Increasing financial anxieties for consumers, rate fluctuations, and mixed messages regarding AI have introduced new complexities to the financial services landscape this year. Combined with the persisting question marks around embedded payments, the looming Great Wealth Transfer and new competition from unlikely sources, 2025 is shaping up to be a year full of both challenges and opportunities. The experts at Candescent have identified the following trends to watch as we prepare for a new year.
The increasing need for more accessible financial fitness tools. Financial literacy and guidance continues to be a challenge, as many struggle to understand the implications of rate cuts, inflation and the scope of their overall buying power. Millennials are tasked with managing the finances of aging parents and trying to prepare for The Great Wealth Transfer while Gen Z and Gen Alpha are increasingly turning to financial influencers on TikTok, unverified sources of information, for tips around money management and investing.
This is a notable opportunity for community and regional financial institutions to help consumers and businesses navigate ongoing financial complexities. Those that can provide relevant, personalized and contextual financial resources and advice will be best positioned to cement loyalty and trust. However, in order to be effective, banks and credit unions must be able to present the information and resources within the context of connected, digital-first journeys – otherwise, they risk the information falling on deaf ears. This is particularly critical as the average customer and member age for community financial institutions rises, creating urgency around attracting and retaining the next generation of customers.
There will be a spotlight on payments. The payments landscape is growing more complex than ever, with different options continuing to emerge such as real-time payments and FedNow, Pay by Bank, embedded payments and BNPL offerings; but not all institutions can or should embrace each innovation from the onset. A strategy must be established for which payment methods will be prioritized based on the bank or credit union’s unique customer base and risk profile. Regardless of the approach, ensuring secure transactions and robust fraud prevention measures is essential to maintain customer trust and protect against evolving threats in this increasingly diverse payments environment.
Payments is a particularly critical area for small businesses, who increasingly need flexible, fast and lower cost options. This segment continues to represent a notable opportunity for banks and credit unions.
AI leaders will emerge, proving not all AI is created equal. The persisting buzz around AI has left many with eroded patience, wanting to see real, tangible use cases instead of hearing about vaporware or hypothetical applications. At the same time, consumers are growing more familiar and comfortable with leveraging AI in several aspects of their lives, showing them that there are good AI experiences and poor ones – with stark differences between the two.
Banks and credit unions will be challenged to distinguish substance from noise next year as AI becomes not just another buzzword but an actionable tool in their arsenal. Those that perform proper due diligence on potential partners and applications, take the steps to have clean, actionable data in place, and establish a comprehensive AI policy and plan will be best positioned for success.
Branches will continue to be reimagined, increasingly designed to facilitate connected experiences. Branches remain the elephant in the boardroom as banks continue to look for more cost-effective ways to serve and support their communities, and customers and businesses increasingly showing a preference toward digital-first interactions.
The look and feel of the branch will continue to evolve. More institutions are doing away with the traditional branch network in favor of smaller footprints that offer specialized advisory services; and there are more branches that are infused with smart, digital-first technologies. The most successful branch designs will enable the seamless connection of digital and physical, allowing customers to effortlessly bridge the two.
“As we march toward 2025, banks and credit unions face a landscape marked by financial anxieties, AI advancements and a host of payment innovations they are pressured to keep pace with,” said Brendan Tansill, CEO of Candescent. “To effectively compete, institutions must form well-defined strategies and invest in the modern technologies that allow them to personalize offerings, engage within the context of digital-first journeys and quickly adapt based on shifting market trends or consumer preferences. Those that do so will be better positioned to retain their relevance, solidify loyalty and grow.”