Episode 4: 2024 Financial Industry Insights: Our Key Takeaways from This Year’s Conferences
Transcription:
Hello and welcome to Speedtalks – the podcast about everything tech in the financial industry.
My name is Basia Bednarczyk, and in this episode I’ll be discussing the latest trends in the banking and finance industry.
Financial Industry 2024 Takeaways
We are only halfway through the year, but our team has already attended more than 15 events related to financial and banking services. We’ve been to conferences in Romania, Poland, the UK, Finland, Belgium, and the Netherlands. The main purpose of these events is networking, discussions, meeting new people, and gaining new perspectives. We noticed that regardless of the conference or the country, some topics are frequently discussed. What are the people working in the industry most interested in and talking about right now? That is what I will tell you about in this episode. Let’s get into it.
Open Banking
First up is, of course, open banking. For those who are not in the financial industry – open banking is a system that allows consumers and businesses to share their financial data with third parties. The aim of open banking is to increase competitiveness and innovation in the financial sector while maintaining the security of the data transferred and the certainty that everything is done legally.
The main challenge currently faced by financial players is to take open banking to the next level. This means moving beyond just implementation and focusing on broader integration and widespread adoption.
It is worth mentioning that open banking is strictly regulated by law. This ensures that customer data is secure and only used with explicit consent. In Europe, for example, these regulations are set out in PSD2 (Payment Services Directive 2). PSD2 is the Payment Services Directive in the EU, which aims to facilitate, standardise and secure payments across the Union. A third version of the directive, PSD3, is currently under development. For this reason, the topic is trendy in the industry.
Generative AI
The combination of open banking and GenAI is also mentioned at all events. This combination allows banks to improve their services and efficiency and improve the customer experience. Banks recognize the transformative value of GenAI. According to EY’s data, the combination allows for:
- Enabling greater productivity by automating sales-related activities.
- Enhancing existing technological capabilities.
- Accelerating broader innovation.
However, this synergy requires a clear vision, the ability to implement changes, familiarity with the right technologies, specific skills, and human resources. It’s a complex process, which is why institutions are initially focusing on back-office automation. What comes next? We shall see.
Artificial Intelligence
Speaking of artificial intelligence… This is probably the most common topic at every conference. However, contrary to the common internet narrative, AI is not being presented as a replacement for humans but as a support for them in certain areas.
In today’s world, full of fake news and uncertainty, clients prefer real human contact. We shouldn’t replace ourselves with machines but rather let them help us. And that’s exactly what’s being discussed in the financial industry.
Predictive AI
One example of the use of AI in the modern world is Predictive AI. Predictive AI – refers to the application of artificial intelligence techniques to predict future events or trends based on historical and current data. This technology is widely used in various industries for forecasting, risk assessment and decision-making. For example, in medical diagnostics: it is used for early detection of diseases and prediction of treatment outcomes. Key topics also include the importance of data quality for training AI models and its impact on accuracy and performance. In the end, it is up to us what artificial intelligence learns.
Growing disappointment?
Fun fact: there are also voices at the conferences talking about the growing disappointment with AI projects. This is mainly due to the high costs resulting from implementing AI solutions and the lack of visible benefits. The craze for artificial intelligence and implementing it without a sensible plan is starting to take its toll.
However, despite the fears and initial setbacks associated with AI solutions, the conversation is still invariably around AI’s potential, whether it is because, in some cases, artificial intelligence is starting to deliver the expected results… or perhaps it is because speculative bubbles take a long time to burst. We’ll probably find out soon enough.
Payments and Digital Money
Another hot topic is Payments and Digital Money. I have yet to attend a conference where the topic of CBDCs has not come up. Central Bank Digital Currencies is a new form of money that exists only digitally. Instead of printing money, the central bank issues widely accessible digital coins, simplifying digital transactions and transfers.
The central bank’s digital currency may affect the way people pay for goods and services and the role of banks and other payment companies. Although its introduction is expected in 2028, banks should start preparing now.
The European Central Bank points to three main benefits of the digital euro.
- First, it would strengthen Europe by promoting monetary sovereignty and making the payment landscape more resilient to non-European providers.
- Second, they say, it would enable financial inclusion and create a common European payment system for all EU citizens.
- Thirdly, they say it would be free to end users with beneficial features such as cash-like privacy.
Speaking of payments, the industry continues to see the impact of COVID-19, which has caused a shift in payment habits towards digital, contactless, and e-commerce payments. Customers have taken a liking to the convenience that digital payments bring.
On an interesting note, after a period of uncertainty, cryptocurrencies developed by private or informal organisations (like Bitcoin) have again seen significant development and value growth, so they are again attracting more interest from those in the industry. But, it remains to be seen how long it will last this time.
Security & Embedded Finance
Of course, security and building customer trust are still mentioned at conferences. Financial institutions know that trust is a critical factor for success. That’s why a lot of emphasis is placed on fraud and how to deal with it.
There is a lot of talk about how security, liquidity, integration, and a personalised experience are essential for customers. Hence the popularity of Embedded Finance. Embedded finance is a term for the integration of banking and financial services with non-financial applications and services. Customers want financial products and services that are embedded in their daily activities. Embedded finance offers both banks and non-financial brands the opportunity to provide a seamless or a smooth customer experience.
Consumers and businesses increasingly expect financial products and services to be tightly integrated into their day-to-day activities, for example, being able to pay for parking or the motorway in a banking app. Fundamentally, these integrated experiences go beyond ‘digital financial services’ and instead bring us closer to the next revolution in finance.
Subscription payments
Subscription payments also come up frequently at conferences – I recently heard that PYMNTS research shows that 80% of those surveyed in the last year have paid for their monthly bills in a subscription format.
The lesson for merchants is that once consumers see how easy and secure it is to manage payments via subscription services, most seem happy to abandon traditional payment methods. Speaking of customer experience and personalisation…
Personalisation
One of the biggest cross-sector trends is mass personalisation. We’ve noticed that no matter what industry I talk to—banks, financial institutions, insurance companies—they all mention the importance of personalisation in their services.
There is a strong focus on interaction channels, customer paths, and engagement. The different channels through which customers interact with financial services are tested, and the importance of mapping and improving customer paths is discussed.
The topic of real-time data analytics, cloud infrastructure and AI as key enablers for developing and improving customer experience emerged at many conferences.
Cross-sector collaboration—for example, value-added services, so-called VAS—between banks and other service providers, such as the ability to buy public transport tickets via the bank’s app, pay for parking, or take out insurance—you can hear more about this in Episode 1 of our podcast, where Michael discusses it in more detail.
Regulations
Finally, I want to mention the topic of regulation in the financial industry. This includes KYC (Know-Your-Customer), AML (Anti-Money Laundering), and the upcoming AI Act, that everyone’s waiting for.
KYC and AML are crucial in the banking sector, given the potential risk of fraud, money laundering, or other illegal activities. KYC and AML play a vital role in protecting companies and financial institutions.
The conferences also cover regulations and technology standards, such as ISO 20022. ISO 20022 became a mandatory standard in 2019, with an initial cutover from MT by March 2023, and a transition to native ISO 20022 messaging by the end of 2025. Because of this, banks and other payment processors around the world are already at an advanced stage of implementing ISO 20022.
Final words
Believe me, I could go on for hours about trends in the industry and go into more depth on each of these issues, but I don’t think we have enough time for that. Still, if you want to learn more about trends in banking and the financial industry, we’ll be talking more about them in the future episodes of our podcast. But, if you’d rather read more about trends – we’ll provide some articles relating to the topics covered in the description of this episode.
Hope you enjoyed! See you next time!
