The Unfolding Landscape of Digital Transformation in Banking

In 2024, banking will undergo a digital transformation driven by AI, data analytics, and open banking. Challenges include legacy systems, data shortages, but open banking fosters creativity and collaboration, prioritising seamless transactions.

FREMONT, CA: The digital transformation of banking is expected to continue growing in 2024, driven by changing consumer expectations in digital financial services. Peer-to-peer platforms, contactless cards, smartphone wallets, and other digital payment systems will grow in popularity, with a focus on central bank and cryptocurrency digital currencies.

The development of hyper-personalised consumer experiences with specialised financial advice, offers, and digital customer care made possible by AI and sophisticated data analytics will mark a significant turning point. AI and machine learning integration for data-driven decision-making will become essential, affecting areas like process optimisation, real-time fraud protection, personalised product suggestions, and customer acquisition.

Open banking ecosystems will keep promoting cooperation between established banks and emerging competitors, opening the door for creative, user-friendly services and goods. To protect data and transactions as digital services grow, there will need to be a greater emphasis on cybersecurity measures, such as system consolidation, improved biometric authentication, and strong controls.

With the widespread use of legacy systems and a highly regulated environment, financial services businesses will need to overcome the obstacle of realising the full potential of generative AI. CIOs are being prompted to reevaluate strategic investments in data capabilities due to the substantial obstacle that inadequate data governance and management capabilities provide to AI endeavours. Internal conflicts could result from this change as new AI teams want funding while current data teams struggle to support AI with little funding.

In 2024, organisations that quickly create teams, processes, and data infrastructures that are ready for AI will have a competitive advantage. However, ongoing data shortages may make it more difficult to fully benefit from generative AI. Open banking has the potential to promote creativity, customisation, and cooperation in the financial sector. It is expected to become deeply embedded in many areas as banks exchange client data with third parties and open their APIs. Better payment experiences with immediate transfers, easier recurring payments, and peer-to-peer integration are anticipated. Customers will have a comprehensive understanding of their finances with the consolidation of financial data on a single platform, which will facilitate well-informed decision-making.

Open banking's advanced fraud detection techniques will increase security, while open data's improved credit rating will enable more customised lending offers. The need for creative, personalised, and integrated banking services is driven by changing customer expectations, which is why banks use open APIs and data sharing. It is predicted that this change will accelerate the adoption of open banking across core financial services and lead the sector toward a more innovative and cooperative future.

Financial organisations will give top priority to integrating open banking to seamlessly combine finance with "buy now, pay later" options. In response to customer requests for quicker transactions, there is a greater emphasis on lowering payment friction via data standardisation and AI-powered fraud checks. The adoption of payment-as-a-service alternatives and growing bank-fintech collaboration are driving the transformation of antiquated legacy systems. For seamless cross-border payments, progressive organisations investigate decentralised networks and digital currencies issued by central banks. In the banking sector, removing payment friction—from new payment methods to infrastructure updates—becomes a key objective to meet consumer expectations for quick, seamless digital interactions in 2024 and beyond.