch before getting the work done?
Now these are areas that have been talked about for some time now. The need of the hour is to effectively tie the front, mid, and back offices across systems, applications, and processes, and this remains on the wish list of financial institutions at large. The key is to have a unique and consistent experience across touchpoints, be it physical, digital, or phygital. The reliance on manual and paper-based processes even now acts as a bottleneck. Extensive usage of digitization and process automation is where the efforts need to be put in. And this is being, to some extent, adopted by the technologies that financial services firms are investing in.
We’ve had experience of working with financial services organizations in modernizing core systems and driving process automation that has helped them roll out products faster, improve turnaround time, reduce overall churn, and improve experiences across customers, staff, and partners. Now in the markets that we operate in, there’s a lot of ground to cover as the maturity levels across financial institutions across geographies differ significantly.
AI and conversational AI gaining momentum
Now we are seeing this being talked about a lot in recent times, but we believe 2025 is when this will start seeing more investment, adoption, and growth at an accelerated pace. More and more financial institutions will look at use cases to engage with customers more, offer personalized products, get more details on spending and travel patterns, and look at AI and conversational AI more closely to bring in customer stickiness. We’ll see more virtual assistants, bots, and AI agents being deployed and increased usage of models to get more bang for the buck. Now how does all of this help customers? After all, that’s the audience being served! With financial institutions bringing about novel ways and more use cases in AI and ML, this will open up a gamut of opportunities for customers to explore. Close integration with Open Banking will provide opportunities for financial institutions to tap into customers across channels and touchpoints and at different stages of the customer’s life cycle.
Growth opportunities through new and quickly deployable products
Can my bank lend me a loan of INR 1,000? A quick loan on interest without having me buy a credit card? There’s a huge market to be addressed here. And more banks would like to tap into the opportunity of competing directly with lending companies, provided the cost of acquisition and other parameters add up. Now, this is just an example of the opportunity that banks have of being nimble and being able to quickly tap into new opportunities to launch products and address new markets. What banks will require here are adaptable technologies that help them achieve long-term objectives efficiently, nimbly, and on time. The focus will also be on easily available data that can be put to good use to develop ideas having a far-reaching impact.
Likewise, in the corporate banking space, how can banks rely on adopting paperless processes, ensure faster cross-border payments, have better control over cash and liquidity, and ensure customers are being served the way retail clients are, faster and more efficiently? Clearly the rules of the game are different for retail customers, but bankers will closely look at narrowing the gap in 2025 and the times ahead. This would require technology adoption and know-how to bring in a new paradigm of working with efficiency, speed, and compliance.
Looking at data in a new way
Data management in financial institutions as a subject isn’t a new discussion point. We’ve seen the evolution of the likes of data warehousing, models, analytics, lakes, data mesh, and AI, all leading to a new paradigm of data management. We can expect data to be investigated more granularly to determine use cases in digital banking, ensure a frictionless experience for customers, and offer more personalization. And the consumption of data in a form easily available to even the non-technical staff. We’ll see more use cases being developed across the core use of data and how it’s treated across third-party applications, partners, and vendors. We are likely to see organizations adopt hybrid and multi-cloud strategies to plan and optimize their data better and save on costs.
Digital Trust, Financial Risk, and Compliance.
With cybercrimes on the rise, financial institutions will see the need to invest heavily in technology that’s secure and that adopts best practices in risk and compliance management. While there’s a deep desire to secure customer data and retail transactions, there’s a growing need to have adequate checks and balances in systems such as AML, KYC, CFT, and local regulations for banks and financial institutions to always comply. Data-related laws are only going to get more stringent, and financial institutions will have to have adequate checks and measures to ensure customer data is protected at all times.
Conclusion
As we step into 2025, the financial landscape is poised for significant transformation. By embracing innovation, prioritizing customer experience, and leveraging cutting-edge technologies, banks and financial institutions can not only navigate challenges but also unlock new opportunities.
At Profinch, we’re committed to partnering with our clients to shape this future. Together, we’ll drive digital transformation, enhance compliance, and deliver exceptional customer experiences.
Would you like to explore how Profinch can help your organization thrive in the digital age? Contact us today to learn more.