From Open Banking reaching a new milestone to real-world applications of generative AI (genAI) being rolled out across the industry, 2024 was a busy and exciting year for innovation and technology in financial services. To assess the impact of these changes, FStech asked a range of experts from across the sector for their reflections on the past year and thoughts on what’s to come in the next 12 months.

Deep integration of genAI agents

Kevin Levitt, global director of financial services at Nvidia, predicts that AI-powered agents will be deeply integrated into the financial services ecosystem next year, improving customer experiences, driving productivity, and reducing operational costs.

“AI agents will take every form based on each financial services firm’s needs,” continues Levitt. “Human-like 3D avatars will take requests and interact directly with clients, while text-based chatbots will summarise thousands of pages of data and documents in seconds to deliver accurate, tailored insights to employees across all business functions.”

Advanced AI will migrate to the front-end

Steve Morgan, former ANZ Bank COO and global banking principal at global software firm Pegasystems – which has partnerships with Lloyds Bank, NatWest, Nationwide, Citibank, and Wells Fargo – says that next year the banking industry will still be on the conveyor belt of exploring AI, machine learning, and automation.

“What will change in 2025 is how those genAI projects will shift from being exclusively internal to venturing into being more external and touch customers directly,” explains Morgan. “The reason for this is how those conservative forces within banks will begin to release their very tight and tough grip on the scope of genAI projects.”

He says that when speaking with technology leaders at major banks, they’ve said they’re under heavy pressure from risk and compliance functions to keep AI experiments restricted internally.

“Growing confidence in how AI can be deployed without serious mistakes will mean that resistance will be more significantly chipped away in the coming months,” continues Morgan.

Dharmesh Ghedia, technical director at Google Cloud partner Qodea, agrees that the banking experience for consumers will undergo further transformation next year.

“Rather than the limited, one-size-fits-all digital interactions of the past, banks will offer customers hyper-personalised experiences to retain customers from the threat of challenger brands,” continues Ghedia. “By leaning on AI, banks will be able to tailor services based on an individual’s banking habits and preferences.”

For instance, he explains, AI will allow banks to recognise specific budgeting behaviours or recurring activities, offering tailored advice and guidance.

“Moreover, banks will be able to use AI agents to alert and provide customers with information to reduce fraud or make them aware of new services and features,” adds the technical director.

Hyper-personalisation is set to open up a great deal of new possibilities, with customers having more control over the services they receive. But striking the right balance between automation and trust will be key.

“Banks will need to help customers feel confident in interacting with AI agents while still giving them the option to speak to a representative,” concludes Ghedia. “In 2025, the banks that leverage AI to empower customers without completely taking away human interaction will offer the best experience.”

Mobile-first commerce

According to data published by Statista, UK mobile commerce retail sales are projected to grow to £109 billion by 2027, up from £96 billion this year.

Rich Bayer, UK country manager at Clearpay says that mobile-first commerce will continue to require sharp focus from payment providers.

“This evolution is being driven by Gen Z and Millennials, who increasingly shop online, via apps, and through social media platforms,” continues Bayer. “Tech providers must respond by creating flexible and seamless payment options, so that retailers can meet consumers’ digital-first expectations.”

He says that social commerce is also playing an increasingly important role in shaping consumer behaviours.

“Platforms like TikTok and Instagram, which 45 per cent of Gen Z respondents cite as major influences on purchasing decisions (according to data from the International Council of Shopping Centres), demonstrate the growing importance of meeting consumers where they shop,” continues the country manager. “Retailers will be leaning into payment innovations that support mobile and social commerce, which will be critical for them to attract and retain these digital-native audiences."

Data, data, data

Due to the sensitive nature of financial data and stringent regulatory requirements, governance will be a key priority for firms as they use data to create reliable and legal AI applications, including for fraud detection, predictions and forecasting, real-time calculations and customer service, says Nvidia’s Kevin Levitt.

“Firms will use AI models to assist in the structure, control, orchestration, processing and utilisation of financial data, making the process of complying with regulations and safeguarding customer privacy smoother and less labor intensive,” he continues. “AI will be the key to making sense of and deriving actionable insights from the industry’s stockpile of underutilised, unstructured data.”

Andrew Beal, chief architect at insurance business Markerstudy, says that data is the lifeblood of modern insurance.

“In 2024, data continues to be the cornerstone of the insurance industry, with many companies now rightly identifying themselves as data companies,” continues Beal. “The rise of GenAI is amplifying the importance of data, driving the need for more raw, unstructured data rather than the structured data traditionally used for MI and traditional reporting use cases.”

He goes on to say that as insurers invest in genAI, they are also realising they need to invest in their data ecosystems.

“The old adage that “data is the new oil” has never been more relevant,” adds the chief architect. “However, while many have been producing “diesel” for MI, the shift towards AI demands “petrol” – highlighting the need for a more refined and versatile data approach.”
Qodea’s Dharmesh Ghedia says that 2025 will be the year of the “big database migration”.

“Many financial institutions rely on legacy database systems but over the next year, the financial services sector will be pushed towards data and database modernisation to harness AI’s full potential − a technology that relies heavily on a robust data foundation,” Ghedia continues. “Banks have historically been hesitant to overhaul their databases, concerned about the cost, effort and risks involved.”

But he predicts that banks will find that their outdated systems limit the effectiveness of AI to improve customer experience, security and fraud.

“While financial institutions have widely adopted cloud and SaaS solutions, database migration has often been pushed aside due to the complexity and perceived risks,” he adds. “In 2025, banks will realise the risk brought by avoiding modernising databases becomes greater risk than if they don’t.”

GenAI to shape the business model for financial services

Shanker Ramamurthy, global managing partner banking & financial markets at IBM says that the most relevant technology for financial services next year will be genAI.

“The technology is enabling banks to achieve the competing objectives of revenue growth and cost compression while managing regulatory compliance and improving the software development life cycle end-to-end,” he tells FStech. “If I look at 2025 the biggest impact is going to be genAI and its ability to shape the business model of banking.”

Markerstudy’s Andrew Beal agrees that genAI will continue to take centre stage across financial services next year.

“The top trend in financial services for 2024 is undoubtedly genAI,” continues Beal. “This year, we’ve seen a significant shift from POC and POV stages to full-scale production deployments.

“The results have been promising, solidifying genAI’s position as a transformative technology rather than a fleeting trend like blockchain.”

However, the transition to production has not been without its challenges.

“Companies are navigating the complexities of integrating genAI into business-as-usual operations, which includes aspects like running, monitoring, and managing model drift,” adds the chief architect. “As the adoption of genAI grows, so does the regulatory landscape.

“With initiatives such as the EU AI Act, companies are beginning to understand the long-term implications of these regulations, which will continue to shape the industry into 2025 and beyond.”

AI factories become table stakes

Nvidia’s Kevin Levitt thinks that next year will see AI factories become commonplace, with AI use cases in the industry exploding.

”This includes improving identity verification for anti-money laundering and know-your-customer regulations, reducing false positives for transaction fraud and generating new trading strategies to improve market returns,” continues Levitt. “AI also is automating document management, reducing funding cycles to help consumers and businesses on their financial journeys.”

He says that to capitalise on opportunities like these, financial institutions will build AI factories that use full-stack accelerated computing to maximise performance and utilisation to build AI-enabled applications that serve hundreds, if not thousands, of use cases — helping set themselves apart from the competition.

Grappling with DORA and wider regulation

Pegasystems’ Steve Morgan highlights that European banks will need to grapple with the Digital Operational Resilience Act (DORA) next year, which goes live from 17 January 2025.

“Let’s expect some teething problems to appear and tax the sanity of banks as it will other sectors,” continues Morgan. “And yet, other regulatory hurdles seem less likely or easy to scope out just yet.

“While he may like to wield a stick to get what he wants, there is little clarity of whether Trump will push ahead with the AI governance plans outlined by Biden. So, the EU AI Act will be the guiding light for how AI safety laws will affect the roll out of AI in banking.”

Nelson Wootton, chief executive and co-founder of core banking firm SaaScada says that DORA will push banks to finally focus on speed-to-report.

“As ever more stringent regulatory and reporting requirements push banks to the edge, DORA will be the catalyst banks need to modernise their core systems and overhaul their outdated reporting processes,” he says. “Long gone are the six-week reporting windows banks are used to, with 24 hour reporting the new norm.”

Wootton continues: “One crucial aspect of DORA for banks is the need to report on third party risk to ensure resilience. Ensuring compliance will be a time-consuming process as banks must vet every technology vendor that plays a part in delivering their banking services, to ensure that their infrastructure remains robust - and fully compliant.”

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