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Banking Trends Shaping the Industry in 2024

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Following the collapse of Silicon Valley Bank (SVB), an institution once deemed “too big to fail,” 2023 was a challenging year for the banking industry.

Amid rising inflation rates, SVB’s announcement that they would be selling $2.25 billion in shares to help offset the eroding value of their bond portfolio triggered a bank run, becoming the third-largest bank failure in U.S. history.

Seeing this ripple effect in the global economy, how will financial institutions navigate uncertain markets and avoid a similar fate?  

Emerging banking trends show a positive outlook on efforts to mitigate these risks and regain customers’ trust. From digital transformation initiatives to embracing technological advances, let’s explore the trends shaping financial services in 2024.

Key Takeaways

  • Major U.S. banks JP Morgan Chase and Wells Fargo expect their net interest income to be down between 2% to 8% from 2023.
  • The average deposit rate of savings accounts is up 0.11% APY year-over-year.
  • The average monthly maintenance fee of a checking account is up 3.19% from the previous year.
  • 40% of financial service providers use generative AI for fraud detection and financial forecasting.
  • The banking sector could add up to $340 billion in operating profits using generative AI.
  • Europe accounts for 36% of digital banks in the world.
  • Neobanking is expected to reach a total transaction value of $6.3 trillion in 2024.
  • 52% of consumers have a product or service with a digital-only bank.
  • A single data breach in the financial industry costs $5.9 million on average.
  • 77% of banks commit to net-zero financed emissions by 2050.

Banking Industry Economic Forecasts

As 2024 progresses, Deloitte expects global inflation to drop to 5.2% this year. A 2024 report by Wells Fargo agrees, believing the U.S. will help lead a gradual global economic recovery later in the year. They expect the economic slowdown to reduce consumer spending and inflation, and policymakers to cut interest rates as a result.

Regarding bank profitability, the outlook for earnings growth isn’t as strong as investors anticipated, according to J.P. Morgan Chase economists. The expected slowdown, likely to concentrate in the business sector, may cause a decline in hiring and spending. On the positive side, the lower interest rates will reduce borrowing costs for households and businesses, prompting more loan activity. 

  • JP Morgan Research forecasts only a moderate slowing in core services inflation to 4% in the first half of 2024, which has been stickier than core goods inflation. (JP Morgan)
  • Inflation remains higher than expected. As of January 2024, core Consumer Price Index (CPI) accelerated 3.9% year-over-year, exceeding the anticipated 3.7% annual increase. (JP Morgan)
  • Core inflation in the U.K. is expected to remain elevated in 2024. (JP Morgan)
  • Overall, JP Morgan expects core inflation in Europe to average 2.6% in 2024. (JP Morgan)
  • The U.S. labor market closed out the 2023 year with 216,000 added jobs, outpacing economists’ expectations and signaling a strong market. (JP Morgan)

Increased Service Fees for Bank Profitability

Slow revenue growth and higher funding costs present challenges to banks in 2024, according to Deloitte. Net interest income for banks didn’t soar as expected, where several of the nation's largest institutions forecast a drop this year. 

In a Barron live coverage report, JPMorgan Chase said it expects net interest income (NII) around $88 billion this year, a slight drop from its $90 billion in 2023. Similarly, Wells Fargo predicts their NII down 9% from last year. To make up for NII shortfall, Deloitte explains banks will seek to raise fees through various channels, such as credit card late fees and overdraft fees. 

These changes, however, are not without backlash. In response to complaints, the Consumer Financial Protection Bureau (CFPB) proposed a new rule in 2024 to prohibit non-sufficient fund (NSF) fees on declined transactions. 

  • The average monthly maintenance fee of a checking account is $13.24 per month, or $158.88 per year, a 3.19% increase from the previous year. (MoneyRates)
  • ATM fees rose 10.7% within the past five years. (MoneyRates)
  • Over a quarter of Americans with a checking account (27%) pay $24 per month, or $288 per year, in overall bank fees. (BankRate)
  • 43% of consumers were surprised by their most recent overdraft fee. (CFPB)
  • About a third (34%) of households making less than $65,000 are negatively impacted by overdraft and non-sufficient fund fees. (CFPB)


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Interest Rate Adjustments To Maintain Customer Loyalty

As federal fund interest rates rose, so did interest rates on high-yield savings accounts and other deposit accounts.

Yet, even as rates hold steady and cuts are expected in 2024, banks may continue increasing their annual percentage yield (APY) on deposit products to mitigate high inflation. Offering higher deposit rates on accounts is an effective way to attract more customers and funding.

In our recent livestream, “Adapting to Rising Interest Rates with Vena,” we discussed how rising interest rates affect financial products and institutional strategies and what banks are doing to attract new customers and maintain their customer base. 

As high interest rates progress into 2024, financial institutions should develop an impact model of these rate adjustments in their net interest margin (NIM) planning.

  • As of February 2024, the prime rate of Bank of America has remained at 8.50%, its same rate from July 2023 after increasing by 75% that year. (Bank of America)
  • The average deposit rate of savings accounts rose from 0.35% APY in February 2023 to 0.46% APY by February 2024. (FDIC)
  • The top three important features to customers when shopping for a savings account are zero fees, good interest rates and branch access. (Forbes Advisor)
  • Deposits rose 84% faster at banks with higher customer satisfaction scores than those with the lowest. (McKinsey

AI and Automation Will Improve Efficiency

On the banking services side, artificial intelligence (AI) applications are expected to make a significant impact on the banking industry. With more automated systems providing around-the-clock availability and service, AI tools may become the secret weapon to banks’ resilience. 

Using chatbots to address queries and resolve issues is enhancing customer experience and operational efficiency. Deloitte’s research suggests that generative AI can boost productivity for front-office employees by up to 35%. 

In addition to virtual assistance, AI-powered analytics are also helping businesses assess credit risk and detect customer patterns more accurately. According to S&P Global, 40% of financial services rely primarily on machine learning for fraud detection and financial forecasting. Finance teams can use these integrations to minimize manual processes and streamline their workflow.

  • Using generative AI can boost productivity for front-office bank employees by up to 35%. (Deloitte)
  • Sixty percent of financial services companies have embedded at least one AI capability. (McKinsey)
  • Of those companies that have embedded AI capability, 36% use robotic process automation for structured operational tasks. (McKinsey)
  • Four in 10 financial services firms rely primarily on machine learning for fraud detection and financial forecasting. (S&P Global)
  • Machine learning in banking, financial services, and insurance accounts for 18% of the total AI market for end-users. (S&P Global)
  • The banking industry is the largest spender in the $166 billion artificial intelligence market by about 13%. (S&P Global)
  • The banking sector could add up to $340 billion in value (a 15% increase in operating profits) using generative AI. (S&P Global)

J.P. Morgan's usage of AI-powered language models has cut account validation rejection rates by as much as 20%.

Neobank Services That Meet Digital Engagement Demands

Neobanks or “challenger” banks are steadily rising as more fintech companies merge into the banking industry via digital-only services. As of 2024, there are over 300 challenger banks worldwide, with Europe boasting the highest with 110. 

In response, traditional banking institutions are stepping up their digital services. The reduction of local bank branches and the rise of virtual subsidiaries, such as HSBC’s First Direct and Scotiabank’s Tangerine, have intensified the competition. 

  • At 110, Europe leads with the highest number of neobanks in the world. (Statista)
  • Fifty-two percent of consumers have a product or service with a digital-only bank. (Accenture)
  • Neobanking is expected to reach a total transaction value of $6.3 trillion in 2024. (Statista)

A bar chart showing the number of digital banks worldwide as of January 2024, with Europe leading with 110

Open Banking APIs To Understand Customer Behavior

Open banking data or “open banking” also presents profitable opportunities for the future. This practice of sharing customer data with third-party financial services providers has revolutionized how banks operate, allowing many to extend their services and create new revenue streams. 

With access to open banking data, banks could develop and tailor offerings based on their customers’ behavior. These data-driven decisions can also help build a competitive advantage, where a bank’s innovative products begin attracting new customers and standing out in the market. 

Still, data sharing has potential challenges, such as privacy concerns and identity theft. A Discover Global Network report revealed that 45% of consumers are uncomfortable sharing their accounts and personal info with third parties. This shows how important transparency is for customers.

  • The value of open banking API is forecasted to reach $330 billion in 2027. (Statista)
  • 45% of consumers are uncomfortable with banks sharing their account and personal info. (Discover Global Network)
  • Nearly half (49%) of all open banking users are in Europe. (Kontomatik

Cybersecurity Improvements

Learning from past breaches and hack attempts, including the 2023 cyberattack of ICBC, the largest bank in the world, more banking institutions are strengthening their security measures. In the financial industry alone, the average cost of a single data breach is nearly $6 million

As more “know your customer” (KYC) regulations are put in place (and fines for noncompliance), advanced security protocols are increasingly relevant in banking. Two protocols in particular are multi-step verification and biometric authentication or “digital ID features,” such as facial recognition and fingerprint scanning. 

Additional steps in client screening, as well as AI integration, are providing more secure and convenient access to banking services, making fraud and cyber threats easier to detect and prevent. 

  • The average cost of a single data breach in the financial industry is $5.9 million. (Statista)
  • Financial institutions account for a quarter of cybersecurity incidents. (MMR)
  • Last year, the SEC fined 11 Wall Street firms $289 million for widespread and long-standing record-keeping failures. (SEC)
  • 54% of banks don’t have a dedicated cyber incident reporting regime. (IMF)
  • 51% of organizations plan to increase their security investments as a result of a breach. (IBM)
  • Organizations using security AI and automation save an average of $1.76 million more than those without. (IBM)


Sustainable Practices That Align With Customer Values

Environmental, social, and governance (ESG) efforts have become increasingly relevant to organizations, consumers, and investors, especially among finance and operations professionals. 

Our industry benchmark report, The State of Strategic Finance, found that 75% of finance professionals believe ESG is important to business strategy. 

In response to this higher prioritization of ESG efforts, companies should define clear ESG goals and how these sustainable efforts align with both their business values and stakeholder expectations. Examples of this may include the demonstration of lowering carbon emissions or prioritization of workplace diversity, equity, and inclusion (DEI).

With financial reporting software, financial institutions can develop specific ESG reports to track and measure the environmental impacts of their organization across fiscal years. 

  • 3 in 4 organizations deem ESG a priority. (Vena)
  • According to a KPMG survey, 77% of banks aim to achieve net zero in financed emissions by 2050 (KPMG)
  • 89% of banks disclose their climate strategy focusing on green/sustainable financing. (KPMG)
  • Over half (54%) of banks—including in the U.S., UK, Europe, Canada, Australia, Japan, India, and China—mention climate in their financial statements, including 100% of UK banks who responded. (KPMG)
  • 40% of banks disclose that they obtained an assurance report on climate-related information as part of their annual report. (KPMG)
  • The sustainable finance market has a $4.2 trillion valuation. (Global Market Insights)

54% of banks include climate in their financial statements

Navigate Market Volatility With Vena 

Not only must banks continuously adapt to evolving consumer preferences and create innovative products, but staying ahead of the curve also requires preparation for interest rate fluctuations and unpredictable financial markets. Vena helps banks navigate this effectively through agile budgeting and forecasting solutions.

With AI-powered tools and deep integration capabilities, Vena helps finance teams improve reporting, streamline workflows and empower strategic decision making.


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