Banking technology trends 2025: The future of money is here

Modern consumers expect next-level customer experience across all sectors, including digital banking. Key banking technology trends in 2025 will include embedded banking, ESG, open banking, and quantum computing. Blockchain technology, hyper-personalization, and generative AI continue gaining momentum as digital transformation dictates its rules. According to the Digital Banking Maturity 2024 by Deloitte, leaders in banking focus their efforts on two main areas. One group aims to provide customers with a comprehensive range of essential banking services while delivering exceptional value and the best possible banking experience. The other group focuses on offering ‘super applications’ that serve multiple purposes within a single platform, along with a host of additional functionalities.

This article explores the most promising financial technology trends that will help top players stay ahead of the competition. Continue reading to learn more about the rise of digital banking in 2025.

The rise of embedded finance in everyday transactions

Between 2025 and 2034, the global embedded finance market is expected to expand at a compound annual growth rate (CAGR) of 23.3% from its 2024 valuation of USD 104.8 billion. Embedded finance is expanding due to the quick uptake of digital payments in both consumer and commercial sectors. Because consumers now anticipate embedded payment solutions in daily activities, companies are integrating financial services into their platforms. But how does the whole “embedded finance” concept work in practice?

APIs are essential for embedded finance because they allow financial services to be directly integrated into a company’s platform or product. As an example:

• The retail platform may integrate a fintech-powered payment gateway to enable consumers to pay without leaving and being transferred to another third-party application.
• A taxi service may offer financing options to drivers via a partner financial institution.

Embedded finance allows financial services to be smoothly integrated into non-financial platforms or products. Services such as payments, lending, and insurance are offered directly through these ecosystems, saving users the effort of contacting traditional banks.

Numerous sectors employ embedded finance to enhance the client experience. For example,

• eCommerce platforms. Buy-Now-Pay-Later (BNPL) solutions and other integrated payment options are available on Amazon and Shopify, ensuring a smooth transaction experience.
• Ridesharing services. Apps such as Uber and Lyft use digital wallets, facilitating easy transactions between drivers and passengers.
• Healthtech. To make things easier for patients, telehealth systems incorporate payment gateways and insurance verification.

Banking is no longer confined to traditional institutions; it increasingly interacts with consumers through their preferred apps and platforms, turning transactions into seamless, frictionless experiences. While customers’ expectations are evolving, so is the very concept of banking — invisible yet essential to modern life.

Hyper-personalization in banking: Meeting customer expectations

Across all industries, hyper-personalization has emerged as the most popular trend, drawing attention and changing the way companies ensure top-notch customer experience. Banking is certainly not an exception. Customers have raised the bar, expecting nothing less than tailor-made experiences at every turn and across all digital channels. Generic messages are now viewed as spam, while one-size-fits-all solutions are no longer sufficient.

Although an increasing number of banks recognize hyper-personalization as a key growth factor, many still struggle to implement it efficiently. While nearly 71% of banks are using personalized campaigns and communications, less than 50% are leveraging enterprise customer data management, proactive advice and recommendations, data-driven micro-segmentation, human-augmented sales, and AI and ML recommendations, according to the report Maximizing Digital Engagement, co-produced by Infosys Finacle and Qorus. However, banks are making progress in bridging the gap. So, what does it truly mean to offer highly personalized banking services?

In this digital age, hyper-personalization encompasses much more than just meeting all the requirements for knowing your customer (KYC). It involves creating a comprehensive profile of each client by analyzing interactions across various touchpoints, such as purchases, support requests, social media, and spending trends. For instance, if a bank identifies that a customer frequently travels abroad, it can proactively offer international credit card options or travel insurance before the customer even considers these needs.

However, understanding your client base is only half the fight. Utilizing data and drawing insightful conclusions is the next stage. This implies leveraging:

• descriptive insights, such as determining that a consumer frequently purchases electronics online;
• diagnostic insights like realizing that their spending has increased, aligning with significant sales or life events;
• predictive insights, such as predicting when your customer might need to take out a loan for a major purchase, such as a house or car.

Having said that, hyper-personalization is the skill of making each client feel appreciated, understood, and ahead of the curve in their financial path.

Technologies enabling the ESG movement in banking

The ESG movement is all about reframing banking’s role in promoting sustainability and social responsibility, not just about compliance. Here’s the list of technologies that enable the ESG:

Blockchain for Trust and Transparency
In terms of ESG advancements, blockchain is recognized as one of those leading technologies. It enhances the transparency of trading carbon credits, issuing green bonds, and other sustainability-focused financial operations. By leveraging blockchain, banks can ensure that funds allocated to green energy projects are genuinely supporting this cause, thereby fostering trust among investors and customers. The technology reduces fraud risks and inefficiencies, making it easier for banks to showcase their environmental impact.

Machine Learning and AI for ESG Analytics
With the use of this technology, banks can now evaluate vast amounts of data to find ESG possibilities and risks. Artificial intelligence-powered advanced tools can predict the environmental effects of lending practices, measure the carbon footprint of investments, and even examine social and governance factors like business diversity and labor practices.

IoT for Real-Time Monitoring
Thanks to the Internet of Things, banks can now track the environmental impact of projects they fund in real time. Sensors will measure water use, emissions, energy use, and other important parameters to provide useful information for decisions that may be made to achieve sustainability objectives.

Platforms for Inclusive Finance Online
On the social front, digital banking platforms promote financial inclusion by providing fundamental financial services to marginalized groups. By filling in gaps in financial accessibility, technology—from mobile wallets to microfinance apps—is assisting banks in meeting the “S” in ESG.

Generative AI: Revolutionizing customer service and operations

Generative AI in banking is a technology no modern bank can avoid: the efficiency and multifunctionality it provides are unprecedented. The global market for generative AI in banking and finance is expected to develop at a compound annual growth rate (CAGR) of 33% from 2024 to 2034, from a value of around USD 1,260.16 million in 2024 to USD 21,824.46 million by 2034.

Chart 1: Generative AI in Banking (2023-2034)

But why exactly is Gen AI one of the most promising banking tech trends? The primary reason is that it is multifunctional: from automating processes to fraud detection and prevention, this tool is reshaping traditional banking to a record-breaking extent. Take, for example, Morgan Stanley. Earlier in the summer of 2024, the banking industry giant reported that it had completed deploying its second generative artificial intelligence application to financial advisors, prioritizing in-house solutions over out-of-the-box tools. Developed in collaboration with OpenAI, Morgan Stanley has unveiled AI @ Morgan Stanley Debrief, a tool that summarizes video sessions and creates follow-up emails. It was developed after the release of the bank’s first generative AI tool, an AI knowledge assistant. According to Alexandra Mousavizadeh, CEO of Evident, working closely with the people creating the AI rather than using pre-made solutions is a common practice in the financial services industry.

Blockchain beyond cryptocurrencies: The backbone of trust

Beyond its Bitcoin origins, blockchain technology is transforming banking; one of its most significant applications is fraud prevention. Blockchain makes it nearly impossible for fraudulent activity to go unnoticed. It establishes an immutable ledger that guarantees every transaction is safely recorded and validated. By helping banks identify irregularities in real time, this degree of transparency promotes security and trust.

Facilitating the KYC process is another effective use case. Blockchain enables banks to safely store and exchange client-identifying information with other institutions. KYC data may be accessible and validated on a shared, impenetrable blockchain, eliminating the need to repeat the process each time a consumer interacts with a different bank. This lowers the chance of data breaches, saves money, and shortens onboarding periods.

In addition to these benefits, blockchain boosts operational efficiency by removing intermediaries, ensuring faster settlements, and improving transparency in international transactions. It is transforming traditional banking systems, proving its value as more than just the foundation for cryptocurrencies.

The promise of open banking and API-driven innovation

Better customer experiences are one of open banking’s main promises. APIs facilitate simple interfaces between banks and fintechs, giving consumers access to cutting-edge services like aggregated account views, tailored financial advice, and budgeting tools—all on a single platform. Tink, for example, is a banking app that uses open banking APIs to provide individualized financial data.

Customers who use open banking have greater autonomy and control over their financial data. The advantages of APIs and open banking are numerous:

• Convenient and customized financial experiences: APIs simplify the management of multiple applications by enabling tailored features like account aggregation, investment analysis, and budgeting, all within a single platform.
• Faster, seamless services with innovation: Real-time data sharing boosts efficiency and fosters innovation, enabling instant credit approvals, simplified payments, and smooth integration with fintech and e-commerce services.
• Inclusive financing: Open banking promotes better access to financial services for underserved groups while ensuring the safety and transparency of shared customer data in compliance with regulations.
• APIs for competitiveness and new opportunities: APIs provide banking and financial services companies with market access, driving innovation, improving financial products, and creating new revenue streams for banks and businesses.

Leveraging quantum computing for advanced financial modeling

With an estimated $2 trillion in potential economic benefits by 2035, quantum computing is certain to transform the financial services, pharmaceutical, chemical, and transportation industries. Financial services stand to gain early advantages from applying quantum technology to problems pertaining to risk management, fraud detection, and portfolio optimization.

Quantum systems can process multiple variables simultaneously, dramatically reducing computing time compared to classical computers, which analyze data sequentially. This makes quantum technology particularly valuable for financial modeling, where billions of data points need to be examined to price complex derivatives or develop effective investment strategies. For example, quantum algorithms can generate actionable insights in seconds and compute high-dimensional risk models that would take traditional systems days to complete.

Financial services companies and banks are exploring quantum’s potential to enhance process accuracy and efficiency. As the technology advances, it could significantly improve decision-making, reduce costs, and revolutionize how financial institutions tackle complex challenges — all essential for the future of global banking.

Cybersecurity innovations to combat evolving threats

As cyber-attacks become more sophisticated, the banking sector is using cutting-edge technologies to safeguard financial systems and consumer data. The following is how banks are addressing these issues:

• Passwordless authentication. To increase security and consumer convenience, banks use biometric fingerprinting, facial recognition, and hardware security keys instead of conventional passwords. These technology solutions provide smooth login experiences while removing threats like phishing and password reuse.
• Behavioral authentication: AI-powered systems monitor user activity, such as typing speed, navigation patterns, and device usage, to detect irregularities. This dynamic security layer identifies suspicious activity in real time, enhancing security without disrupting the user experience.
• PSD3 setup: With the impending Payment Services Directive 3 (PSD3), banks are being required to implement advanced cybersecurity measures, including multi-factor authentication and secure API architecture. These initiatives help build trust in open banking systems while ensuring compliance with more stringent regulations.
• Addressing social engineering threats. Banks use AI systems to spot suspicious activity and implement comprehensive training programs to reduce human error, a major cybersecurity vulnerability.
• Biometric authentication. The latest innovations in the banking industry, such as fingerprint verification, iris scanning, and voice recognition, increase security like nothing else. Biometrics make it easier for users to access their accounts and complete transactions because they are more difficult to copy than passwords.

Embracing innovation to shape the future of banking

The banking landscape has embraced technology investments focused primarily on providing the best possible customer experience. Whether it’s providing top-notch security, open banking, or embedded finance, all the emerging trends will keep the user as the focal point.

Want to learn more about banking technology trends for 2025 and beyond? Contact Avenga, your trusted software and innovation partner.