2024: Digital Transformation & Financial Services Trends

FinTech Magazine gets the outlooks from industry experts on the future of financial services and what form digital transformation will take as we enter 2024, featuring leaders from Intellias and Confluent.

Peter Pugh-Jones, Director of Financial Services at Confluent

Below, Peter Pugh-Jones discusses the importance of back-office efficiencies for financial institutions in 2024.

“Financial institutions are, fundamentally, data companies; really, data is their ‘product’, rather than the agreements they enter with customers. 

“If they don’t recognise that reality, they’re not going to survive, because their competitors will be increasingly capable of delivering more accurate results than them, more quickly.

“At the same time, it’s understandable that many financial institutions are inherently risk averse. 

“There’s a tough balance between making the most of the systems that are in their current remit and investing in replacements that are much more in tune with modern processes.

“A root-and-stem approach to tearing out legacy technologies is not financially or operationally viable for many financial institutions. 

“But even automating just 20% of their business can transform how elements of their business operate and put them in a much stronger position compared to competitors.

“It’s undoubtedly difficult to remove deeply entrenched legacy systems. Many will have custom integrations built into other areas of the business, and the replacement technology may require a change in staffing or skills. 

“But stasis isn’t an option – so, at some point, the plaster must be ripped off.”

Pavlo Khropatyy, VP of Delivery, Head of Financial Services & Insurance, Intellias

Elsewhere, Intellias’ Pavlo Khropatyy expects a heightened focus on cybersecurity in 2024, increased adoption of mobile payments, and the use of gamification to drive customer engagement.

Cybersecurity

“Fraud in the fintech sector poses a significant challenge for businesses, leading to massive economic losses.  Machine learning offers a promising solution for combating financial fraud. 

“By analysing enormous datasets of simultaneous transactions in real-time, machine learning algorithms can identify patterns indicative of fraudulent activities. 

“The advantage of using machine learning lies in its ability to continuously learn from results and update models, minimising the need for human intervention in detecting fraudulent behaviour. 

“For example, Danske Bank used to have a fraud detection system based on hand-crafted rules. At times, their rate of false positives reached 99.5% of transactions, skyrocketing investigation costs, and underlying customer experience. 

“After adopting machine learning for fraud detection, the bank managed to reduce the false positive rate by 50% and increase fraud detection rates by 60%. 

“While fraud detection will continue to present challenges for businesses, other critical areas require mindfulness and the implementation of measures to address issues such as money laundering, cyberattacks, data privacy, and infrastructure vulnerabilities.”

Mobile Payments

“Mobile payments are key to making banking services accessible, fast, safe, and reliable for everyone. This represents the direction for the future development of the banking industry as a whole.

“Millennials and Gen Zs are growing their disposable income and personal wealth. FinTech product adoption is surging. When you pair these facts together, it’s obvious that to stay competitive every bank will need to set a higher CX bar.

“In addition, the evolving needs of the current customer persona will require continuous investments in improving the latter.  

“Customer experience (CX) and Open Banking (seamless integration) are now a defining competitive differentiator in the banking sector, and we can expect to see a significant rise in the use in adoption of digital wallets for mobile cashless payments in 2024.  

“Digital Wallets for Mobile Cashless Payments are integrated QR code-based payment systems that benefit banks, e-wallets, payment platforms, retailers, and consumers by allowing fast and secure transactions via a smartphone or smartwatch. 

“The user connects their bank account with the system and completes the transaction with a one-time scan. No personal data or bank details enter the system which makes it completely anonymous and safe. 

“A solution can be smoothly integrated into banking applications, cash registers, vending machines, and retailer loyalty rewards programmes.  

Gamifying customer experiences 

“Gamification is a smart technique banks are adopting to deliver the best CX experience and stay ahead of their competitors.

“Gamification is a powerful mechanism to propel smart banking services and drive customer engagement - by using gamification in banking apps, a bank can target customers according to their specific needs. 

“Games appeal to people’s desire for fun, entertainment, simplicity, social interactions, rewards, and competition. And it’s an especially good way considering the proliferation of smart devices, the mass popularity of gaming, and the hobbies of tech-savvy millennials and Gen Zs. 

“The millennial generation is highly motivated in getting rewards for purchases and engaging with brands using immersive and interactive technology.”

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