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Banking is evolving quickly, driven by the need for speed, personalization, and security. As we move forward, a few key trends are already shaping the future of the financial industry, with technology playing a major role in how banks meet customer expectations. From hyper-personalization powered by AI to the rise of real-time payments and digital wallets, these trends are setting the stage for a more seamless and intuitive banking experience.
Let's explore the top trends transforming digital banking and what they mean for the future of financial services.
Another year is reaching its end and yet some things don´t change. Digital banking is still about the user and his experience, so hyper-personalisation will continue to be one of the most important themes of digital banking innovation. Leveraging artificial intelligence (AI) and machine learning, banks can now analyze vast amounts of transaction data to offer real-time, individualized financial insights.
Did you know?
According to KPMG research, over 60% of bank executives state that they are 1-2 years away from implementing their first generative AI solution.
Customer data platforms (CDPs) will be crucial in helping banks unify data across various channels, allowing for more targeted product recommendations and proactive customer support. Through transaction data enrichment from providers like Tapix, banks will not only offer insights on spending patterns but also predict future needs, enhancing customer engagement and bringing in more revenue from different sources.
Real-time payments (RTP) are becoming a game-changer for both retail and corporate banking. RTP technology, already driving growth in countries like the UK and India, will become increasingly critical in 2025 as consumers and businesses demand faster, more secure transactions. According to PYMNTS research, real-time transactions are expected to hit $575 billion by 2028.
One of the most significant drivers of RTP’s growth is the evolving consumer and business demand for immediacy. Businesses utilizing RTP are seeing improvements in operational efficiency and customer satisfaction. For example, RTP minimizes the need for manual processes, which helps reduce fraud risks. Banks that adopt real-time fraud detection tools will be better positioned to prevent cyber threats while delivering the immediacy customers expect. The challenge lies in balancing speed and security, with significant investment needed in cybersecurity to counteract potential vulnerabilities.
Digital wallets are continuing their growth. By 2028, global digital wallets transaction value is projected to reach $16 trillion, Jupiter Research finds. To put this figure into context, this value represents not only the sheer volume of payments being processed but also the growing adoption of digital wallets as a primary tool for both consumers and businesses. For instance, in 2022, the total global retail sales were approximately $26 trillion, meaning that by 2028, digital wallets could facilitate around 60 % of all retail transactions.
The rise of e-wallets like Apple Pay, Google Pay, and local players like Alipay and M-Pesa is boosting the payment ecosystem, offering consumers contactless, secure, and convenient ways to manage their money in much more ways than before.
Did you know?
According to the Global Mobile Payment Methods 2024 report, the digital wallet market is projected to experience a compound annual growth rate of over 14% between 2023 and 2030, with digital wallets nearly doubling their market value during this period.
With the integration of features like Buy Now, Pay Later (BNPL) services and even cryptocurrency management, e-wallets will become full-fledged financial hubs by 2025. The expanding role of digital wallets also aligns with banks’ goals to include underbanked populations by making mobile banking more accessible.
Embedded finance is transforming how consumers and businesses interact with financial services by seamlessly integrating these services into non-financial platforms. Instead of accessing banking services through traditional interfaces, consumers can now make payments, apply for loans, or purchase insurance directly within apps or services they use daily, such as e-commerce platforms or ride-sharing apps. This trend eliminates the need for customers to engage with a traditional bank and creates a more streamlined, convenient financial experience.
Banking-as-a-Service (BaaS) plays a pretty big role in this shift. BaaS allows banks to provide their core financial products - such as payments, lending, and insurance - via APIs to third-party companies like retailers or tech firms. These companies can then integrate banking services directly into their existing platforms without needing to develop the financial infrastructure themselves.
However, BaaS is often misunderstood as simply outsourcing financial services, but it is more nuanced than that. To put it simply, BaaS enables non-financial companies to offer banking features while keeping the banking license holder accountable for regulatory compliance. The essence of BaaS is to provide regulated financial services as a back-end offering, allowing third-party platforms to handle the customer-facing interface. The power of BaaS lies in partnerships between banks and non-banks, ensuring that the regulatory and operational expertise of banks is combined with the innovation of technology-driven companies.
For BaaS to function effectively, high-quality transaction data is essential. This enriched data, enhanced by providers such as Tapix, gives customers a much deeper and more meaningful understanding of their financial behavior. By providing insights into spending patterns and offering personalized financial services, BaaS platforms can create a richer user experience and drive customer engagement.
E-identity systems and the impending PSD3 directive are getting integrated into digital banking on a much larger scale, enabling more secure, seamless, and customer-centric financial experiences. These technologies aim to enhance authentication methods while giving customers greater control over their financial data.
E-identity (electronic identity) systems allow users to verify their identity across multiple financial services without relying on traditional, password-based logins. Instead, customers can authenticate themselves through secure methods like biometric data (e.g., fingerprints, facial recognition), making the authentication process more convenient and secure.
Governments and financial regulators are also encouraging the adoption of e-identity solutions. The European Union's eIDAS Regulation (Electronic Identification, Authentication, and Trust Services) has already laid the groundwork for standardized e-identity systems across the EU, helping banks streamline Know Your Customer (KYC) procedures.
The Payment Services Directive 3 (PSD3) is expected to take the foundations laid by PSD2 to new heights, broadening the scope of open banking to include a wider range of financial services and institutions. PSD3 will aim to enhance data portability, giving customers more control over how their financial data is shared between banks, fintech companies, and other third-party providers.
The shift toward Everything-as-a-Service (XaaS) and cloud platforms is transforming the banking sector, enabling financial institutions to become more agile, cost-efficient, and responsive to market demands. Cloud adoption not only enables scalability but also enhances the integration of advanced APIs like transaction data enrichment - a crucial component of modern digital banking. Transaction data enrichment uses tools like AI and machine learning to transform raw transaction data into actionable insights, allowing banks to offer personalized financial experiences.
Did you know?
A recent survey by EY highlights that 54% of businesses are prepared to adopt XaaS models today, a significant increase from just 13% in 2019.
Transaction data enrichment enhances raw payment data by adding valuable context, such as merchant details, categorisation, and spending patterns, providing customers with deeper insights into their financial behavior. By integrating this data into their cloud-based platforms, banks can automate these insights at scale, using customer analytics to offer tailored financial advice.
The XaaS model will also enhance collaboration between banks and fintech providers, allowing for seamless integration of third-party services, including AI advisors, micro-lending platforms, and payment gateways. This collaboration will be critical in delivering the next generation of financial services, with customer data providing the foundation for these interactions.
In 2024, the Mastercard mandate came into effect, requiring banks and payment providers to adapt to stricter standards for fraud prevention, data security, and transparency in transactions. This mandate aligns with the global trend toward enhancing consumer protection and improving the resilience of financial systems in the face of growing cyber threats.
This change comes alongside the AI Act, a piece of legislation passed by the European Union, which imposes stringent regulations on the use of artificial intelligence in financial services. The AI Act aims to ensure accountability, transparency, and fairness in algorithmic decision-making - a crucial concern given AI’s growing role in automating processes such as credit scoring, loan approvals, and fraud detection. The Act categorizes AI systems into risk levels and enforces strict compliance for high-risk AI applications, including those in banking and finance.
Did you know?
According to Accenture, the cost of AI compliance for the average bank could rise by 15-20% between 2024 and 2025.
The road through 2025 is obvious. Banks will face intense pressure to adopt strategies that comply with the AI Act while remaining innovative. They’ll need to balance regulatory compliance with AI’s operational efficiency and personalisation benefits. Some may establish AI ethics committees or partner with third-party AI auditing firms to ensure compliance. Additionally, the costs associated with ensuring compliance will likely drive further consolidation within the industry, as smaller institutions may struggle to meet the mandates.
As we slowly move from 2024 to 2025, digital banking trends will be noticeably defined by little evolutions and innovations that center around speed, personalisation, and security. The financial institutions leading the charge will be those that strike the perfect balance between innovation, customer experience, and safety.
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Michal Maliarov
Senior insider
