Top Trends and Investments in Bank and Technology for 2025

How is technology changing banks? By 2025, banks are investing in AI, blockchain, and cybersecurity to improve services and stay ahead. This article covers the top trends and innovations in bank and technology that are shaping the future.

Increasing Bank Technology Budgets

The banking sector has seen a significant rise in technology budgets, with global bank IT spending projected to grow at 9% annually. This surge is driven by the need to stay competitive. Key points include:

• Investments in generative AI, cybersecurity, and data management are recognized as essential for business growth.
• Currently, over 60% of technology spending in banks goes to maintaining existing operations.
• Effective technology integration can free up resources for innovation.

Strengthening data management and IT critical infrastructure is a strategic imperative. Regulatory compliance, previously seen as a cost burden, is now an opportunity to enhance operational resilience. This shift helps banks navigate complex regulations while driving technological value.

Technology adoption is not just a cost-reduction strategy but a pathway to future growth and gaining a competitive edge in the banking sector.

Smartphone AI Integration in Banking

Smartphone AI integration is no longer a futuristic concept; it is rapidly becoming a cornerstone of modern banking technology. By 2025, AI in mobile banking apps will be a key focus for financial institutions to enhance customer experience and competitiveness. AI offers benefits like improved voice-to-text capabilities, task management, and document search, enabling more personalized and efficient services to meet evolving customer needs.

However, these advancements bring new risks. Banks must effectively test, govern, and manage how these advancements affect the additional risk vectors associated with smartphone AI at this point.

Digital wallets and alternative payment methods are gaining popularity, offering customers more options and flexibility. As banks integrate AI, they must balance innovation with robust risk management to ensure the security and reliability of their applications.

The Rise of Decentralized Finance (DeFi)

Decentralized finance (DeFi) is revolutionizing the financial sector, addressing issues like slow transaction times and high costs. DeFi aims to improve efficiencies in areas like cross-border payments and micro-lending. As regulatory conditions improve, banks are expected to cautiously invest in blockchain technologies, allowing better integration of DeFi solutions while mitigating risks.

DeFi’s growth could lead to stronger partnerships between banks and blockchain innovators. These collaborations are essential for navigating DeFi complexities and leveraging its full potential. Embracing DeFi allows banks to enhance digital services, offering faster, more cost-effective financial solutions.

Enhancing Customer Experience with Personalization Technology

Financial institutions are increasingly focusing on hyper-personalization through AI to tailor services to individual needs. This approach has significantly increased revenue and customer satisfaction. Enhancing digital onboarding processes minimizes customer attrition and ensures sustainable growth.

AI-powered chatbots and proactive financial advising are transforming customer service by offering 24/7 support and personalized interactions. Banks can now suggest products based on customer interest and behavior, creating highly personalized content and experiences.

Streamlining product offerings can significantly enhance customer experiences and reduce costs, allowing customers to feel valued and understood. Investing in personalization technology gives banks a competitive edge, making customers feel valued and understood.

Instant Payment Solutions

In 2025, banks are focusing on instant payment solutions to meet the demand for faster, more efficient transactions. AI-powered tools enhance bank transfers by analyzing data, automating deposits, and facilitating account openings. These investments aim for better customer experience, reduced costs, and lower risk. Online and mobile banking enable banks to facilitate 24/7 money transfers, facilitating withdrawals and reducing barriers for changing banks.

Key points include:

• Interoperability among payment systems is crucial for quicker transactions and smoother operations.
• Neobanks are rapidly expanding due to their focus on customer-centric services.
• The Buy Now, Pay Later (BNPL) model is transitioning into B2B transactions, offering flexible payment solutions within procurement systems.

Investing in instant payment solutions allows banks to offer more convenient and efficient services, enhancing customer satisfaction and loyalty.

Open Banking and Embedded Finance Strategies

Financial institutions are prioritizing investments in open banking architectures to foster efficient product development and vendor partnerships. Banks plan to invest in API developer portals, integrated payment solutions, and risk management tools. Embedded finance is set to revolutionize payment methods by integrating financial services into various applications, enabling more seamless and innovative banking services.

In 2025, improving treasury management services for profitability will be crucial for banks. Investing in open banking and embedded finance enhances digital offerings, providing more flexible and efficient financial solutions. This approach improves customer satisfaction and drives business growth and competitiveness.

Advanced Identity Verification and Fraud Management

AI systems are being developed to analyze customer behavior patterns for enhanced fraud detection. Key points include:

• Generative AI helps banks improve fraud detection through advanced algorithms that identify suspicious patterns.
• AI and ML within hyperautomation detect fraudulent activities by analyzing transaction data in real time.
• Fraudsters increasingly use generative AI to create realistic synthetic identities, complicating detection efforts.

A comprehensive identity verification strategy is crucial for financial providers to combat evolving fraud. Multi-layered identity verification is critical as fraud spans various channels, including mobile and online platforms.

Collaboration with cross-industry networks enhances fraud detection by sharing intelligence and identifying trends. Investing in advanced identity verification and fraud management technologies helps banks protect customers and maintain trust in their services.

Prioritizing Cybersecurity Measures

In 2024, many financial institutions increased their cybersecurity budgets due to rising cyber threats. Effective cybersecurity relies on:

• Continuous investment in technology and employee training
• Addressing the increasing targeting of mobile banking applications by cybercriminals with enhanced security measures
• Utilizing AI and ML tools for real-time monitoring and response to security threats.

Incorporating security within the DevOps cycle is crucial for addressing rising cyber threats as banks expand their digital presence. Balancing security measures with customer convenience is a key challenge. Effective integration of security practices in DevOps aids in early detection of vulnerabilities, reducing potential risks and costs.

Creating a culture of shared responsibility across security, development, and operations teams enables successful DevSecOps implementation and enhanced cybersecurity measures.

Optimizing Data Management Practices

Banks are investing in various data management systems, including data lakes, customer data platforms, CRM systems, and AI layers. The primary goal is to achieve a comprehensive view of customer and bank operations. Maintaining clean processed data leads to improved customer experience and productivity. Process mining techniques are essential for identifying inefficiencies in workflows and facilitating targeted automation strategies.

Data analytics enhances credit risk assessment by allowing banks to utilize alternative data sources. Effective risk management is bolstered through big data by identifying vulnerabilities and implementing preventative strategies.

However, many banks face challenges in integrating legacy systems, hindering their ability to fully leverage big data analytics. Optimizing data management practices enhances operational efficiency and improves customer services.

Streamlining Account Opening and Onboarding Processes

In 2025, a majority of financial institutions will prioritize partnerships for digital account opening, with 49% focusing on enhancing customer acquisition and onboarding. Banks will focus on maturing platforms and products with the highest return on investment. This approach significantly improves onboarding and KYC processes by automating data extraction and document verification. Loan processing times can be dramatically reduced from weeks to days through automated approval checks enabled by hyperautomation.

Blockchain-based digital identity solutions are being piloted to enhance secure identity management and streamline customer onboarding. Investing in these technologies reduces costs and improves onboarding efficiency, offering a better customer experience and a competitive edge.

Embracing Generative AI for Operational Efficiency

Generative AI in banking technology spending and adoption:

• Expected to lead trends in bank technology spending growth for 2025.
• In 2024, 75% of banking leaders reported either deploying or planning to deploy generative AI and agentic ai.
• Its integration is expected to significantly enhance operational efficiency and productivity.

AI integration in banking automates tasks and enables more sophisticated decision-making processes. Utilizing artificial intelligence facilitates substantial improvements in efficiency within the software development lifecycle and democratizes data intelligence.

Digital Banking Transformation

By 2025, mobile banking and online banking services are anticipated to facilitate transactions totaling $1 trillion. A study found that 89% of financial services executives view cloud computing as essential for transforming banking operations.

Cloud technology facilitates accelerated product innovation, enabling banks to launch new services more swiftly and with greater speed in response to customer demands. This digital transformation is crucial for banks to remain relevant and competitive in a rapidly evolving market.

Hyperautomation in Banking Operations

Hyperautomation incorporates RPA, AI, and ML to enhance operational efficiency in banking by streamlining processes. Utilizing business intelligence, banks can identify operational inefficiencies and streamline processes to cut costs.

This comprehensive approach to automation improves operational efficiency and enables banks to provide better services to their customers.

Low-Code Development Platforms

Low-code development platforms allow banks to create applications quickly with minimal coding, expediting development processes. These platforms often feature visual interfaces and pre-built templates, enabling both technical and non-technical staff to develop app development.

Adoption of low-code technology can lead to:

• Significant reductions in application development time, potentially decreasing it by up to 90%.
• Reduced reliance on IT teams for banks.
• Enhanced agility in responding to market demands.

Leveraging Cloud Computing

Cloud computing is transforming the banking industry in several ways:

• Reducing costs associated with maintaining physical infrastructure and enabling a pay-as-you-go pricing model.
• Providing enhanced security features that help mitigate risks from cyber threats and ensure data protection.
• Improving business continuity by enabling advanced disaster recovery mechanisms, ensuring minimal service interruption.
• Offering cost optimization, scalability, faster deployment, and enhanced security, which are driving increased adoption by banks.

The ability to quickly scale services up or down based on demand is crucial for banks to remain competitive. Cloud computing provides the infrastructure needed to support this agility, allowing banks to innovate rapidly and respond to market changes effectively.

By leveraging cloud technology, banks can focus on delivering exceptional customer experiences while maintaining robust security and operational efficiency.

Blockchain Applications in Banking

Blockchain technology is currently being utilized in the following ways:

• To streamline international payments by eliminating intermediaries, which reduces transaction costs and speeds up transfers.
• In trade finance, by simplifying transactions through a shared ledger that automates processes and minimizes the potential for error or fraud.
• For tokenization of financial assets, allowing for fractional ownership and simplifying the transfer of traditionally illiquid assets.

The decentralized nature of blockchain facilitates secure data sharing and expedites processes such as compliance checks and settlements. Combining AI with blockchain can improve fraud detection and operational efficiency by utilizing secure data for actionable insights.

The combination of IoT and blockchain in banking facilitates secure, real-time transaction tracking without intermediaries. By investing in blockchain applications, banks can enhance their operational efficiency and provide more secure and efficient services to their customers.

Data Analytics and Big Data Utilization

Business intelligence (BI) and big data analytics are essential for banks due to the following reasons:

• BI converts raw data into actionable insights, enhancing operational decision-making.
• Big data analytics transforms vast data into actionable insights, improving decision-making and operational efficiency.
• The market for big data analytics in banking is projected to increase significantly, indicating strong growth.
• Effective BI tools help banks automate data collection, reduce manual errors, and ensure timely regulatory compliance.

Real-time data access through BI systems allows banks to quickly adapt to market trends and improve customer services. Implementing a strong data governance framework is critical for banks to maintain data accuracy and adhere to compliance regulations.

Customer segmentation is refined using data analytics, allowing banks to:

• Create personalized services based on detailed customer profiles.
• Predict customer behavior and needs using advanced analytics tools, fostering proactive service delivery.
• Leverage data analytics and big data to gain valuable insights that drive business growth and enhance customer satisfaction.

Internet of Things (IoT) in Banking

IoT devices enable round-the-clock monitoring in banking, enhancing security through smart alarm systems and biometric authentication. Banks can utilize IoT to deliver personalized services that improve customer experiences by analyzing real-time data. Wearable devices connected to banking apps can track spending and help customers manage their finances more effectively.

IoT integration aids banks in operational efficiency by:

• Automating processes like cash management and energy usage
• Using smart ATMs equipped with IoT technology to proactively manage cash levels
• Providing enhanced customer support through smart ATMs

By investing in IoT technologies, banks can enhance their security measures, deliver more personalized services, and improve their operational efficiency.

DevOps Practices for Banking Agility

Agile methodologies like continuous integration and continuous delivery (CI/CD) enable financial institutions to respond quickly to customer demands. DevOps fosters collaboration among development and operations teams, enhancing productivity and providing better oversight through automation. DevOps practices are transforming the banking industry by enhancing collaboration, speeding up application deployment, and improving service quality.

The integration of DevOps practices results in higher quality services and improved operational efficiency for banks. By adopting DevOps practices, banks can enhance their agility, enabling them to respond more effectively to market changes and customer needs. This approach not only improves service quality but also drives business growth and competitiveness in the banking sector.

Emerging Trends: Biometrics and RegTech

The adoption of biometric authentication methods, such as voice recognition and behavioral biometrics, is expected to enhance security in financial transactions. Biometric methods not only bolster security but also improve customer convenience by streamlining the authentication process in banking services. Regulatory compliance investments are increasingly viewed as opportunities to enhance operational resilience rather than just costs.

Emphasizing regulatory compliance helps financial institutions build operational resilience that can withstand challenges in the banking landscape. By adopting new technologies like biometrics and RegTech, banks can enhance their security measures, improve customer convenience, and ensure compliance with regulatory requirements. These emerging trends will play a crucial role in shaping the future of the banking industry.

Strategic Roadmap for Technology Investment

Banks need to align technology investments closely with their strategic business objectives to enhance overall effectiveness. Key considerations include:

• Scalability: Technology must accommodate growth and evolving services without incurring excessive costs.
• Future-proofing: Ensuring technology can adapt to emerging trends and innovations in the banking sector.
• Regulatory compliance: Investments here can enhance operational resilience and improve overall efficiency.

RegTech solutions are increasingly utilized to automate compliance processes, enabling financial institutions to better manage their obligations under complex regulations. Real-time monitoring provided by RegTech can help financial institutions identify potential risks and respond proactively.

Banks are encouraged to see compliance spending as a strategic advantage rather than just a cost burden. By developing a strategic roadmap for technology investment, banks can ensure they are well-positioned to navigate the complexities of the banking industry and drive future growth.

Choosing the Right Technology for Banks

Conducting a cost-benefit analysis helps banks assess the long-term value of new technology compared to its initial investment. Selecting appropriate banking technology requires understanding the compatibility with existing legacy systems to avoid operational issues. Due diligence on the vendor’s reputation and support services is crucial to ensure reliability and effective problem resolution.

By carefully choosing the right technology, banks can enhance their operational efficiency, improve customer services, and drive business growth. This strategic approach to technology adoption ensures that banks remain competitive and can effectively navigate the rapidly evolving banking landscape.

Conclusion

The banking industry is rapidly evolving, driven by investments in technologies like AI, DeFi, cybersecurity, and data analytics. These innovations help banks improve customer experience, boost operational efficiency, and fuel growth. By aligning technology adoption with strategic goals, banks can stay competitive and successfully navigate today’s complex financial landscape. The future of banking is promising, full of opportunities for those who embrace innovation.

Frequently Asked Questions

Why Are Banks Increasing Their Technology Budgets in 2025?

Banks are increasing their technology budgets in 2025 to enhance competitiveness, improve customer experience, and boost operational efficiency, with a particular focus on generative AI, cybersecurity, and data management. This strategic investment is essential for adapting to the rapidly evolving financial landscape.

How Is AI Being Integrated Into Smartphone Banking Applications?

AI is enhancing smartphone banking applications by improving customer experience, managing risks, and offering features like better voice-to-text capabilities and streamlined document searches. This integration leads to more efficient banking services for users.

What Is DeFi, and How Is It Impacting the Banking Industry?

DeFi is transforming the banking industry by enhancing efficiency and lowering costs, particularly in areas like cross-border payments and micro-lending. This shift is prompting traditional banks to reconsider their operational models to remain competitive.

How Are Banks Enhancing Fraud Management and Identity Verification?

Banks are enhancing fraud management and identity verification through the use of AI and machine learning to analyze customer behavior patterns, along with implementing multi-layered identity verification and collaborating with cross-industry networks. This approach significantly improves their ability to detect and mitigate fraud risks effectively.

What Role Does Cloud Computing Play in Banking Transformation?

Cloud computing is pivotal in banking transformation as it minimizes infrastructure costs, bolsters security, and ensures robust business continuity. Additionally, it enables banks to scale services and innovate quickly to meet market demands.