4 Predictions for 2024: The Year of Financial Data IntelligenceHere are our four predictions for 2024 — the year of financial data intelligence — including what the next generation of financial wellness tools looks like, the future of AI and personalization, the evolution of bank-fintech partnerships, and what’s next for Open Banking.
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For the financial services industry, 2023 will be a year to remember. Financial institutions and fintechs saw everything from bank failures and record-high interest rates to the rise of ChatGPT and new regulatory expectations. Coupled with increased competition, market consolidation, and increasingly demanding consumer expectations, financial providers face a myriad of challenges and opportunities this year. 2024 will show us how the challenges and innovations of 2023 will have a lasting impact and reshape the financial services industry forever.
Behind each of these lasting impacts, we see one common thread — financial data. Vast amounts of transaction and customer data are generated daily. And, it tells us everything we need to know about how to win and retain customers. Financial institutions and fintechs that are able to unlock this financial data intelligence will see tremendous growth and success.
Here are our four predictions for 2024 — the year of financial data intelligence — including what the next generation of financial wellness tools looks like, the future of AI and personalization, the evolution of bank-fintech partnerships, and what’s next for Open Banking.
Intuit’s plan to shut down Mint beginning January 1 represents a milestone and an opportunity for the future of personal financial management (PFM) tools and apps.
The reality is that it’s difficult to drive engagement and revenue based on a standalone PFM app. According to Forbes, the problem is two-fold: 1) PFM tools have historically been focused on budgeting and expense categorization and 2) consumers don’t want to pay for budgeting and expense categorization.
In fact, our research shows that 45% of consumers only check their finances through their financial accounts. And, nearly 1 in 10 say they don’t track their finances at all. The majority of consumers want to improve their finances and make better decisions with their money, but don't want to do the work — particularly if it means logging in and managing yet another app.
Mint and other standalone PFM solutions are for the super users, not the average Joes. 2024 will be the year that banks, credit unions, and other financial providers rethink and retool PFM solutions to reach more consumers.
In fact, Harvard Business Review points to employers as a key player in providing financial wellness tools to their employees citing a 2023 report by the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) which found that employees spend an average 8 hours a week dealing with financial issues — with four of those hours occurring at work.
And, even the U.S. Treasury Department has begun work on a national strategy for financial inclusion focused on advancing financial inclusion and broadening access to financial products and services among underserved communities.
By making financial wellness an embedded part of life for consumers — whether at work or in their community, we can drive better outcomes across the board.
According to Alex Johnson, author and creator of Fintech Takes, “we make a mistake when we assume that PFM = budgeting and expense categorization. It’s much broader than that. PFM is about meeting consumers where they are and delivering them the best possible financial outcomes.”
Financial institutions and fintechs should focus on integrated, personalized experiences that bring PFM into the everyday habits of consumers, rather than asking them to build a new habit. In 2024, we expect to see:
Financial providers sit on a mountain of data about their customers. However, translating that data into personalized experiences or targeted offerings remains difficult for the majority of organizations.
New research from MX found that 44% of U.S. consumers either said no or weren’t sure when asked if they believe financial providers are leveraging the data they have about them to personalize their experience. This is telling as it becomes easier for consumers to open new accounts or switch financial providers if they aren’t satisfied. Consumers are more likely to leave if the provider isn’t leveraging what it knows about its consumers. And, simply saying “Dear INSERT NAME” in an email doesn’t cut it.
Unlocking the value of financial data to better understand consumer needs and the explosive growth of generative AI over the past year will further enable financial institutions and fintechs to take personalization to the next level in 2024.
With enriched data and new tools powered by AI and machine learning, financial data intelligence gets a boost that will drive faster and better personalization at scale. But AI isn’t a silver bullet on its own — it starts with clear, structured, and enhanced data. In 2024, we expect financial institutions and fintechs to leverage data to finally get personalization right, such as:
Jim Marous, co-publisher of The Financial Brand, says “banks adept at deriving actionable intelligence from customer insights and nimble enough to act quickly can foster much deeper consumer relationships through advanced engagement. The key to seizing these CX [customer experience] possibilities lies in fully utilizing data, analytics and technology to revolutionize how engagement is supported.”
According to a 2023 Ernst & Young survey, 40% of bank-fintech partnerships “fail to operationalize.” And, those that make it off the ground, tend to underwhelm. Two-thirds of these partnerships fall below expectations, according to a survey by Aite-Novarica.
Why do so many bank-fintech partnerships fail? Kate Drew at Forbes points to a mismatch of priorities and approaches. “The reasons for these troubles are varied — they stem in part from overexcitement in the last few years that got knocked back in 2023 as fintech funding plummeted and the macroeconomic environment grew uncertain, but they’re also likely the result of a fundamental mismatch between how traditional banks and fintechs think and operate.
Traditional institutions are very risk averse; even the most progressive ones generally think about one thing more than anything else, staying compliant. If you were to ask any fintech what they think about most, they’re likely to tell you it’s the customer experience. Now, imagine being in a relationship in which you and your partner have such different ideas about what matters to your future.”
If 2023 was the year of reckoning for bank-fintech partnerships, 2024 will be the year of building sustainable relationships. Fintech partnerships are not going away — they are critical to help augment staffing and resources to implement and support technology, as well as bring in and fuel new innovation. But, how banks and other financial institutions partner with fintechs will change in 2024, including:
It’s no surprise to see Open Banking round out our list of 2024 predictions. The U.S. Consumer Financial Protection Bureau (CFPB) published its notice of proposed rulemaking for personal financial data rights under Dodd-Frank Act Section 1033 in October 2023.
People and small businesses have been sharing their financial data for decades — to create budgets, track net worth, pay taxes and bills, etc. However, until recently, consumer financial data access and control has primarily been left up to the financial institutions, fintechs, and other third parties involved.
The CFPB shared, “currently, people’s access to their financial data is inconsistent from one financial institution to another. Even among companies that do share data at a customer’s request, the terms of the sharing vary greatly. This lack of norms in the market allows incumbents to play games to their own customers’ detriment – including hiding or obscuring important data points like prices.”
The final rulemaking for Section 1033 is an important milestone in making sure consumers have the right to access and control their financial information. We also believe it will lay the groundwork for the United States to move into the next chapter of fintech innovation. But, this won’t happen overnight.
We predict 2024 — and beyond... based on CFPB’s proposed compliance dates — will be a year of open banking growing pains, including: