Banker's dozen: 13 finserv forecasts for 2025

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Dec 12, 2024, 09:47 ET

SAS experts foresee AI acceleration bringing big developments in fraud, risk management, customer experience and more

CARY, N.C., Dec. 12, 2024 /PRNewswire/ -- In the face of continued economic headwinds, regulatory uncertainty and accelerating tech advancement, what does 2025 have in store for the banking sector? Tune in to the live webinar 2025 Trends in Global Banking on Jan.16 at 10 a.m. ET, where a panel of industry experts from SAS, Chartis and Unconventional Ventures will explore the trends that will shape banking in 2025 and beyond.

Ahead of its January webinar, 2025 Trends in Global Banking, SAS experts make their predictions for the year in finserv

Where does AI fit in? Prominently. A recent report on the use of generative AI in banking showed large numbers of banks realizing significant benefits from GenAI in employee experience, risk and compliance, and time and cost savings.

But why wait until 2025 for a peek at the future? Right here, SAS execs and experts offer 13 predictions – a banker's dozen, if you will – about trends and changes the year ahead may bring in AI, data management, ESG, retail media and more."

Digital fraud goes mainstream amid its industrialization
"The Digital Industrial Age of Fraud has dawned, fueled by a perfect storm of social, economic and technological factors that have made fraud more common – and easier to commit – than ever. In one recent survey, 42% of Zoomers admitted to disputing legitimate transactions. At the same time, fraud as a service has come to the fore, buoyed by the prevalence of inexpensive, readily accessible GenAI tools to automate phishing attacks and other digital schemes. The barrier to entry to criminal activity has never been lower. Banking leaders must evolve their thinking and adapt quickly to meet consumers' expectations for fraud protection – the sooner the better."

- Thomas French, Senior Financial Industry Consultant for Fraud, SAS

Industry struggles to balance demand for AI's power with the energy it requires to run
"As industry clamors for AI to drive greater speed, automation and productivity, AI demands GPUs to satisfy the higher levels of processing. Banks and other businesses face the paradox of consuming more energy while facing pressure to enhance their own environmental sustainability and promote ESG measures. The sustainability-related disclosures mandated by IFRS S1 and S2 will only increase scrutiny of energy consumption as a major contributor to global warming.

"Quantum computing will likely be the next big demand on resources. But without the emergence of a sustainable source of energy to power all that computing, will industry be forced to forgo innovation to meet environmental restrictions and maintain consumer confidence?"

- Ian Holmes, Director and Global Lead for Enterprise Fraud Solutions, SAS

Need to make a deposit? The robot can help you.
"Watch for robot assistants to begin replacing branch staff and customer service desks. Less sophisticated versions of these have been used by Japanese retailers for many years now, answering simple queries like 'where can I find No. 3 screwdrivers?' The AI-driven smarter assistants used in banking will be able to converse with customers much like chatbots, and they'll provide better guidance than an ATM. This could prove a boon to banks and their customers alike, but these advances will necessitate a higher level of governance and control at financial institutions."

- Naeem Siddiqi, Senior Risk Advisor, SAS

AI and cloud acceleration trigger a Great IT Rationalization
"Businesses have long run on siloed systems, each serving a different function or customer segment. IT teams are buckling under the weight of cumbersome integrations, unable to provide the agility their enterprises need. A Great IT Rationalization is on the horizon, where business leaders will use the cloud to simplify their IT infrastructures and vendor relationships, gain critical speed and cut costs. Those who modernize on an AI platform that drives multiple functions will derive the greatest value. They can achieve integrated, democratized data and decisioning that spans the customer life cycle and the enterprise at large."

- Stu Bradley, Senior Vice President of Risk, Fraud and Compliance Solutions, SAS

AI regulation is about to get (more) complicated
"Various US states and municipalities will pass their own AI statutes, adding complexity to an already complex regulatory landscape. Companies doing business in multiple states will need to navigate a menagerie of disconnected AI statutes. Obstacles created by unaligned policies will be more pronounced for those operating globally.

"As lawmakers attempt to designate the scope of AI regulation, varying definitions of what constitutes AI will emerge. Some of these definitions will include algorithms and analytics that have been used for years, intensifying pressure to ensure compliance. Organizations will scramble to identify deployments that meet the new definitions of AI, and to quickly establish governance."

- Jason DiNovi, Senior Industry Consultant, SAS

Banks cash in on all that data – or get buried under it
"Big data has the potential to become the next big oil – or the next big debacle – for global banking. The explosive growth of data, driven ever higher by accelerating AI implementations, presents both opportunities and challenges. Whether their vast stores of structured and unstructured data become an asset or a liability depends largely on banks' ability to effectively evolve and implement their data framework and governance processes. Working toward deployment of a unified decisioning platform can help banks dismantle data silos and gain cross-functional insights that drive strategy and transformation."

- Julie Muckleroy, Global Banking Strategic Advisor, SAS

Banks face stricter risk management oversight
"US bank regulators will substantially toughen both analytical requirements and supervision for interest rate risk in the wake of the analytical missteps that took down several banks in recent years. For example, Silicon Valley Bank was highly esteemed and in compliance with all regulatory capital rules, but it still failed – the first of five US bank collapses that made 2023 the biggest year ever for bank failures, all triggered by unchecked liquidity risk due to rising interest rates. Expect regulators to demand investment in more sophisticated risk management solutions and human capital."

- Donald van Deventer, Managing Director of Risk Research and Quantitative Solutions, SAS

AML innovators pump the brakes on AI
"Anti-money laundering practitioners will cautiously evolve their responsible innovation practices due to lack of regulatory clarity on effectiveness. Many innovative firms will apply machine learning methods to tune and optimize incumbent monitoring strategies rather than incur the model governance overhead of pure AI-based detection strategies."

- David Stewart, Director of Financial Crimes and Compliance, SAS

AI gains momentum in risk and compliance
"AI's overhyped reputation as a silver bullet to automate any task will come down to earth as banks start to see where AI can and cannot enhance operations. In particular, financial firms, with appropriate human-in-the-loop oversight, will establish AI as an indispensable risk management tool. They'll also put greater focus on implementing effective AI governance frameworks as AI pilots move to production.

"Further, with a skyrocketing number of models under development and in production, model risk management will come into sharper focus. Financial services leaders are seeing convergence between data governance, model development and deployment, and model governance – and with multiple touch points along this value chain, the lines between model governance and the model life cycle are blurring. Firms will seek ways to improve efficiency and automation in model validation, model documentation and model monitoring."

- Terisa Roberts, Global Lead for Risk Modeling and Decisioning, SAS

Even as the planet warms, banks cool on environmental, social and governance (ESG)
"Banks' interest and investment in ESG initiatives will wane as they struggle to show concrete value. Declining investor enthusiasm and 'greenwashing' concerns will also diminish its relevance in financial markets. Without clear financial benefits, banks will view ESG as a cost burden rather than a revenue driver, and it will be primarily regarded as a reputational safeguard, not a strategic priority for growth – unless and until it's mandated by regulation or demanded by consumers."

- Stephen Greer, Banking Industry Consultant, SAS

Liveness checks rise in prevalence to combat deepfakes
"Generative AI is both a curse and a blessing, used by both the fraudster and the fraud fighter. As fraudsters use GenAI to create voice and video deepfakes that are increasingly difficult to detect, liveness tests will become more commonplace as part of banks' multifactor digital identity authentication processes. This technology assesses a biometric sample to distinguish a live person from a potential fake representation, such as from a photo, video or mask. While forms of liveness detection have existed for decades, 2025 will see fraud fighters embrace next-gen liveness testing among the latest anti-fraud technology trends."

- Dan Barta, Principal Industry Consultant for Enterprise Fraud and Risk Strategy, SAS

Retail media will drive personalized consumer offers – and revenue
"In 2025, consumer banks will make a significant move into retail media, following models set by Chase, Revolut and PayPal. By incorporating personalized third-party offers using their high-quality, first-party data, financial firms will be able to offer tailored promotions that blend with in-house offers and services. This will not only deepen customer engagement but also create new revenue streams and position banks as important players in the evolving retail media landscape."

- Cornelia Reitinger, Head of Advertising Business Development, SAS

Banks confront ongoing market volatility with increased risk management investment
"Market volatility is here to stay in 2025. Banks will respond with continued risk management investment, taking advantage of cloud and AI advances or simply modernizing their current risk systems. Asset and liability management capabilities will be a particular focus given ongoing interest rate risk and liquidity risk. Faster-evolving conditions require more timely risk analysis to quickly anticipate impacts and correlations between risk types and financial measures. They also demand greater integration capabilities to achieve a more holistic view of risks across the balance sheet."

- Martim Rocha, Global Head of Risk Banking Solutions, SAS

Get even more AI predictions
There's no doubt: 2025 will be a big year for AI in banking. But AI's impact won't stop there. For forecasts on trends in insurance, marketing, government and ethical AI, visit SAS' technology and AI 2025 predictions hub. While you're there, take a quick quiz to see whether you're an AI optimist, pessimist or realist.

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