As we kick off the new year, we asked our practice group leaders to reflect on the trends they have seen in their industry in 2023 and what may lie ahead in 2024. Jeanne Branthover, Managing Partner, Global Financial Services/Fintech, discusses hardships in the banking industry, customer satisfaction, and digital transformation and what business leaders should be thinking about to stay ahead in 2024.
Trends in 2023
Turmoil in the Banking Industry: In 2023, several banks failed, shocking financial services leaders who thought history couldn’t repeat itself – and that the systems in place would have prevented such devastating events. What followed was about survival, specifically what financial services institutions needed to change in order to survive.
Aligning Core Business to Customer Needs: As firms worked to stay afloat in a challenging year, it became critical to evaluate core areas of the business. For example, should a firm invest in a business that is outside its specialty and has not been successful in generating revenue? Prioritizing customer needs allowed firms to focus on areas where they could compete and win.
Layoffs in Preparation for 2024: Banks had significant percentages of layoffs to save money for 2024 programs. After a two-year hiring boom, organizations looked into the bottom 10% to see how much support staff was needed, resulting in about 20,000 layoffs across five of the largest banking institutions and restructuring to save money due to a lack of deals in the second half of 2023.
Mergers & Acquisitions Pull Through: While 2023 was a challenging year geopolitically and economically for mergers and acquisitions, deals still happened. According to this study, the total value of deals in 2023 fell by 23%, the lowest it has been since 2013, and the total number of deals fell by 16%.
Digital Transformation Transforms the Industry: In addition to artificial intelligence, three technology trends made a splash in the industry: the deeper adoption of cloud computing, a greater need for advanced analytics, and new tools beyond CRMs for sellers. Digital and technology opportunities and challenges presented themselves this year, and organizations needed to quickly adapt to the changing environment to keep up.
Predictions for 2024
- 2024 Talent Implications: Financial Services will continue focusing on core areas that will create and drive growth in their strategy. In these areas, such as technology, product development, and customer service, they will strive for the best talent, skills, and leadership to have an organization with exceptional talent to gain market share. Business leaders need to look at new hires through a 2025 lens, deciding who can add the right qualities and skills to their teams, have flexibility to offer their workforce, and have a culture of collaboration.
- Leveraging Data to Improve Customer Experience: Customer service is everything. Having good data and leveraging it into actionable insights will improve customer engagement and experience. In 2024, financial services firms will focus on leveraging data to improve customer relationships and grow the business.
- Digital Capabilities Continue to Advance: Super apps are the future; they offer more than just banking and a multi-functional, wide range of available services. Financial services firms will build relationships with FinTech partners to stay at the forefront of innovation. According to Deloitte, “self-service” will become the norm, making it easier for customers to take care of their financial needs.
- Cybersecurity & Compliance a Top Priority: With cyberattacks quickly becoming more sophisticated, banking firms will need to improve cybersecurity efforts to ensure customer data safety and compliance. Having preventive systems in place, like security integrated with AI, will better encompass automated responses and predictive analytics, which will improve threat detection, incident response, and analysis of data. Critical roles in this area include customer service, regulatory, and compliance. These leaders need to be forward-thinking and understand the importance of advanced technology, like AI, machine learning, and national language processing.
- Wealth Management Firms Are Here To Stay: As the economy ebbs and flows, one thing that remains steady is that people have cash and assets that need managing. Because of this, most banks have an established, successful wealth management division. Those financial institutions that have not formed a wealth management specialty are now focused on this business. These firms are looking to create revenue and enhance customer service to build market share in wealth management. Allied Analytics reported that the market in 2020 was worth $1.25 trillion and is set to more than double that amount to $3.4 trillion with a 10.7% CAGR from 2021 to 2031.
- Relocation and Hybrid Work: Financial services, like all industries, have had to make a decision for their workforce to return to the office policy. Some firms have mandated a five-day work week, while most firms decided to enforce a hybrid approach. Many leaders have recognized that remote work retains team talent, offers flexibility, and gives employees a sustainable work-life balance.
The financial services and FinTech industry is ever-evolving and challenging, and these factors will affect how financial organizations build their workforces and leadership teams. By staying up to date on the latest trends and developments, financial services leaders will be prepared to address these challenges and opportunities for continued success in 2024 and beyond.