The financial services industry is at a pivotal juncture in 2024, facing a slew of challenges and opportunities that are shaping its future. As technological advancements like artificial intelligence (AI) revolutionize operations and customer interactions, the sector is also grappling with the imperative of enhancing cybersecurity, promoting sustainable business practices, elevating the customer experience and maintaining a steady and satisfied workforce.
This blog explores a few key trends we’ll see unfold in the year ahead as organizations grapple with the changing landscape and how training strategies must adapt to meet new challenges head on.
Taking Advantage Of Artificial Intelligence
Artificial intelligence (AI) is revolutionizing the financial services sector, with giants like Bank of America, Wells Fargo, BlackRock and Citigroup spearheading AI-driven transformations. These innovations aim to enhance customer experiences, mitigate risk and streamline operations across the board.
NVIDIA’s fourth annual State of AI in Financial Services Report reveals that 97% of firms are set to ramp up their AI investments. “Portfolio optimization, fraud detection, and risk management remain top AI use cases,” says Kevin Levitt. He goes on to highlight the emerging trend of generative AI as a tool for discovering new efficiencies as well as the utilization of data analysis to inform more strategic investment decisions.
The commitment to improving client interactions is evident through the deployment of AI technologies like chatbots, virtual assistants, and personalized recommendations, aiming to foster greater user engagement and make banking more convenient.
In the realm of insurance, AI’s potential to refine product offerings and achieve more precise risk evaluations could significantly benefit consumers, Teaganne Finn explains in an IBM feature. This could translate into more favorable insurance premiums for individuals.
However, embracing AI does not come without ethical considerations. The drive to employ AI specialists and data scientists is indicative of the industry’s awareness of these issues, though recruitment challenges persist. Darryl Knopp, writing for FICO, emphasizes the need for transparency and accountability in AI applications: “It will be increasingly important for organizations to understand, test, and validate the AI models they utilize…To ensure ethical outcomes, AI systems must be fully explainable and auditable.”
Increasing Cybersecurity Risk Management & Fraud Detection
The financial services industry has witnessed several high-profile cybersecurity incidents that spotlight the critical need for advanced protection measures. For instance, the SWIFT banking network has been targeted multiple times, leading to significant financial losses. In 2016, hackers attempted to steal nearly $1 billion from the Bangladesh Central Bank through the network, successfully transferring $81 million. Another notable event, the Capital One data breach of 2019 leaked sensitive information from over 100 million customers. These incidents serve as stark reminders of the vulnerabilities present in financial systems and the continuous need for innovation in cybersecurity strategies to combat the evolving threat landscape.
And as AI and other technological advancements accelerate, they bring with them a heightened need for robust cybersecurity measures to counter these increasingly sophisticated cyber threats. Bernard Marr, a recognized expert in business and technology, highlights this urgency on LinkedIn, stating, “The escalating frequency and complexity of cyber threats and the ongoing AI arms race between cyber criminals and organizations means cybersecurity will continue to be a key trend.”
As a result, Gartner predicts a significant surge in global spending on security and risk management, projecting it to reach $215 billion by 2024. This represents a substantial 14.3 percent increase from 2023, underscoring the critical importance organizations place on fortifying their defenses against cyber incidents.
In the battle against fraud, the role of machine learning is becoming increasingly pivotal. Pavlo Khropatyy, VP of Delivery and Head of Financial Services & Insurance at Intellias, emphasizes its potential in FinTech Magazine: “By analyzing enormous datasets of simultaneous transactions in real-time, machine learning algorithms can identify patterns indicative of fraudulent activities.” He points to Danske Bank’s experience as a testament to machine learning’s efficacy, where its implementation led to a 50% reduction in the false positive rate and a 60% improvement in fraud detection rates.
Cultivating & Demonstrating Sustainable Business Practices
Financial services companies are steering towards sustainability, embracing Environmental, Social and Governance (ESG) practices as integral to their operations and strategic vision. This shift is deeply influenced by a collective realization of the critical importance of sustainability in ensuring long-term business viability and value creation.
Natalie Runyon, in a Thomson Reuters article, says that companies are set to “overhaul their business structures” to fully integrate ESG practices. She adds that “ESG issues will transition from being optional extras to integral elements of corporate strategy, essential for generating sustained value.” The financial sector’s journey towards sustainability is characterized by a focus on renewable resources, recycling and efforts to reduce carbon footprints.
The drive towards ESG integration is further propelled by changing consumer and investor preferences, with a growing demand for socially and environmentally responsible business practices. Marius Galdikas, CEO at ConnectPay, reflects on this trend in FinTech Magazine, noting the competitive advantage for fintechs in aligning with these values: “In an increasingly eco-conscious industry, the integration of ESG considerations could lead to a competitive edge for fintechs, attracting environmentally-conscious investors and fostering long-term resilience.”
Denise Johansson, Co-founder and Co-CEO at Enfuce, observes the challenges and opportunities inherent in adapting business models to prioritize sustainable growth: “Players that have engaged in aggressive pricing strategies to secure significant logos or clients may find it challenging to sustain their operational margins and maintain shareholder expectations for profitability.”
Central to these evolving dynamics is the role of Scope 3 rules in driving sustainability efforts, compelling companies to consider the full spectrum of their environmental impact, from direct to indirect emissions. This regulatory push underscores the importance of a holistic approach to sustainability, encompassing every facet of business operations and extending to the broader ecosystem.
Putting The Customer Experience Front & Center
In 2024, financial services companies are significantly enhancing their focus on customer experience (CX), recognizing its pivotal role in driving growth and staying competitive in a rapidly evolving market. According to Kameleoon, a customer experience platform, retail banks that actively engage in customer experience optimization grow at a rate 3.2 times faster than their competitors who do not prioritize CX. This growth is largely fueled by the strategic deployment of advanced technologies such as AI, which organizations are leveraging to gain new insights and pivot their strategies accordingly. Finn, a proponent of this approach, highlights, “New technology can analyze almost every detail of a customer’s interactions, which can enhance customer loyalty and increase satisfaction over time.”
The adoption of new and improved chatbots and virtual assistants is a testament to the industry’s commitment to elevating the digital customer experience. IBM’s watsonx Assistant, for example, utilizes natural language processing (NLP) to provide customers with faster access to the solutions they need, ensuring the service is both humanized and personalized.
Additionally, Knopp says there’s a growing investment in tools and resources aimed at promoting financial well-being. These initiatives are particularly focused on reaching underserved and credit-invisible populations, offering robust money management solutions. He emphasizes the importance of showing genuine care for customers, stating, “People want to know that their bank cares about them and this is a trend that will continue to gain momentum in the coming years. The old adage comes into play – ‘People don’t care what you know until they know that you care.’
The integration of gamification into digital banking platforms is also on the rise, aimed at increasing customer engagement through rewards and loyalty programs, personal finance challenges and educational tools on cybersecurity and fraud prevention. This strategy not only makes financial management more engaging but also empowers customers with the knowledge to protect themselves against risks.
Supercharging Employee Retention & Recruitment Efforts
Sir Richard Branson famously once said, “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.” That quote certainly resonates with today’s financial services organizations, who are rethinking the employee experience.
Banks and credit unions, in particular, have had a difficult time both reeling in new and keeping existing talent. Finding novel and innovative ways to support workers during uncertain economic times and rising interest rates will become critical.
Employee turnover presents significant costs and challenges, affecting not only financial outcomes but also customer satisfaction. The disruption caused by a continuous change in personnel, especially with less experienced newcomers, can erode the quality of customer service. This underscores the importance of maintaining a stable and experienced workforce.
A KPMG report highlights the banking sector’s proactive approach in navigating the post-pandemic landscape, particularly emphasizing the trend towards resuming office work. This shift underscores the necessity of developing new strategies to ensure flexibility and promote work-life balance in an era where remote work options are plentiful.
Other strategies being considered and put into place include:
- Enhanced Support Systems: To support employees’ mental and physical well-being, companies are expanding access to wellness programs, mental health resources and family support services.
- Professional Development Opportunities: Investment in continuous learning and growth opportunities is a key focus, enabling employees to advance their skills and careers within the organization.
- Inclusive Work Cultures: Emphasizing diversity, equity, inclusion (DEI), and corporate social responsibility (CSR) initiatives aligns with employees’ core values and fosters a sense of belonging and purpose.
- Recognition and Rewards: Tailored recognition programs that appreciate individual and team contributions effectively boost morale and engagement.
- Innovative Technology Tools: Leveraging technology to streamline workflows, enhance communication and facilitate collaboration, even in a hybrid work environment, is critical for efficiency and satisfaction.
According to the KPMG report, 84% of CEOs surveyed acknowledge that their company’s success and growth are intricately linked to an ethical culture that resonates with employees’ core beliefs. This reflects a broader industry acknowledgment that strategies centered around strong leadership, a commitment to ESG principles (environment, social, governance), DEI and CSR are not just ethical choices but foundational to a strong and steadfast employee culture.
Rethinking Employee Training
The intricacies outlined above don’t just warrant effective training, they demand it. Whether it’s educating staff on new AI functionality, developing employee soft skills to better serve customers, learning the latest cybersecurity best practices or rolling out sustainable business practices, it all comes down to the effectiveness of your learning ecosystem. Organizations must adopt solutions and strategies that engage employees, properly embed knowledge and allow employees to practice and master key skills.
Microlearning and knowledge reinforcement platforms like Qstream are the perfect fit for the financial services industry, where training customer-facing employees without hindering productivity is a challenge, yet regular training is essential to propel the business forward. Short bursts of knowledge are pushed out to learners in the flow of work to keep them up to date on need-to-know information and practices.
This training approach not only enhances business performance but also enriches the employee experience by fostering professional growth and demonstrating a commitment to workforce success.
Click here to learn more about how Qstream helps the top financial services companies engage, train and develop their workforces.
