Advancements in financial technology have brought banks closer to unbanked consumers, and connected businesses with more customers. The digital migration has seen millions of individuals shifting from traditional banking, and instead opting for more connected services. For instance, globally, digital wallet services and transactions are predicted to reach more than 360 billion transactions by 2026. In total, over 40 percent of all transactions by volume will be completed through a digital wallet in the coming years.
Financial technology creates demand for seamless, on-demand, and secure transactions. This, in turn, helps to empower businesses to take advantage of new opportunities, while bringing new financial services closer to consumers in all corners of the world.
In 2024, plenty of new developments helped to shape the future of financial services, including digital banking, cross-border transactions, and cybersecurity. Looking ahead towards 2025, and beyond, a plethora of digital innovation is set to change the way customers transact, and companies conduct business.
Digital Data Factories
Around the world, across a varying number of industries, enterprises rely on digital data to improve their decision-making processes. Not only this, but digital data provides a business with more accurate forward-looking analysis, which in turn helps a business to understand current market trends.
For quite some time, digital data has enabled banks and financial institutions to create more tailored customer experiences and develop a range of functions that would allow them to retain more customers as the digital banking ecosystem becomes increasingly competitive.
However, banks and financial institutions have started using data to analyze client’s risk management abilities, credit risk modeling, and implement more effective analysis procedures for different products.
In the coming year, and beyond, the finance sector will become increasingly dependent on digital data. Accessibility to accurate data will provide financial institutions with a wealth of new opportunities, allowing them to better understand their customers and, in return, analyze risks more effectively, and develop on-demand solutions in a changing landscape.
Artificial Intelligence Fraud Prevention
Banks, credit unions, mortgage lenders, and other financial institutions account for nearly one-fifth of cyber attacks, according to new research by the International Monetary Fund (IMF). Advancements in Artificial Intelligence (AI) and Machine Learning (ML) technologies have become key tools in combatting digital banking fraud.
These technologies are helping identify suspicious activities, track and analyze data, and provide real-time fraud prevention measures across a wide network of financial services. There has been a significant increase in the number of financial institutions using AI and ML technologies for fraud detection. In 2023, the figure of financial entities using these technologies rose from 66 percent to 71 percent.
Artificial technology creates a new barrier of protection for financial institutions. By using these systems, banks, and other fintech companies harness a variety of digital capabilities that enable them to detect patterns, create new fraud prevention measures, and systematically adapt to changing threat patterns.
As this technology continues to evolve in the new year, financial institutions will play an important role in helping to train AI models. This cross-section between two industries will ensure safer, more secure banking for all consumers and businesses, and help experts unearth emerging threats in advance.
Mainstream Digital Currencies
In some advanced economies, central banks have become increasingly supportive of digital currencies. For quite some time there has been a widespread push-back on the adoption of a digital currency, however, advancements in the field have opened new opportunities, and could potentially be the start of replacing traditional fiat currencies.
For instance, the Federal Reserve of the United States has published multiple research papers on the use of digital currencies, celebrating their efficacy, safety, and wider potential to influence the global economy. The Central Bank Digital Currency (CBDC) would introduce the next generation of digital currencies, transforming financial services and practices.
The Federal Reserve argues that a central digital currency would enable consumers and businesses to harness a safe, transferable, and identify-verified currency to complete transactions, pay for goods and services, and deter fraudulent activity.
Digital currencies have already become more mainstream in recent years. For instance, the adoption of cryptocurrency among consumers has seen widespread popularity, with over seventeen percent of American adults claiming that they have invested, traded, or used a cryptocurrency before.
Despite the potential, lawmakers and regulators are still unclear about the long-term sustainability of digital currencies. Unlike fiat currencies, which are backed and protected by central banks, and various financial institutions, digital currencies continue to fall outside of this realm, creating larger skepticism among users.
Change through the introduction of new monetary policies, and appropriate regulatory oversight could bring new opportunities for digital currencies, and this could become a reality within the following years as the Trump administration could show wider support for digital currencies, and remove Biden-era red tape for these instruments.
Instant Cross-Border Payments
Digitization of commerce has meant that more consumers have access to a wider range of goods and services, including those in under-banked communities in developing economies. This improvement, among the digitization of labor and supply chains, has created new opportunities in connecting local enterprises with domestic and international consumers.
These activities have seen accelerated growth during recent years, most notably during the pandemic. In developing regions, cross-border payments have played a crucial part in sending local and foreign currency abroad or completing transactions more seamlessly.
In fact, many people and businesses heavily rely on cross-border transactions for financial well-being. In 2023, more than $190 trillion in cross-border transactions were completed, and it’s expected that this number will grow to more than $290 trillion by 2030.
Despite the importance of cross-border transactions, there is still more work to be done to improve the processing of transactions to help create more seamless, efficient, and safe experiences.
Over 63 percent of consumers globally made use of international real-time payment (RTP), according to GlobalData’s 2024 Financial Services Consumers Survey. Much of this activity was to send money to family and friends or to complete direct-to-business transactions.
Making these services more convenient, and providing real-time payment clearance for cross-border transactions will open new economic avenues for small and medium retailers, and help connect consumers more directly with local suppliers and businesses.
Super App Revolution
Super apps have become a go-to solution for consumers looking to have an all-in-one digital interface that enables them to complete multiple transactions without having to switch between platforms or mobile applications.
For instance, a super app may contain more than one service, such as a ride-share app that has a delivery service, package collection, shopping, and other services. Super apps have become more mainstream in recent years as direct-to-consumer commerce becomes more digitized.
Several financial institutions have taken a similar approach to developing super apps that allow consumers to complete a number of transactions all through one platform. Super apps provide a financial ecosystem that is personalized around an individual’s needs.
Take for example, in some cities across the world, local governments and utility companies are now launching super apps that would allow residents to complete multiple transactions all under one roof.
For instance, in Toronto, residents can use the MyToronto Pay app, which is a collaboration between the City of Toronto and PayIt. Residents can pay for their Toronto utility bill, property taxes, and even parking violations through one super app.
The City of Redding, California, has a similar application called AutoPay, which works as a digital wallet and is connected to a resident’s municipal account. This way, residents can track their bills, fund accounts automatically via a wire or direct transfer, and pay for various services, duties, and other bills.
Super apps combine multiple features, and by using financial technology, it’s possible to see more consumers utilizing these applications to complete important transactions and track their spending through automated reporting.
Breaking Barriers with Blockchain Technology
There is still a lot of potential on the cards for blockchain technology in the financial services sector. Looking into 2025, we will see more financial institutions prioritizing the integration of blockchain technology to further streamline various aspects of the payments and transaction process.
Perhaps more importantly, blockchain technology will help to improve transparency among enterprises, allowing for faster, and more efficient audit processes, securities settlements, and verification. Through this, companies will have the ability to set up more advanced payment procedures for larger transactions and establish sustainable security practices throughout the entire settlement process.
Looking at current developments, Bank of America (BoA) predicts that blockchain infrastructure could reshape the way in which value is being stored and exchanged. This could play a significant role in how economies are transformed.
Globally, blockchain technology will impact not only financial services but every industry. In fact, around 10 percent of global GDP could be tokenized and stored on the blockchain by 2027, according to the World Economic Forum.
Blockchain technology will help to remove silos, improving cross-collaboration between multiple stakeholders, including governments, corporations, and smaller enterprises. These functions will help to reduce payment settlement times, reduce transaction costs for both consumers and businesses, and create more rapid secure payments across the financial ecosystem.
Change In Job Market Requirements
Aside from creating personalized banking experiences, removing transactional friction, and creating a safer financial ecosystem; technology is changing the connectivity between employees and their work in the financial services sector.
For starters, technology will change the employability of many workers in the near future. New systems will make certain tasks redundant, eliminating the need to hire human workers for these positions and replacing them with automated systems.
In other instances, employees will need to acquire a new skill set to work with different types of systems, including new technologies that have a direct impact on their work. This would mean that older workers will need to be educated and that resources will have to be made available to them in order to remain competitive in the labor market.
Working in finance will look a lot different in the coming years, and employees should consider how technology could be used as a tool to help improve their work, helping them become more productive, efficient, and reduce potential human errors.
Similarly, technology might make certain roles obsolete, which would require more employees to become more digitally savvy. Being part of the digital revolution will have a profound impact on how the finance industry hires new employees, and consider the forward-looking talent they need to create an innovative environment.
Rise of Virtual Banking, Cards and Transactions
Brands will continue to recognize the importance of virtual applications, including things such as cards and wallets. The coming year could help pivot financial services into the next frontier of virtual banking experiences.
While there has been a gradual increase in the number of consumers using virtual wallets to complete transactions, virtual cards have seen similar growth in popularity in recent years. In fact, research suggests that more than 175 billion virtual card transactions will be completed in 2028, a sharp increase from a recorded 36 billion in 2023.
In addition to business-to-consumer (B2C) transactions, business-to-business (B2B) transactions have been on the rise in recent years, with virtual banking making it possible for smaller retailers to connect with local suppliers and manufacturers more effectively.
Virtual banking is leading to an increase in the adoption of financial services among unbanked and underbanked communities. The technology behind these services has made it more convenient for individuals to sign up for bank accounts, pay for transactions through a virtual application, such as a virtual card, and set up a virtual wallet to help consolidate their finances.
The use of virtual technologies is helping financial institutions recognize new opportunities in the industry, and how they can seamlessly integrate advanced technology, connect those that are underserved, and bring commerce more into the digital ecosystem.
Finance Of The Future
Taking into consideration how far we’ve come in such a short amount of time, and looking towards where we are heading, it’s clear that technology is helping push financial services into the next frontier of digital advancements, breaking barriers and connecting people. We’ve become accustomed to the seamless integration of technology in our everyday lives, and these tools have made our finances more personalized while creating tailored experiences across a range of services.
Looking ahead, it’s clear that technology will continue to change the way consumers transact, and enterprises conduct business. These advancements will continue to change the way people work, reshape our understanding of money, remove barriers to entry, and create more transparent and sustainable financial chains.
