Ahead of The Curve:
2025 Innovation Priorities for Banking

For banks, the recent high interest rate environment has reduced loan volumes and had a mostly positive but mixed effect on net interest margins. Banks increasingly seek fee-based revenue streams that are more resilient to interest rate fluctuations. As rates come down, they are also shifting their focus to cost. The relentless march toward open banking, a new raft of AI and technology capabilities, and recent regulatory shifts conspire to create a complicated yet strategically rich environment for banks eager to pursue innovation and growth. In the coming year, banks should pay close attention to five business technology trends as they build growth strategies and integrate technology to achieve those objectives.

1. AI is the real deal

GenAI is far beyond the proof-of-concept phase for many banks and provides real benefits. One of the more obvious use cases has been GenAI for contact centers, but its potential goes far beyond that. GenAI also plays a crucial role in automating portfolio performance KPIs and driving other forms of customer communication. Meanwhile, GenAI and other forms of AI/ML are accelerating hyper-personalization, customer analytics, and relationship comingling. AI also transforms financial wellness, steering customers toward offerings and decisions that improve financial resilience and promote customer retention. Simultaneously, “emotional AI” is poised to further refine customer retention and support strategies, painting a promising picture for the future.

2. A new era for open finance in the US

While the US has lagged in open banking innovation, a new CFBP rule is poised to bring much-needed structure to open banking. Tier 1 banks, in particular, must seize the opportunity to make the most of this development. They will need to become more adept at managing an ecosystem of external APIs, collaborating with fintechs, building innovative new marketplaces for financial services, and extending their embedded finance offerings to a broader range of commercial partners. Compliance will be part of the equation, but so will open-minded strategic creativity.

3. A massive opportunity to simplify payments

The new ISO 20022 standards present banks with a compelling opportunity to improve and streamline their payment infrastructure. Organic growth and acquisitions have saddled banks with numerous payment systems and messaging standards in the US and globally. International banks, in particular, have an enormous opportunity to achieve new cost efficiencies and strategic benefits in the payments space.

4. A renewed push for SMB digitalization

Like retail customers, small and medium-sized business (SMB) customers are overwhelmed by the many cumbersome digital relationships they must maintain to keep their finances on track. As banks seek to build new fee-based revenue streams, they should continue to mature their SMB digitalization efforts. It’s not just about offering a broad range of services (lending, treasury services, transformation, trade finance, liquidity management, etc.) but, more importantly, about integrating those offerings to drive seamless engagement. Tactically, success will require blending intelligent AI- and technology-driven automation with a high-touch “relationship manager” approach for the more valuable accounts. The bottom line: Banks must efficiently yet actively serve more SMB clients.

5. New anti-fraud strategies for the GenAI era

Behavioral biometrics and device intelligence are now at the leading edge of anti-fraud efforts, and banks should continue to develop those capabilities. At the same time, GenAI is throwing a wrench in the works. Thanks to GenAI, fraudsters are becoming bold and developing sophisticated scams using deepfakes, voice cloning, and document forgery. It’s not just that AI-generated material can be complex to detect; it’s also easy to create at scale, and the sheer volume of fraudulent AI-generated material is proving challenging for traditional security measures to combat. To respond, banking leaders need to embrace a much more algorithmic and predictive approach to cybersecurity, which goes far beyond the rules-based models of the past. Banks must combat emerging threats – including GenAI fraud – with more robust GenAI tools.

Banks find themselves at a complicated moment defined by significant regulatory actions, evolving market realities, and the unrelenting advancement of AI capabilities. Fortunately, it’s also a time full of opportunities. Leveraging technology to bring new products and user experiences to market — rather than simply driving efficiency — will be the key to winning customers and achieving growth in 2025.

About the Authors

James Curzon
Global Head of BFSI Consulting – Banking

Thomas Brady
Consulting Partner, Global Retail Banking Practice Lead

Ahead of The Curve: 2025 Innovation Priorities for Banking

About the Authors

Ahead of The Curve:
2025 Innovation Priorities for Banking