Over the next few months, Financial Services Industry (FSI) leaders are likely to face several new financial challenges and trends for 2024. These are higher interest rates, increasing regulatory pressures, and a new technology landscape.
This article provides a clear overview of the key trends that will impact the financial sector in the coming year and beyond. By effectively leveraging these developments, banking sectors can expect more efficient and cost-effective solutions. However, these changes also bring challenges that need to be addressed carefully and ethically.
Financial trends for 2024 and market forecasts for 2024
Generative AI in FinTech
The financial sector is changing. Generative AI, ChatGPT is one of the most notable breakthroughs, profoundly revolutionizing the finance and fintech professions.
It will make it possible to identify investment opportunities or potential risks more quickly. Generative AI will also allow advanced personalization of financial services. By studying each client's profile and needs, they can provide personalized advice on investments, loans, insurance and much more.
Sustainable financing
Incorporating ESG (environmental, social and governance) criteria into corporate strategies is a trend that is gaining more ground. Ethical investing, green technologies and renewable energy are now considerations influencing investment decisions and operational practices.
FinTech companies that incorporate these standards into their business model are not only improving their image. They build long-term resilience. Investing in the future to address clients' and partners' concerns about sustainable development.
Customer service
For customer experience in 2024, the use of new technologies will be crucial. They will provide analysis of every touchpoint in the customer journey. It's important to reduce friction and improve the overall customer experience.
Furthermore, new technologies are beginning to enable more engaging options for customers to engage and interact.
To improve the quality of subscription and save time, one can make use of a digital twin. This twin helps in modeling insured assets during high-risk situations. This also allows for better prices to be offered. Therefore, more financial services will prioritize this in 2024.
AI-powered insurance
While AI is growing a little more every day, insurance is also investing in AI.
“Some insurance companies, which have been implementing efficiency plans for years, find themselves facing a glass ceiling. Thanks to artificial intelligence, they will be able to make a big leap.
We see this especially in the generation of computer code or in the automatic generation of reports. At larger risks, you can improve subscription quality and save time by using a digital twin to model insured assets. This also allows for better prices to be offered.
AI accelerates the process of understanding and segmenting customers for personalized offers and experiences. Additionally, it enhances on-demand insurance.
Open banking
It is not a question of declaring the end of historical models that… Despite everything, they prove their resilience year after year. But by emphasizing that open banking services constitute a good catalyst for the current revolutions, and a long-term journey in which there is no room for retreat.
Today Open Ba brings together a community of innovators and developers with over 10,000 members. This project provides banking IT and fintech with open standards and platforms, thus promoting open banking.
Fintech companies are benefiting from this movement. Account aggregators can access customer information and savings accounts because customers allow them to, not because of the regulator.
In terminology we then talk about “data stripping” carried out by fintech companies at the expense of historical players. Stopping “data harvesting” is difficult because it relies on consumers allowing access to their banking data through a login and password.
The bank is not sure whether the customer or anyone else (such as a Fintech or aggregator) can access their account.
Cybersecurity and fraud detection
Cybersecurity will continue to be a major trend in the financial sector. AI-powered security solutions can analyze large amounts of data. They can detect fraudulent activity and anomalies in real time. By providing more robust identity verification, it improves the security of the open banking platform.
FinTech companies should anticipate an increase in cyber threats, making sophisticated and responsive security measures essential. Adapting quickly to regulatory changes ensures credibility with consumers and investors.
Financial trends for 2024 – financial market forecasts
As we approach 2024, we expect inflation and economic demand to decline. Tailwinds for growth and risk markets are diminishing, making us cautious about the performance of risk assets and the broader economic outlook. This caution stems from rising monetary challenges, geopolitical risks, and rising asset valuations.
It seems unlikely that a sustained economic acceleration or rise in risks will occur without a significant drop in interest rates and a rollback of quantitative tightening. This creates a difficult situation where risk assets cannot rise under current monetary constraints, and decisive easing may not occur unless there is a market correction or decline in inflation, which could lead to market declines and volatility in 2024.
Although avoiding a recession is now a popular belief, signs of yield curve inversion point to high recession risks through most of 2024.
In terms of the stock market, the S&P 500 index fell nearly 20% in 2022 due to rapid interest rate increases by the Fed, but recovered somewhat in 2023. Despite positive stock performance so far, earnings growth has not Strong as expected. The concentration of stocks in the S&P 500, driven by a handful of giant technology stocks, has reached levels last seen in the 1970s. This situation, coupled with the end of record pricing power as high inflation eases, points to significant challenges for corporate margins in 2024.
