The financial services industry in 2023 was defined by playing catch up to rapidly evolving technology in an increasingly competitive environment. Heading into 2024, commercial banking is set to focus on much of the same – though with accelerating dynamics certain to intensify pressure on financial institutions (FIs) and business end users.
Modernization efforts centered on payments and other financial processes are top priorities for FIs and businesses. Datos Insights survey data shows that 94% of businesses expect at least somewhat significant investment in payments technology in the next 24 to 36 months. Along with keeping up with rapidly evolving technological innovation and continued digitization of financial products and services, modernizing financial capabilities among businesses presents unique market opportunities for FIs.
Most banks are expecting to invest in payments technology and other best-in-class financial services over the coming year. However, many FIs are experiencing significant hurdles when it comes to focusing on technology advancement, integration, and go-to-market strategies, simultaneously risking slow return on investment and underutilization from slow end-user adoption. In sum, modernization means that opportunities are abundant, but capturing market share and realizing ROI presents an ongoing challenge.
With modernization as a key driver of new market opportunities, Datos Insights recognizes several key trends for the commercial banking and payments industry in 2024.
- Payment modernization fills critical needs for automation and real-time payments. Businesses increasingly demand a difficult-to-achieve payments scenario – simple processes with robust options and capabilities. Payments modernization for businesses translates to efficient procedures that maximize capabilities within accounts payable and accounts receivable, often through automation, along with faster payments. Banks have been slow to offer holistic product solutions and new capabilities with clearly defined value propositions, both of which are areas of focus for FIs going into 2024.
- Industry-vertical payment trends provide market opportunity. There is a growing awareness within financial services that product deployments have varied use cases and unique value propositions between industry verticals. This is especially true of payments but also holds for other cash management and lending products. Fintech vendors have often led the way in devising industry-specific solutions. FIs have always catered to certain industries or had specialization with certain client types, but many banks are integrating or developing solutions geared toward specific industries, such as healthcare payments.
- Generative AI is rolling out into live production at banks. Generative AI has suddenly become the hottest topic when it comes to the deployment of new technologies within financial services. Most banks have not yet integrated generative AI into processes or products, but this is likely to evolve rapidly throughout 2024. Integration will likely begin with embedded generative AI capabilities into existing third-party or in-house-developed platforms for routine back- and middle-office bank procedures. However, expect to also see the rollout of generative AI within specialized financial products throughout the year.
Other areas like enterprise resource planning banking (ERP banking), foreign exchange processing, competition for small-business banking, and increased churn in commercial lending will also impact the financial services industry in 2024.
To learn more about the key trends Datos Insights is watching in the commercial banking and payments market this year, read the full report or reach out to Erika Baumann, Director, Commercial Banking & Payments and Healthcare Payments at [email protected].