Forecasting the Future of Finance

The ever-evolving financial sector is fueled by innovation and emerging technologies, and 2024 is poised to be a transformative year for the industry.

From the increasing importance of personalized experiences to the boundless possibilities of artificial intelligence, the traditional finance giants have reached a crossroads: Adapt or fail.

But how might that adaption look? Like embracing fintech partnerships to offer bespoke financial advice. Or leveraging the power of AI to identify financial benchmarks for an individual.

No matter how these adaptations manifest, the most innovative financial institutions will look forward and be driven by innovative tech.

Let’s explore some burgeoning trends and their potential impact on the financial sector.

1. The advantages of fintech partnerships for a traditional financial institution. Navigating the hyper-competitive financial landscape demands agility, and legacy systems become anchors that weigh credit unions and other financial institutions down. Partnering with nimble fintechs unlocks access to proven technology, seamlessly integrating with existing digital experiences. This win-win delivers powerful functionality to customers and boosts institutions’ bottom line.

But the key to success isn’t just a handshake agreement. Trust is paramount. Financial institutions must confidently embrace the fintech’s expertise, allowing it to continuously refine and elevate the platform. The most attractive fintechs won’t just offer cutting-edge solutions; they’ll prioritize smooth implementation, seamless management and unwavering support, ensuring the technology scales and evolves alongside the business.

2. Consumers crave cutting-edge solutions. Forget clunky interfaces and confusing menus. In 2024, consumers want effortless, intuitive experiences – think seamless goal tracking that gamifies progress, applications that glide through with a few taps and transactions that melt into the background. These details are the cornerstones of engagement driving customer loyalty and deeper connections with financial institutions and their offerings. It’s not just about products. It’s about providing a delightful financial journey for every user.

3. Illuminating limited consumer data files. Thin credit files create a roadblock for lenders, requiring them to estimate a borrower’s true risk. However, underwriting is evolving, incorporating new data streams beyond traditional credit scores. Imagine rent payments, utility bills and even streaming service subscriptions leaving footprints on a borrower’s financial roadmap. With permission, lenders can peek into borrowers’ bank accounts to gain visibility into cash flow patterns. This transparency provides a clear picture of income and outgoings, further unraveling the mystery of thin credit files and paving the way for more nuanced risk assessments. These alternative tradelines paint a more complete picture, empowering lenders with deeper insights into borrowers’ ability to manage recurring expenses.

4. Leveraging AI to meet consumer demands. As consumers’ demand for personalization continues to increase in the coming year, the smartest credit unions will leverage AI to meet those expectations and deliver a better overall member experience. When it comes to their finances, members want to know what they’re doing right and where they can improve. The data gleaned from AI and machine learning will help identify benchmarks for different member segments so individuals can see where they stack up against where they’re “supposed” to be. These benchmarks will help build financial roadmaps for consumers that guide their path forward, provide personalized recommendations and, ultimately, improve financial well-being.

Despite the potential benefits of AI recommendations, they’re not always accurate. Institutions must ensure they have a meaningful system of checks and balances in place to avoid this potential pitfall. AI can do the heavy lifting and package up personalized suggestions, but human representatives must double-check the output to verify its accuracy and appropriateness for the customer or member.

5. The student loan repayment conundrum. The student loan payment pause ended last year, and it’s increasingly critical people prioritize how they’re paying off debt. Before making their next financial move, however, borrowers must take a deep breath and weigh their options. First, they should contact their student loan lender and ask if late or lowered payments will ding their credit score with late fees or negative reports. If not – and the borrower has consumer debt with a higher interest rate – it might make more sense to pay on that higher debt. Student loans aren’t going anywhere.

The golden rule? Communication is key. If a borrower chooses to tackle the higher-rate debt first, they must tell their student loan lender, explain the plan and consider a partial payment as a good-faith gesture. Maintaining open communication helps avoid future problems and ensures borrowers stay on track toward financial freedom.

So, how will your organization adapt to stay relevant? What kind of fintech partnerships does your credit union value the most? Are you ready to capitalize on the AI revolution?

JB Orecchia is President/CEO of the Dublin, Calif.-based SavvyMoney, which partners with financial institutions to bring credit score solutions to online and mobile banking platforms.