RESEARCH REPORT
Commercial banking top trends for 2024
5-MINUTE READ
February 15, 2024
In brief
- Commercial banks are searching for a balance between the challenges they face today and setting themselves up for strong growth in the future.
- There is a growing focus on compliance and risk management in response to increasing pressure from regulators.
- As banks prioritize stability and efficiency, they are also investing in gen AI to boost innovation and growth and expand their data capabilities.
Bridging today's challenges and tomorrow's possibilities
Last year, interest rates were headline news. The economy is now shifting gears as customers seek stability and banks adjust to increased compliance and capital allocation challenges. The financial world is walking on tiptoe, trying not to disturb the “soft landing” everyone is hoping for as inflation settles down.
However, this cautious approach may hold commercial banks back from investing in technological advances with the potential to boost productivity, simplify compliance, automate risk management and transform the customer experience.
Commercial banks may struggle to find the balance between addressing the present challenges conservatively and embracing reinvention and innovation—made possible by gen AI and advanced data tools. That balance will be the key to a smooth ride through the uncertain waters of 2024 and will propel banks toward future growth.
As we share the trends that we expect to dominate the industry for the next year, the focus is split between these two priorities. Each bank will need to calculate where its balance point lies.
Watch our leaders present the six trends on the American Banker Webinar
6 commercial banking trends
As high interest rates start to recede, banks will be looking for ways to control costs and maintain a healthy bottom line. Strategic cost management will be a long-term priority, rather than a collection of short-term cost-cutting measures.
From capital requirements to credit lifecycles and ESG commitments, banks will have more regulatory challenges to meet. Intelligent automation and improved risk-assessment tools will help banks adjust to the increasing compliance workload.
Higher interest rates stoked competition for deposits in 2023. But to retain clients, banks will need to offer more than just a solid return. Leaders will focus on advanced treasury capabilities powered by a strong digital core.
Commercial clients are seeking value-added payments services. It is time for banks to step up with better fraud management tools, tax and accounting software integrations, real-time data dashboards, automated credit checking and more.
Amid higher interest rates, demand for loans declined and credit standards tightened. To reduce risk and improve the targeting of loans to each client, commercial banks will look to increase automation and use more advanced data tools, including AI.
Generative AI is likely to touch almost every aspect of banking. Commercial banking leaders are using it to enhance risk management and compliance, automate and augment underwriting processes and support relationship managers.
The opportunities that lie hidden in banks’ data will rise to the surface as they invest in systems that allow them to add high-value services to their client offers, customize these offers, automate tasks to improve efficiency, use gen AI to unlock data insights and stay ready to take on new challenges.
Although banks have been increasing their IT spend, most of that budget has been allocated to compliance and maintenance activities. In 2024, we expect to see a shift to projects with transformative potential, separating the leaders from the pack.
Many of the trends that will shape 2024 started years ago, but this is the year that the disparate threads will come together in a single tapestry.
Jared Rorrer / Global Commercial Banking Lead
Frequently asked questions
Although risks vary by region, globally, banks will be focusing on meeting new compliance requirements, staying on top of ESG commitments and optimizing capital. Geopolitical risks, such as disruptions to the supply chain, will also be top of mind.
Commercial banks should establish a strong digital core and invest in advanced analytics and automation tools for treasury management, fraud prevention and compliance. They also need to stay at the forefront by incorporating AI into their workflow.
Our analysis suggests generative AI could uplift a bank’s operating income by an average of 20%, and banks that leverage the technology effectively could get a 22% to 30% productivity uplift.