Five Key Banking Trends for 2025: Insights from FinovateEurope

Last month saw the return of FinovateEurope, where over a thousand decision-makers —the majority from banks and investors— came together in London to discuss the latest market-ready innovations and trends in Financial Services.

The agenda was rich and broad, spanning everything from the rise of GenAI in the sector to the escalation of geopolitical risk. But while we’d love to dive into everything we learned this week, let's explore five of the most important banking trends that look set to influence the industry landscape over the next twelve months (and beyond).

1. Fraudsters are innovating rapidly, and banks need to catch up

In the first of two panel discussions on the rise of fraud, representatives from Wells Fargo, OakNorth and Lloyds Bank agreed that financial crime now poses an existential threat to banks, and as a result, the industry needs to rethink its outdated view of financial crime as merely a compliance issue. Plus, as new technologies — including AI, behavioural analytics and real-time monitoring — play an increasing role in fraud detection, collaboration between regulators, banks, fintechs and tech leaders will need strengthening in the years to come. “We need to shift our thinking from ‘response’ to ‘detection and prevention’ — and a lot of conversations need to happen between the fraud side of the business and other players to say, ‘this is what we’ve seen, this is what we’re doing, and be careful because it’s coming your way'” — Monica Carlesso, Business Platform Lead, ID & Authentication Platform, CIO Enabling Services, Lloyds TSB.

In the second panel discussion on the rise of fraud, we heard about the very real and very worrying power of deepfakes in fueling fraud over the years to come. In fact, we learned that fintechs have estimated a window of 12-18 months before deepfake fraud takes over. In response, banks urgently need to consider new, multi-party approaches to authentication that go beyond traditional KYC. But while this shift is inevitable, one of the biggest challenges banks will face in expediting it will be connecting the dots in their processes in the first place to get a unified view of authentication — a challenge they’re already grappling with in KYC as it stands today.

2. Digital assets require a reimagining of cross-border-transaction infrastructure

The rise of global interest in digital assets was a hot topic this year. There were multiple discussions around the tokenization of assets and currencies, and what this shift means for how value will flow worldwide over the years to come, including how ownership will be structured, how regulatory frameworks will come together, and how settlements will take place. We heard that many banks have already launched tokenized funds, deposits and stable coins, but the true size of the opportunity is still a question mark — though if BCG’s estimates become reality, the market size of tokenized real-world assets will reach $16 trillion by 2030.

Nick Kerigan, Head of Innovation at Swift, argued, “Regulated digital assets aren’t just going to be a parallel system. They’re going to become integral to how money and value move globally.” As of this year, 44 jurisdictions are currently testing a central-bank digital currency, with China having processed over 900 billion dollars worth of e-CNY already during its 2024 pilot. This shift will require a rethink of banking infrastructure so new asset forms can flow across borders as seamlessly as established assets. But this is a complex feat — digital assets are currently in silos, being run by different platforms across different networks, all of which adhere to different standards. Connecting this fragmented ecosystem to facilitate interoperability will be a necessary first step for transacting digital assets on a global scale.

The good news is, behind the scenes, Swift is developing a new platform to connect disparate central-bank digital currencies to the existing finance system — the first trial of the technology having already proven that banks could keep using their existing infrastructure.

3. Embedded finance is a golden opportunity — but it leaves banks at a crossroads

There were many discussions about embedded finance and the potential for banks and other financial institutions. On one hand, the opportunity for banks to widen their distribution footprint for minimal costs, coupled with soaring consumer demand for always-on, personalized digital services makes embedded finance look like a golden opportunity.

On the other there’s a risk that, with embedded finance on the rise in ecommerce stores and more payment locations, banking brands will become distanced from consumers. “When loyalty is transactional, it very quickly evaporates,” said Vladimir Lounegov, Co-Founder of Mbanq, a global Banking-as-a-Service provider. Comparing banking consumers with sports fans — in a session on how the fundamental psychology of loyalty doesn’t change across industries — he told us to anticipate a fintech-led shift away from loyalty programmes centred around transactional rewards. Instead, he said, fintechs will increasingly be the ones collaborating with brands to build value propositions that foster deeper, more emotional connections with consumers, as "Consumers don’t necessarily need banks; they need banking services." Ultimately, he argued, the businesses who can cultivate fan-like loyalty will be the winners in this new dynamic, as “Fans will never be delinquent on payments.”

Meanwhile, with regulators increasingly demanding more robust risk-management strategies from license-holding institutions, there’s added pressure on banks to find ways of productising real-time customer onboarding and KYC on partner platforms.

4. There’s a bright future for AI in banking — but the biggest ROI is still untapped

Discussing the rise of geopolitical risk and what it means for the future of business, Linda Yueh, Economist at University of Oxford and London Business School, said we now live in an era of “great power and competition,” and explained how this has already had a direct effect on businesses — for example, triggering a rise in "China Plus One" supply chain strategies. She also suggested that this new era of competition has led to a rapid increase in GenAI adoption to boost productivity, but that maximizing ROI on GenAI deployments will depend heavily on whether businesses can establish the right processes and change-management approaches to drive usage: “Technology only raises productivity for both countries and companies if it is actually used. Technology sitting on the shelf doesn’t do anything. It’s about changing processes."

We also heard from Aurélie L’Hostis, Principal Analyst for Financial Services at Forrester, who said that while there’s a lot of excitement and optimism around GenAI in banking — with 44% of leaders expecting it to raise productivity, 44% expecting it to fuel revenue growth and 38% expecting it to drive innovation — impatience with AI ROI could prompt banks to prematurely scale back investments. In addition to setting more realistic expectations for time-to-ROI, she argued, banks should dedicate ample time to choosing AI vendors “judiciously”, and that they should ensure compliance from the outset by asking vendors detailed questions early around how they plan to handle and use data, for example. She also suggested banks establish strong governance frameworks, policies and processes for any GenAI deployments, to minimize the risks of accidentally exposing their company and customers’ data.

5. Adaptability is key to survival

“Adapt or die” — a bold statement from Richard de Roos, Head of Operations CIB for Standard Bank, on the need for banks to build more adaptive operations to keep up with the increasing pace of change. Standard Bank is using Celonis on AWS and their story was shown during a session on how banks can become more adaptive using process intelligence, led by Celonis’ Banking Industry Principal Joaquim Nogueira.

According to Joaquim, the challenges banks face today — including those mentioned above such as facilitating cross-border payments and embracing AI — ultimately fall into three categories: “operations are fragmented, customer journeys are complex, and risks and regulations are rapidly evolving.” Joaquim argued that the underlying cause of all three issues is that banks lack a unified view of the processes relating to them. Only with that unified view will banks be able to see how they can make improvements, and ultimately, overcome the challenges.

For example, “Say you need to do customer onboarding…to do that, you need to do account opening…to do that you need to do KYC, only then can you start approving the application.”

This is where process intelligence comes in, says Joaquim, bringing all of these processes together to create a digital twin of the entire business operation, featuring not just every individual process, but the interactions between them, across functions. AI then helps banks see where the improvement opportunities are and how to adapt their processes to maximize ROI, either by saving costs, increasing revenue or boosting productivity.