Market Trends: The Latest in Financial Software Development  

As we reach the halfway point of 2024, we can see some key trends starting to emerge. Being aware of these trends is key to staying ahead and maintaining a competitive edge. 

Check out the 8 trends shaping the future of financial software development:

1. Artificial Intelligence and Machine Learning

AI and machine learning (ML) are revolutionizing financial software by enhancing data analysis, automating routine tasks, improving decision-making processes, and minimizing risk. AI technology creates opportunities for financial software across many areas such as predictive analytics, fraud detection, personalized financial advice, and efficient customer service as well as security. 

Walter Wriston, CEO of Citicorp/Citibank stated that “Information about money has become almost as important as money itself.” 

Leveraging data and information in the financial sector is crucial in this information-intensive industry. It’s growing more and more obvious that AI and ML will make a significant difference to the sector. 

2. Blockchain Technology

Blockchain continues to gain traction in financial software development due to its potential to increase transparency, reduce fraud and streamline operations. Financial institutions are exploring blockchain for secure transactions, smart contracts, and decentralized finance (DeFi) applications. 

Tokenization of assets such as real estate and fine art is expected to grow significantly in the coming years. According to Boston Consulting Group, by 2030 10% of Global GDP will be held in tokenized illiquid assets valued at more than $16 trillion, best case scenario. This tokenization of assets will turn illiquid assets into liquid assets and make buying and selling much easier. 

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3.Cloud Computing 

The adoption of cloud computing is accelerating rapidly within the financial sector; offering scalability, cost efficiency, and improved security.

According to an analysis published by McKinsey, Fortune 500 financial institutions alone could generate as much as $60 to $80 billion in run rate EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2030 by making the most of the cost-optimization levers and business use cases unlocked by cloud.”

Cloud-based financial software enables real-time data access and collaboration, which is crucial for modern financial operations. However, the migration process for traditional financial institutions is complex and expensive. Experts expect the next 5 years to see rapid adoption of cloud-based technology across the financial sector. 

4. Robotic Process Automation (RPA) 

RPA is being widely adopted to automate repetitive tasks such as data entry, compliance reporting and transaction processing. This not only increases efficiency but also reduces the potential for human error.

As AI and ML technologies start to become more mainstream, these technologies will work in tandem and complement each other. RPAs will ensure data is input correctly and that repetitive tasks are completed effectively, based on rules. While AI and machine learning will use this data to learn, and make decisions. This combination of RPA, AI, and ML is known as IPA – Intelligent Process Automation.  

5.Cybersecurity Innovations 

With the increase in cyber threats, staying aware of cybersecurity trends is of the utmost importance. Financial software development is prioritizing advanced cybersecurity measures. This includes the use of AI for threat detection, multi-factor authentication, and enhanced encryption protocols to safeguard sensitive financial data.

Firms are finding that there is increased pressure to stay ahead of cybersecurity trends as gen AI becomes increasingly mainstream and the adoption of cloud grows, changing the face of digital ecosystems. 

6. Open Banking and APIs

Open banking has largely been driven by regulatory changes and the demand for more customer-centric services. It is pushing financial institutions to develop APIs that enable secure data sharing with third-party providers.

The following is from an article shared in the Financial Times:

“Open banking regulations came into force across Europe in 2019 and it was a pivotal step towards democratising access to financial data. With a 450% growth in APIs from 2019 to 2020, the adoption rate has followed a strong positive trend.”

According to data published in Statista, the “number of open banking Application Programming Interface (API) calls is forecast to grow from 102 billion in 2023 to 580 billion in 2027. During the same period, the value of open banking transactions is expected to grow sharply as well and reach 330 billion U.S. dollars in 2027.”

Open banking has made it easier for new market entrants and third-party providers to gain access, innovate, and improve product offerings. Customers benefit from increased personalization and competitive financial products. 

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7. FinTech and Mobile Banking 

The rise of FinTech startups and the growing demand for mobile banking solutions are driving significant advancements in financial software. Open banking APIs and the rise of AI and ML have led to dramatic innovation in the financial software space. Several banks have built BaaS (Banking as a Service) platforms to facilitate FinTechs and other banks.

FinTech solutions offer greater accessibility, user-friendly interfaces, and innovative features that cater to the tech-savvy consumer. In the coming years, with further advancements in AI and machine learning, FinTech products can become truly transformative.

8. Big Data and Analytics 

Financial institutions are leveraging big data, advanced analytics and AI technology to gain insights into customer behavior, market trends, and risk management. This data-driven approach helps make informed strategic decisions and offers tailored financial products. 

According to Innowise, ‘data integration and centralization of data systems’ is a key trend for 2024. This trend is driven by the need for efficient data management and analysis, which is used in financial projection and reporting. Centralization of data improves data quality, leading to more effective decision-making for advanced analytics such as AI. 

Conclusion 

The financial software development landscape is rapidly evolving with technological advancements that are enhancing efficiency, security and customer experience.

You may notice a link between all eight trends; the rise of AI.

There is no doubt that AI technology is having a huge impact on the financial sector and in building financial software. Integrating software systems with AI technology is no longer a ‘nice to have’ but a must have. And the gap between those who embrace AI and those who don’t is going to become even more pronounced in the years to come.

To remain competitive, organizations in the financial space must be willing to adapt.


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