Technology trends impacting financial institutions in 2024

Innovation and finance have always been interlinked. From the birth of the personalized checkbook to the recent boom of AI and machine learning, finance has always been on the cutting edge of change – and that change is happening faster now more than ever before.

Today, financial institutions find themselves at a crossroads of adaptation and transformation, an intersection shaped by the imperatives of technological innovation and the shifting demands of consumers. As the contours of banking continue to evolve, it becomes increasingly evident that the future belongs to those who can seamlessly integrate innovation into their operations while staying true to the core principles of trust and reliability.

To prepare for the future of payments, financial leaders should familiarize themselves with emerging trends shaping the trajectory of banking and payments in 2024 and beyond. Here, global payment experts dive into those trends, flagging obstacles to avoid and highlighting areas of opportunity.

Priorities for financial institutions in 2024

Thanks in part to factors like COVID-19 and the saturation of generative AI, it’s no secret that financial technologies are evolving at breakneck speeds. In a booming industry with such a variety of growth areas, it can be difficult to pinpoint exactly which goals to priorities. To better understand the unique hurdles faced in finance, Deluxe surveyed¹ its clients to understand their priorities for the coming year. Here are the initiatives that were uncovered:

1. Keep pace with innovation. In the past, technology acted as a bridge – a solution born out of the need to fix an issue. Today, technology is more likely to act as a catalyst that drives innovation and change. The majority of those surveyed (51 percent) stated that keeping up with digitization and technological transformation is their primary concern.
2. Ditch paper, embrace digital. 47 percent of respondents said their 2024 priority was to remove their reliance on paper-based payments and embrace digital. Currently, paper is still part of the payments ecosystem, and managing the paper is a hurdle for AR departments across the globe.
3. Accelerate adoption of embedded banking. With so many newcomers to the embedded finance space, adopting Banking as a Service (BaaS) and embedded finance are two initiatives that Deluxe clients flagged as a huge priority.
4. Meet demand for personalized customer services. For those focused on personalization of products and services in 2024, managing and interpreting customer data can be a huge hurdle in meeting the demands of consumers. But it’s an occasion worth rising to, as experts predict that those who don’t utilize personalized marketing will be at a significant disadvantage. 

Technology trends impacting financial institutions in 2024

The results of the survey demonstrate a continued need for financial institutions to seek out trustworthy partners. With modern needs such as more robust security and personalized content, a technology partner must have the bank’s long-term success in mind – a point echoed by payments experts echoed in a 2024 panel hosted by Deluxe.

This panel, which explored global technology trends in payables and receivables, included Yogaraj (Yogs) Jayaprakasam, Chief Technology and Digital Officer at Deluxe. Jayaprakasam further drove home the importance of trusted partnership, stating, “The technological changes that matter to us are the ones that matter to [our] customers.”

During this panel discussion, experts in payments were asked to share technology-related trends they saw impacting banks and others in the global finance space.

“It's an interesting time to be in payments,” commented panelist Abhilash Kaduthanum, Head of Payments at TCS. “Traditionally, when we think about payments, it’s all banking and financial institutions,” Kaduthanum explained. “That's no longer the case.” Payments have evolved to be embedded into journeys unrelated to banks, and are now integrated with experiences in retail, health care, transportation and others. The handlers of those payment experiences have evolving identities as well. “Many of the payment companies I talk to refer to themselves as technology companies who happen to be in payments,” Kaduthanum explained.

1. Real-time payments

The demand for payments in real time is paramount. Panelist Charith Mendis, Head of Worldwide Banking Market Development at AWS, spoke to this rising demand.

“Everything is becoming real time,” Mendis said. “And real time is real.” Faster payments are growing in application, with companies like Amazon Go and Uber rising to meet these demands. Mendis continued by stressing the value in financial institutions embracing and exploring real-time with their product offerings as well. “Make it part of your consumer’s lifestyle and embed it as part of their lifestyle,” he said.

2. Embedded payments

The more that payments evolve, the more seamless the payment experience becomes. Rather than disrupting the customer journey, payments are falling into the background of existing journeys.

“With a lot of the technologies that we currently use, customers embrace embedded finance,” Mendis explained. “We don't actually do payments – it just becomes incidental.”

Panelist Kevin Dodson, VP Division Product Officer of Merchant Services at Deluxe, described this trending design as ‘weaving payments into the fabric of how money moves.’

“The next evolution [of payments] is embedding into everyday life,” Dodson said, noting the role generative AI will play in this progression. “I think GenAI will continue to push payments from an embeddable perspective and customize our experience.” Dodson predicts that the application of GenAI will use consumer preferences to make decisions on how they pay. “It's an exciting place to be,” he said.

While GenAI hasn't yet been applied to consumer decision making, the impact of this technology is undeniable. According to a recent report by PYMNTS, 43% of consumers say they plan to use generative AI to answer financial questions.

3. Invisible payments

Payments aren’t only evolving in terms of proximity, but also in relation to permissions. Kaduthanum explains that when it comes to younger generations, they’re comfortable making and receiving payments with a lot less steps than are traditionally involved.

“With respect to younger generations, they’re not even talking about doing an actual payment,” he explained. “They just say, ‘Okay, let me give you consent to do this,’ and the consent itself is sufficient to take a floor limit, take the risk parameters and then decide to go ahead and do the payment from that standpoint.”

Kaduthanum also described a world where initiating payments won’t require human involvement. “We are going to see a whole lot of payments becoming invisible in the next few years,” he continued.  “In the very near future, a lot of payments are not going to be initiated by human beings.” Instead, Kaduthanum predicted a rise in IoT (Internet of Things) devices and other machines with the ability to make decisions, thus becoming part of the payment journey itself.

4. Contactless payments

As far as what caused the accelerated adoption of these technology trends, Dodson pointed to the COVID-19 pandemic as a catalyst. “Of all the negative things around COVID-19, the positive things were in payments,” Dodson said. “It spring-boarded us years in advance than where organic growth or any organic innovation would have occurred, because we had to adapt.” That adaptation resulted in the rise of contactless payments.

Not only did the pandemic force those in the payments space to rethink how people pay, but it made them rethink the entire concept of payments. “COVID-19 has forced us to review how we allow people to pay,” Dodson continued. “This advancement helped us push forward payments as a flow and as a concept.”

Expanding on Dodson’s theory, Mendis noted a rising trend in payment experiences moving from the physical world to the digital world. “Digital proximity over physical proximity is the norm,” Mendis said. “When we were all reluctant to use actual physical payments [during the pandemic], digital payments came to the rescue. We changed our behavior, how we used cash, checks and even cards.”

5. Application of machine learning

Every industry is being rocked by innovations like ML (machine learning) and generative AI, and finance is no different. Mendis noted that this trend is further fueled by the need for speedy and safe data management and analysis.

“If you think about all that payment data and all that exhaust coming out of [consumer] journeys, how do you then enrich that data?” asked Mendis. “How do you leverage that data to provide greater insights back to the banking institutions, and in the instance of U.S. banking institutions, back to your end consumers?” ML solves for this problem, and as its application saturates the market, those who don’t take advantage of ML will fall behind. 

Final thoughts

In the ever-evolving landscape of finance, financial institutions are at a pivotal juncture where innovation and adaptability are the keys to survival. As banks and other organizations continue to navigate the complexities of this rapidly changing environment, the emphasis on customer-centricity, digital transformation and technological integration becomes more important than ever. By working with trustworthy partners and embracing emerging trends such as real-time payments, embedded finance and machine learning, financial institutions can position themselves not just to survive, but to thrive in the dynamic world of modern banking.

1. Internal Deluxe Customer Survey Data, 2023