More volatility and uncertainty in 2024: bank treasurers must balance risk and innovation  

Wissam Khoury, EVP, Treasury & Capital Markets at Finastra 

If I were to describe 2023 using one word, it would be turbulence. Uncertainty and volatility are becoming the norm and will continue to dominate headlines in 2024. The International Monetary Fund (IMF) expects the headline inflation to decelerate to 4.8%, while global economic growth will slow to 2.9% in 2024, from an expected 3%. However, we are not out of the woods yet. 

Besides the turbulent economic climate, according to a Deloitte study, technological turbulence underpinned by Gen AI, transition to the cloud, increased fraud, and cyber risk, will also dominate the board agendas. Banks need to use the experience they have gained to balance risk and innovation and become more agile. For example, 2023 shone a light on the importance of effective Asset Liability Management (ALM), and we will continue to see significant investments in this area. To optimize the balance sheet, banks need to move beyond compliance and take a closer look at key metrics on a more frequent basis. Community banks, mid-tier banks and top-tier banks may also have different approaches to ALM.  

In 2024, I expect to see banks and decision makers look at ALM through the lens of viability. To achieve long-term growth and success, banks will invest in innovation and new technologies that manage risk and optimize their balance sheets. Cloud-based SaaS solutions enable banks to optimize positions under multiple regulatory constraints, shield from risk and be better equipped to serve the needs of the community, including private individuals and small-medium enterprises (SMEs).  

Institutions will need to leverage new technologies and tools to measure and monitor liquidity, interest rate and FX risks in the balance sheet. By using technologies such as artificial intelligence – including generative AI (Gen AI) – and machine learning, banks can analyze the past, monitor the present and prepare for the future. According to a McKinsey report, Gen AI could also reduce the industry's costs by $200bn to $340bn per year. The good news is that banks don’t have to follow a big-bang approach. With microservices and composable banking, institutions can enhance agility, scalability, innovation and speed of deployment by breaking down applications and services into smaller parts. As a result, banks can react quickly to economic events and adjust risk accordingly, while ensuring their long-term growth.  

2024: the year of instant and tech-driven payments 

Barry Rodrigues, EVP, Payments at Finastra 

Instant payments will dominate the headlines and board agendas in 2024. In 2023, we saw the launch of the US FedNow Service, while the European Commission announced its plan to mandate instant payments in euros. Around the world, more consumers and businesses will continue to demand instant, seamless payment services to manage their cash flow in real-time and improve user journeys. 

Underpinning many instant payment infrastructures is ISO 20022. Banks are required to transition to the new messaging standard before November 2025, but many will implement the necessary changes ahead of time for a competitive advantage. Instant payments underpinned by ISO 20022 give banks access to richer and more structured data sets in real-time, enabling them to better automate processes, improve efficiencies and truly understand their customers to offer them more personalized services.    

However, as payment innovation accelerates, so too does innovation in fraud. Payments operating in real-time bring increased risks of instant financial crime. Banks will need to invest in technologies such as machine learning (ML) and artificial intelligence (AI) for faster and more accurate sanctions screening, transaction monitoring and fraud detection. Additionally, more institutions will explore the use of generative AI (Gen AI). For example, to produce synthetic data that looks like fraud transactions, which will enable banks to build more robust models to identify new sets of fraud they’ve never seen before.

For banks to truly benefit from the move towards frictionless, instant and data-rich payments – without compromising fraud prevention – investment in payments modernization will be key. Cloud solutions provide the agility that banks need to quickly transform and scale their operations to cope with increasing payment volumes. With Payments as a Service (PaaS), banks gain additional benefits, such as reduced time to market and value for new services, and at a lower Total Cost of Ownership (TCO). 

2024: Modernization, integration and collaboration 

Isabel Fernandez, EVP, Lending at Finastra  

2023 shone a light on the importance of agility. Banks around the world were forced to navigate volatile global markets and supply chains, changing customer behaviors and disruptive technologies, alongside pressures to strengthen their Environmental, Social and Governance (ESG) credentials. We do not expect this to ease in 2024, and yet many banks are struggling to adapt quickly enough. 

Whether they are providing retail loans to consumers, or working capital finance to corporates, financial institutions will face continued demands from their customers for quicker, more seamless, and personalized lending experiences. To meet these demands and avoid being on the back foot, institutions need to prioritize modernization – whether that be adopting a microservices approach, redeploying to the cloud or consuming ‘as a service’. By upgrading their technology, banks will be better equipped to adapt to changing market requirements, remain competitive, have access to better quality data, and securely decrease their time to value when bringing new services to market. 

For me, the biggest tech trend of the moment, and one that will only continue to accelerate in 2024, is Gen AI. At Finastra, we’re very optimistic about its significant benefits for our customers and our people. I am thrilled about the quality enhancements it can bring in everything we do and the opportunity to give developers more time to unleash their creativity. It is an exciting time for the industry, and proof points will emerge as we test and learn with the technology. AI and machine learning are already being used to solve challenges in lending processes, such as document digitization by ‘reading’ documents, extracting information, and offering actionable insights.  

One of my primary beliefs is that finance is open, and ecosystems and networks will be critical for the success of financial services. We often talk about buy vs build, but for me, collaboration is essential. By integrating fintech applications into their platforms, banks will benefit from the latest technology to strengthen anti-fraud measures, access to ESG data and analytics, and process automation. Despite ongoing uncertainty in 2024, I am confident about the future. By embracing modernization, capitalizing on the potential offered by Gen AI, and leveraging the power of the network, the financial services industry has the opportunity to undergo a transformational shift.