By Allison Maddock, CSI

To find out how bankers will confront challenges associated with a changing technology landscape, artificial intelligence, cybersecurity, financial crimes and more, Kentucky-based CSI, a leader in the fintech and regtech industries, surveyed banking executives from across the nation about their strategies and priorities for 2024. The survey results spotlight the challenges and emerging opportunities in the banking industry. Let’s examine the issues bankers selected as most likely to affect the industry in 2024, along with top technology trends.

Top Industry Issues for Bankers in 2024

1. Responding to High Interest Rates: Bankers indicated that continued high interest rates will affect the industry most, with 35 percent of respondents choosing this issue. To cope with this environment, 50 percent of respondents are offering competitive interest rates on deposits, and 46 percent plan to shift their investment strategy. Banks must evaluate the opportunities in their existing market and portfolio to offset decreased interest revenue. To find investments with a higher yield, like loans with variable interest rates, some institutions have also begun seeking new interest income opportunities (48 percent) and diversifying portfolios through resources like lending marketplaces.
2. Fighting Fraud: Coming in second, fraud was identified by 30 percent of respondents as the most pressing issue. Specifically, more than four in 10 banks identified card fraud (45 percent) and wire transfer fraud (42 percent) as the foremost challenges. Fraud remains an ever-present threat, with the Federal Trade Commission estimating $8.8 billion in stolen funds throughout 2022. And the acceleration of AI is only increasing criminals’ ability to execute fraud. Keeping up with changing regulations and investing in the right technology is crucial for financial institutions to stay ahead of scammers and win the war on financial crime.
3. Keeping Up with Mergers and Acquisitions: Ranking third, mergers and acquisitions gained prominence among bankers, with 14 percent of the vote. Since this marks an increase from the 5 percent reported in last year’s survey, rising consideration of mergers and acquisitions could signal increased attention to market consolidation and plans for heightened M&A activity, recovering from the 2022 slowdown and headwinds throughout 2023.
4. Recruiting and Retaining Employees: Only 11 percent of bankers selected talent acquisition and retention, a significant decline from last year’s top spot (34 percent). This result could signal that bankers sense a stabilizing job market or potential to streamline operations, a likely factor contributing to overall optimism.
5. Navigating Regulatory Change: Contrary to the 27 percent reported last year, a mere 8 percent of bankers now view impending regulatory changes as the most pressing issue. However, more than eight in 10 bankers were concerned with all regulatory issues evaluated in the survey, including financial crimes compliance (89 percent), building a financial services ecosystem (88 percent) and cybersecurity compliance (87 percent).

What Technology Trends Did Bankers Identify?

Technology’s rapid evolution is reshaping the financial services landscape, introducing new opportunities and prompting banks to reassess their operations. Bankers in CSI’s survey generally agreed on the key technology trends driving changes and their potential effects in 2024.

1. AI and Machine Learning: With 44 percent of respondents selecting their transformative potential, AI and machine learning emerged as 2024’s most impactful technologies. This result follows a year of headlines and stories around AI and machine learning’s potential to revolutionize risk management, customer service, fraud detection and personalized financial services. Further, AI and machine learning could potentially support the open banking and BaaS models through methods like API development and help banks better leverage data and automation.
2. Banking as a Service (BaaS): BaaS emerged as the second most impactful trend, capturing 20 percent of respondents’ votes. BaaS uses the foundation of open banking to foster collaborations between financial institutions, fintechs and neobanks. With BaaS, banks can seamlessly introduce new, innovative products and explore new markets. Notably, institutions in the $100-million-to-$250-million asset range expressed particular interest in BaaS, indicating smaller institutions’ growing enthusiasm for leveraging it to enhance operational capabilities and enrich customer offerings.
3. Digital Transformation: 18 percent of respondents selected digital transformation as the top trend, highlighting the continued industry-wide shift toward digitalization for improved processes and enhanced customer experiences.
4. Instant Payments: Although the Federal Reserve’s instant payments network made a splash in 2023, instant payments received only 10 percent of the vote for 2024, a sharp decline from the previous year.
5. APIs/Open Banking: 7 percent of respondents chose APIs and open banking, a sharp decline compared to last year’s 17 percent of the vote. However, the lower response does not diminish the critical role of APIs in fostering collaboration in the financial ecosystem. Banks embracing open banking can harness data to streamline processes and continually introduce innovative solutions that can originate outside of their primary technology provider.

Exploring Cybersecurity Concerns

When asked about the single greatest cybersecurity concern facing the industry, 19 percent of respondents selected adapting to changes in the cyber insurance market. This result highlights potential uncertainty in forthcoming developments for cyber insurance, whether regarding increasing prices or coverage exceptions, and emphasizes the importance of better controls to mitigate risks.

18 percent of bankers also expressed concern about being unprepared to respond to a cyberattack, reinforcing the importance of planning responses to cyber incidents. This involves developing and testing robust incident response plans (IRPs) that cover data and system backups, communication plans, business continuity plans and strategies for dealing with attackers. In an era when cyber threats continue to make headlines, it’s critical that institutions remain vigilant and adopt comprehensive cybersecurity protections.

Get the Full Results of the 2024 Banking Priorities Survey

Want additional insight into bankers’ priorities and challenges? Explore the results of the 2024 Banking Priorities Survey to learn about the latest strategies and trends relating to modern banking, cybersecurity, compliance, financial crimes and more.

Allison Maddock is chief product officer at CSI.