As we enter 2025, financial institutions – from banks to fintechs – must be ready to adapt to changes, particularly in regulation and technology. The geopolitical landscape remains turbulent, a new administration is preparing to take the reins in the United States, and regulatory changes related to changes in government and government strategies will lead to broader changes for the industry.
At the same time, advances in artificial intelligence capabilities will create new opportunities, new regulatory challenges and new compliance requirements. As economic uncertainty persists, banks and fintechs will look to make the most of their existing technology investments to grow their business.
Fintechs will focus on value creation
The fintech space has evolved in several stages, from being just a single link in the value chain to adding services to compete with banks. However, competing with established traditional banks has proven difficult, and we have recently seen fintechs move back towards solving specific challenges. Based on this trend, we expect to see fintechs expand their offerings again in the coming year, but with a greater focus on value creation and path to profitability rather than on growth just for growth’s sake.
AI is helping fintechs add capabilities by leveraging data and improving operational efficiencies, with several companies already taking the plunge and implementing these technologies. For example, a buy now, pay later service provider recently implemented AI capabilities which better help buyers. Instead of spending hours researching and comparing items, consumers can now chat with an AI assistant about what they’re looking for and receive research-based recommendations, resulting in faster shopping experiences and easier.
In 2025, fintechs will apply generative AI capabilities to support payments innovations, particularly blockchain and digital currency payments. Fintechs also have the opportunity to use AI to create personal financial advisory tools that can help individuals optimize their daily spending decisions to achieve their long-term financial goals, as well as enterprise use cases linked to blockchain transactions, all with an eye to meeting investors’ expectations in terms of profitability.
AI and automation will enable more value creation
Expect banks as well as fintechs to explore more ways to use AI to drive efficiencies and support growth in the coming year. For example, AI customer service agents can augment rather than replace employees by quickly handling rote requests and tasks, so that customer service representatives can focus on more complex or higher value-added activities.
In fact, a global wealth report found that 49% of wealth management firms were already using AI for some applications in 2024. Generative AI can help these organizations analyze customer data to deliver “superior customer experiences” like highly personalized interactions with clients. wealthy clients. Internally, AI can also enable banks to update their IT infrastructure, which tends to lag behind other industries, by taking over basic coding tasks to free up members of the team for other projects.
Any financial institution using AI must develop policies regarding employee training, data security and compliance. Bias and privacy concerns in training datasets and AI-generated results have already prompted regulatory notices federal agencies in the United States and legislation in the EU. Financial institutions will also need to address AI-related sustainability issues, such as climate impacts, as AI computing requires more data centers that need more energy and water to function.
Wealth management services and family offices will grow
Fee-based wealth management and family office services are expected to see growth in 2025. This is due to an increase in the number of high net worth individuals and greater wealth in their holdings. Globally, the wealth of high net worth individuals increased by an average of 4.7% this yearwith high-net-worth individuals (those with more than $30 million in investments) making the biggest gains.
Managing complex asset allocations and a variety of risks requires a comprehensive set of specialized services for these high net worth clients. 78% of ultra-wealthy individuals surveyed for the report “view value-added services as essential to relationships with wealth management firms.” Firms that can offer centralized advice on a variety of investment and wealth options, as well as family office services dedicated to managing the assets of specific families, can gain and maintain valuable long-term client relationships.
ESG strategies will adapt to new conditions
The importance and visibility of companies’ ESG (environment, sustainability and governance) strategies already differ between the US and the EU. With a new American administration less supportive of ESG initiativesU.S.-based financial institutions will need to prepare for shifts in priorities that will challenge their ability to please all stakeholders and remain globally competitive in these investment areas.
For example, if federal policies and financial incentives return to fossil fuel extraction and away from renewable energy, will banks follow suit? Or will they remain committed to their existing ESG investments (on track to be worth $50 trillion by 2030) to meet the expectations of their customers, investors and clients? Potentially thorny dilemmas like this have increased the likelihood that we will see an increase in so-called “greenhushing” year ahead, as U.S. financial institutions try to avoid drawing attention to ESG investments on which shareholders expect returns, but which could also draw criticism from other quarters.
The financial sector will be a dynamic space in 2025, as organizations focus on technological and strategic adaptations to maximize value creation, improve customer offerings and services, and balance the sometimes competing needs of stakeholders in an era of surveillance and changing regulations. Banks, wealth management firms and fintechs that plan their AI, ESG and customer service strategies to adapt to changing conditions will be best positioned to create real value over the course of the year. year to come.