Retail banking: Key technologies CTOs should prioritize for 2024

Competition in the digital era: Challenges retail banks must address 

In the ever-evolving landscape of retail banking, the year 2024 is marked by unprecedented economic uncertainty. This has forced banks and credit unions to reassess their IT investment strategies.

The global economy has faced numerous challenges in 2023, with widespread inflation causing macroeconomic difficulties. As a result, the competitive landscape for banks and credit unions has intensified and is expected to continue into 2024, according to industry experts. To navigate these challenges, many central banks have opted to increase interest rates, leading to a shift in the sector's competitive dynamics. Furthermore, retail consumers have become increasingly price-sensitive, impacting banks in terms of acquiring new customers and retaining existing ones.

The digital customer experience proved to be another significant challenge for retail banks this year, particularly regarding the onboarding processes for new account openings. With GenZers and Millennials increasingly relying on digital channels for their banking needs, the demand for seamless digital experiences has grown exponentially. As a result, traditional physical branches are gradually becoming obsolete in this era of digitalization. The retail banks that have not yet embarked on their digital transformation journey find themselves at a significant disadvantage.

To meet the evolving demands of consumers and stay competitive in the retail banking industry, future strategies should prioritize open banking, flexibility, and adaptability. These key factors will enable banks to deliver personalized experiences that align with customers’ expectations for value and convenience. As technology continues to play a crucial role in achieving this objective, we have identified the latest trends connecting technology with retail banking business outcomes.

What are the technology priorities in retail banking

Over the past few years, IT budget allocations towards technology have seen a noticeable increase. Global spending saw a positive growth of 2.7% in 2023, and this is expected to continue into 2024. However, banks are still exercising caution, especially when compared to inflation rates.

Looking ahead to 2024, the global expectation according to CELENT is around 4.6% as the need for digital transformation remains a fundamental aspect for many banks. There is a strong push towards a digital banking operating model, which will continue to drive IT spending despite the competitive and cost pressures in the overall market.

1. Innovation and agility

57% of banks see delivering greater speed and agility in the organization as one of their top three priorities.

- Celent Technology Insight and Strategy Survey, 2023

Agile IT infrastructure is characterized by its flexibility and adaptability, enabling organizations to respond swiftly to changing circumstances. For retail banks, this means the ability to pivot and adjust to economic shifts with ease. In times of uncertainty, the ability to quickly reallocate resources and adjust IT systems is crucial.

Therefore, one of the primary areas where retail banks are investing heavily is the adoption of cloud technologies. Cloud computing offers a scalable and cost-effective solution for banks looking to optimize their IT infrastructure. With the cloud, banks can scale their resources up or down based on demand, reducing the risk associated with traditional, on-premises infrastructure.

2. Compliance and Regulatory requirements

1 in 5 of survey respondents cited compliance as the biggest single driver of the technology strategy this year.

- Celent Technology Insight and Strategy Survey, 2023

Compliance will continue to consume a large proportion of the technology resources available to the industry in 2024 as it is an essential aspect in the banking industry. It is crucial for banking executives to prioritize it.

Given the non-negotiable nature of compliance and its integral role in financial institutions' technology strategy, banking executives must prioritize identifying investments that can unlock new opportunities for product innovation as they focus on revenue growth. One such opportunity lies in the recent adoption of ISO 2022 message formats in the payment space, driven by Open Banking regulation.

This adoption opens the door for banks to explore ways to monetize or leverage the richer information available through these payment messages. By embracing this new technology, banks can stay ahead of the competition and drive innovation in the industry.

 

3. Product enhancement

27% of banks see this as their single most urgent priority for this year, and that rises to 45% among banks in Middle East and Africa. 

- Celent Technology Insight and Strategy Survey, 2023

Addressing the hurdles posed by outdated technology and legacy systems ranks among the top three priorities for 46% of retail banks. This focus on discovering solutions to sustain revenue growth showcases the industry’s resilience and determination to thrive. 

ebankIT maintains a dynamic and forward-thinking roadmap that is consistently updated every six months, ensuring that financial institutions receive the highest quality services and access to the latest cutting-edge technology.

Key technologies retail banks should focus on in 2024

1. Digital account opening

75% of retail banks report that it is more challenging to win and retain customers than it was 12 months ago.

- Celent Technology Insight and Strategy Survey, 2023

This is a top priority for 45% of the global market as the demand for a seamless onboarding experience through digital channels continues to grow. This need has been further amplified by the impact of the pandemic, as well as the evolving preferences and behaviors of customers in the long run.

With the innovative ebankIT platform, clients can effortlessly open a new account in under five minutes from the comfort of their homes. It is a fully digitized process that ensures customers a seamless and convenient experience.

2. Artificial Intelligence

Generative AI is one of the hottest topics in the industry at the moment and is something that 72% of banks and credit unions are actively working on. Artificial intelligence in banking revolutionizes customer experiences by delivering exceptional banking services while also reducing operational costs.

Financial institutions have recognized the immense potential of this technology and are eagerly embracing the trend. They are actively exploring and, in some cases, already experimenting with innovative ways to leverage Artificial intelligence in order to achieve their broader objectives.

AI-driven technologies, like virtual assistants and chatbots, streamline customer service interactions by automating processes. Furthermore, they offer customers access to account details and address any account-related inquiries effectively. Furthermore, AI technology analyzes vast financial datasets to enhance risk assessment and financial forecasting, leading to more informed investment decisions.

3. Digital channels

The increasing prominence of digital channels has emerged as a pivotal area for investment, underscoring the fierce competition within the industry. According to the Financial Brand, 72% of organizations stated that they would be increasing investment in digital channels.

In addition to breaking down geographical barriers, digital channels provide round-the-clock availability, allowing customers to carry out their banking activities conveniently and ultimately enhancing overall customer satisfaction. PwC urges to “prioritize a customer experience that is frictionless and omnichannel.” (2023)

By embracing digital channels, banks can eliminate the need for physical branches, reduce the reliance on staff, and minimize paperwork. This streamlines operations and leads to substantial cost savings, enabling banks to allocate their resources more effectively.

30% of millennials said they would prefer a digital channel (online or mobile apps) to reach out to their bank for financial advice.

- Deloitte

Moreover, banks can leverage digital channels to introduce innovative financial services and products. Marketing has assumed a critical role in banking, highlighting the importance of cross-selling to existing customers and providing irresistible incentives to attract new ones across various digital channels.

As the world becomes more digitally focused, traditional marketing channels are being complemented by digital channels and innovative digital marketing strategies. These strategies encompass various approaches, such as personalized email campaigns, push notifications, and outbound campaigns. By investing in these channels, businesses can effectively expand their reach and connect with a broader, more targeted audience.

4. Digital customer experience

Improving the digital experience for small business banking customers is a priority for around 35% of banks, according to CELENT. Financial institutions must prioritize delivering a personalized digital banking experience to enhance customer retention.

This can be achieved through the implementation of various strategies, such as adopting an omnichannel banking approach, enhancing the frontline capabilities with optimized contact centers, and investing in marketing tools such as campaign and analytics platforms to provide tailored offerings.

38% of customers want service agents to know who they are and their past queries.

- Forrester, 2022

By leveraging these strategies, banks and credit unions can create a seamless and customized banking experience that meets the individual needs and preferences of their customers.

These tools will facilitate seamless communication with customers, allowing banks to effectively convey information about product innovation, development, and personalized pricing. By leveraging analytics to segment and target their audience, banks can ensure that they deliver the right information at the right time, enhancing the overall customer experience.

2024 and Beyond: Transformative Technologies for retail banking CTOs

The economic uncertainty of 2024 has accelerated the transformation of IT strategies within the retail banking sector. The adoption of agile IT infrastructure, cloud technologies, Artificial intelligence, and data-related initiatives are key components of this transformation.

Banks and credit unions that invest wisely in these areas are better equipped to navigate economic uncertainty and gain a competitive advantage in a crowded marketplace. The ability to adapt quickly, deliver innovative digital services, and make data-driven decisions positions them for success in an ever-changing financial landscape.