• Mission-critical Applications Are Exposed
• Mission-critical RPO and RTO Policies: Help Needed!
• Many Incidents Are Ignored
• In the last 12 months, approximately how many of the following security incidents has your organization experienced due to the following threats? (N=600)
• Response Effectiveness Perceived As Very High Across Respondents
• Many Technologies At Play For Response...Adding Complexity?
• Bye Bye Data...
• Approximately what percentage of your organization's data was recovered after the cyber-attack? (N=399
• There Is NO Quick Recovery for Most...
• How long would your organization take to fully recover from a ransomware or cyber incident event and resume operations? (N=600)
• Air Gapping Is Becoming A Standard

9 more annotations...

• many of the most promising companies in insurtech 2. Source: Gartner, Compare AI Software Spending in the Insurance Industry, 2023-2027, 27 March 2024. 3. Source: Free Partners LLP, “The Re-Generation Report.” 4. Source: Accenture press release, “Poor Claims Experiences Could Put Up to $170B of Global Insurance Premiums at Risk by 2027, According to New Accenture Research.” 5. Source: Gartner, Top 10 Technology Trends for P&C Insurance CIOs in 2024, 18 March 2024, Sham Gill, James Ingham, Kimberly Harris-Ferrante. 6. Source: Deloitte, “The AI Imperative in Insurance,” March 20, 2024. 7. Source: SAS Institute, “Your journey to a GenAI future: An insurer’s strategic path to success.” 8. Source: Deloitte, “The AI Imperative in Insurance,” March 20, 2024. are AI-native platforms built to address insurance-specific challenges. For example, there are exciting platforms that leverage predictive AI to streamline claims processing by automatically flagging high-risk claims and fast-tracking simpler ones. One cybersecurity company leverages AI to pinpoint security vulnerabilities, model cyber breach scenarios, and quantify the overall cyber risk on a portfolio- and individual-policy basis.
• “Global AI software spending in the insurance market is forecast to increase 17.4% in 2024 to $9.5 billion and reach $15.9 billion by 2027, with a five-year CAGR of 18.2%.” 2
• With this necessary infrastructure emerging, insurance companies across the value chain can turn to AI to help alleviate industry challenges. Among them is a massive talent drain coming to the industry with waves of retirements expected in the coming years. The resulting vacancies will not be easily filled, as less than a third of young people surveyed recently in the U.S. and U.K. said insurance is an appealing career choice
• 94% of insurance CIOs saying that adoption of AI will
• be critical to success over the next five years

3 more annotations...

• Embedded insurance offers a frictionless, convenient user experience by integrating coverage at the point of sale. This aligns with the consumer expectation for a seamless digital experience where insurance is embedded within the digital purchase journey whether buying a car, booking travel, or shopping online. Open APIs and cloud-based platforms enable seamless integration of insurance into third-party ecosystems. Millennials and Gen Z consumers prefer on-demand, subscription-based, and value-embedded services, which is slated to bolster the embedded insurance market growth through 2032. Collaborations between insurance companies and digital platforms like e-commerce sites, travel portals, and fintech apps have accelerated the demand for embedded insurance.
• Artificial intelligence is transforming embedded insurance by enabling hyper-personalized, real-time underwriting, pricing, and claims processing. It analyzes user behavior, transaction data, and contextual factors to offer relevant insurance products at the point of need, seamlessly integrated into digital platforms

• 1. A move beyond generative AI pilot programs     

   

       

   

   

  <p>But any investments in banking automation will need to be balanced with governance. AI autonomy must be guarded with human oversight to meet explainability and governance standards. If they proceed responsibly, though, early adopters will gain a competitive edge as they scale their AI implementations to unlock new levels of productivity.</p>\r "}}"> 

  Generative AI will move from experimental pilots to widespread adoption in banking, fundamentally transforming banking operations and risk management. Financial institutions will focus on integrating AI into risk management processes for things like fraud detection and regulatory compliance and monitoring. By improving data accuracy, AI will make fraud management more effective and reduce false positives in compliance monitoring.

• 1. A move beyond generative AI pilot programs     

   

       

   

   

  <p>But any investments in banking automation will need to be balanced with governance. AI autonomy must be guarded with human oversight to meet explainability and governance standards. If they proceed responsibly, though, early adopters will gain a competitive edge as they scale their AI implementations to unlock new levels of productivity.</p>\r "}}"> 

  Generative AI will move from experimental pilots to widespread adoption in banking, fundamentally transforming banking operations and risk management. Financial institutions will focus on integrating AI into risk management processes for things like fraud detection and regulatory compliance and monitoring. By improving data accuracy, AI will make fraud management more effective and reduce false positives in compliance monitoring

• 2. Increased regulatory pressure      

   

       

   

   

  <p>Banking regulations like the<a href=\"https://appian.com/learn/resources/resource-center/whitepapers/2024/matching-the-pace-of-regulatory-changes\" target=\"_blank\"> Digital Operations Resilience Act (DORA)</a> in the EU demand robust risk management across the supply chain. Banks with existing expertise in model risk management should establish AI-specific governance processes that meet compliance and reporting requirements.</p>\r "}}"> 

  Regulatory requirements will focus on ensuring ethical and responsible use of AI—particularly as it relates to sensitive customer financial data. Banking industry compliance teams need strong AI governance to mitigate risks like cyber threats and maintain their competitive advantage. 

• 6. Growth in open banking brings cybersecurity concerns     

   

       

   

   

  <p>With more players joining the field of complex financial process chains, banks must address security concerns. To succeed, collaboration between banks and fintechs will be necessary. They will have to develop robust security measures and advanced security tools to protect against fraud and evolving cyber threats.</p>\r "}}"> 

  Open banking application programming interfaces (APIs) are getting more popular, fostering innovation as fintechs use customer-consented bank data to offer new financial products. This drives progress and has a positive impact on competition, but it also creates complex ecosystems that increase cybersecurity risks.

2 more annotations...

• As for deposits, even as rates drop, the cost of funding may not decrease commensurately. According to Deloitte’s analysis, deposit betas will likely be less than in a typical downward rate cycle. Primarily, this is because the demand for liquidity from banks, and the reluctance from depositors to accept lower deposit rates, could continue to fuel the war for deposits. Although the deposit mix—between interest-bearing and noninterest-bearing deposits—might stabilize, and the aggregate deposit costs will likely be lower than at the end of 2024, deposit costs are estimated to be elevated at 2.03% in 2025 (figure 1), higher than the previous five-year average of 0.9%.¹¹ At some banks, asset and liability management committees will be challenged to maintain the optimal balance between loan and deposit rates.

    

   

       

      

   

      

   

   

     

     

     

     

                  

   

        

• As a consequence, the industry may see a noticeable dip in net interest margin, settling in at around 3% by the end of 2025 (figure 2).¹²

   
• The commercial real estate (CRE) sector, particularly the office segment, continues to remain in distress, with regional banks possibly facing the brunt of potential loan losses. Some banks may opt to continue reducing their exposure to troubled CRE assets and reposition their balance sheets.

• What actions can banks take in 2025 to boost noninterest income?

   

  Key messages:

   
  1. Banks should focus more on boosting noninterest income to compensate for challenges in growing net interest income.
  2. Using the following strategies may help banks achieve this goal.
   
  • Retail banking: Implementing pricing innovations like service bundling and tiered accounts.
  • Payments: Increasing transaction volumes via new channels and expanding value-added services.
  • Wealth management: Emphasizing the value of personalized advice, enhancing the customer experience, and revising fee structures.
   

  As discussed earlier, banks’ net interest income will likely face pressure in 2025; deposit costs are expected to remain elevated despite rates coming down. As a result, banks may want to prioritize boosting noninterest income.

• The proportion of noninterest income to total income for the US banking industry in the last 10+ years has averaged 35%, with very low overall growth.³⁴ That said, noninterest income product lines require minimal capital and tend to be more profitable than business that relies on interest income.

   

  Banks have several options to grow noninterest income. Among them:

   
  1. Increase volume in transactions, customers or customer segments, or new geographic markets;
  2. Offer new services to generate additional income; or
  3. Implement new pricing strategies, such as charging for services that are currently free, designing new pricing models, or bundling or unbundling services.

• Payments

   

  Fee income generates well over US$100 billion for US payments companies, as per Deloitte’s analysis. A 2022 Federal Reserve study concluded that fees, excluding interchange fees, make up 15% of the total profitability for credit card issuers.⁴⁰ Payment networks, meanwhile, earn almost all their revenues and profits from fees.⁴¹

   

  But increasingly, this business is facing challenges like declining transaction margins and greater regulatory pressure on credit card late fees. Merchants are also fighting back against interchange fees by incentivizing customers to use low-cost payment methods, such as point-of-sale (POS) account-to-account (“pay-by-bank”) payments.⁴² And, of course, competition from bigtechs and fintechs is also growing.

   

  To boost fee income, payments companies can consider:

   
  1. Increasing transaction volumes by enabling seamless and secure transaction flows; and
  2. Delivering more value-added services to merchants and customers on top of those transactions.

• Wealth management

   

  Wealth management has been a bright spot for many banks in recent years.⁴⁶ But, it appears, much of this growth has come from increased assets under management, driven largely by overall market gains and net inflows.

   

  There is still room to grow, though: Top banks only have a 32% market share of the total wealth management market globally.⁴⁷ But these opportunities could be harder to exploit than before, due to increasing competition, commoditization of advice, and widespread customer dissatisfaction with fees.⁴⁸ Regulators are also focusing their attention on fee transparency.
• According to a 2024 Citigroup report, AI could propel global banking industry profits to a staggering US$2 trillion by 2028, reflecting a 9% increase over the next five years.⁵⁶
• In Deloitte’s State of Generative AI in the Enterprise: Quarter three report survey, only one-quarter of banking respondents said their data management platforms are highly or very highly prepared to adopt generative AI tools and applications.⁵⁷
• In May 2024, the bank revealed that a solution built to nudge customers who abandon a product application using AI resulted in a 10% to 20% boost to completion rates, for example.⁵⁹ Even smaller, community banks are implementing AI tools. For instance, BAC Community Bank in Stockton, California, which has about US$800 million in assets, launched an AI-powered app that answers user questions and assigns a nearby banker to serve as their point of contact.⁶⁰
• Banks with more limited tech budgets can also consider deploying small language models
• In a 2023 Forbes Insights report, nearly six out of 10 banking leaders surveyed consider legacy infrastructure to be the top challenge impeding their organization’s business growth.⁶⁶

• generative AI that may prove most valuable in upgrading legacy mainframes at scale. Some generative AI prototypes, for example, are being trained to rewrite the 1960s-era code that underpins older cores to be compatible with modern software.⁷³ Generative AI tools may also be used to assess the current state of banking systems,⁷⁴ prepare data for core conversions,⁷⁵ and automate integration of microservice-based applications.⁷⁶

   
• Similarly, an AI-powered bank cannot reach full potential without robust, modern data. But the current state of the data infrastructure at many banks is not up to par, and many of these institutions realize this.⁷⁹ Revamping the disparate, complex data systems may not be easy, however, because of fragmentation, incompatibility of data formats, and the difficulty of access to data.

• Banks are struggling to get their costs under control, and the imperative to bring down expenses should only intensify as revenue growth is expected to remain elusive in 2025.⁸⁸ Many banks will likely need to make tough choices on how to allocate spending to generate additional savings and preserve profitability.

   

  Over the last few years, growth in total noninterest expenses has outpaced net revenue growth for banks with more than US$10 billion in assets (figure 9), and this trend could continue.
• In a recent Deloitte MarginPLUS survey, 56% of the 25 global banking and capital markets executive respondents in the sample stated their institutions did not achieve even 50% of their cost savings targets last year.⁹⁶ And, in fact, only one respondent indicated their institution unlocked 100% of their savings targets or more.⁹⁷
• 2025 could be a defining moment for establishing sustainable growth in the banking industry. The strategic actions taken now could be the catalysts that propel banks toward a brighter, more resilient future. By responding decisively, banks can ensure that the path to success is not just aspirational, but achievable.

15 more annotations...

• At the outset of 2025, the picture that’s developing for banking and capital markets firms at the regional, national and global level points toward a favorable time to take a bolder approach to growth.

• 2025 US bank net interest income is projected to increase 5.7% year on year, according to S&P Capital Global Market Intelligence, a step up from essentially no growth last year.

   
• a US recession currently appears unlikely.
• Go on offense. With expectations for more interest rate cuts and streamlined regulations — plus a potentially faster growing economy, expanding profits and generally strong capital levels, banks are in a position to reassess their growth agenda.
• A growing political consensus now exists to provide financial incentives to drive a range of infrastructure development, whether factories, data centers, energy projects, residential construction and more. Those types of projects typically have not been bank financed, yet the political backing is creating potentially enormous new markets that are too large to ignore.
• New Trump-appointed leaders of the Treasury Department, Federal Reserve, OCC, FDIC, CFPB, SEC and CFTC are likely to streamline regulatory requirements, reverse some Biden Administration rulemakings and create a conducive atmosphere for dealmaking in 2025 and the development of innovative financial products and services.
• In 2025, we anticipate attention will pivot to agentic workflows to drive the next level of operational efficiency, coupled with a more disciplined way of measuring returns on investment. Leading banks are shifting from grassroots experimentation with use cases to a bold, top-down AI strategy, identifying ways to responsibly fast-track risk and compliance reviews, and increase impact.

• Banks should identify legacy platforms that can no longer support the speed and scale to maintain a competitive edge, enable prompt risk and fraud prevention, and meet the changing expectations of customers.

   

  This requires evaluation of the current technology landscape to identify critical bottlenecks in terms of resilience, scalability, interoperability and real time limitations. Resolving these challenges is critical to building a robust, resilient foundation that supports fast pace of operations and integrates efficiently with advanced AI tools.

6 more annotations...

• Top Banking Trends to Watch in 2025

• The Rise of Digital-Only Banks

   

  Digital-only banks, also known as neobanks, have been growing rapidly in recent years, and this trend is set to continue into 2025. As more consumers demand seamless, mobile-first banking experiences, traditional banks will face increasing competition from digital-only providers offering lower fees, innovative services, and superior user experiences.
• In 2025, banks will be expected to demonstrate more robust ESG initiatives, including sustainable financing, green bonds, and responsible lending practices. Consumers are looking to align their financial choices with their values, and financial institutions that prioritize sustainability will gain a competitive edge.

• 5. Cybersecurity and Privacy Protection

   

  As cyber threats grow more sophisticated, protecting customer data and ensuring secure transactions will be a top priority for banks in 2025. With the increasing reliance on digital banking, institutions must invest heavily in cybersecurity measures such as AI-driven threat detection, biometric authentication, and multi-factor authentication (MFA). Banks will also need to comply with

   

  stringent privacy regulations, such as GDPR and CCPA, which require greater transparency and protection of customer data.

• 7. Personalized Banking and Customer Experience

   

  Customers increasingly demand personalized banking experiences tailored to their unique needs and preferences. In 2025, banks will rely on advanced data analytics and AI to offer highly personalized financial services, from customized savings plans to personalized investment advice

3 more annotations...