As a new year begins, it is always useful to take stock of where we are and to contemplate where we’re headed. With that in mind, here’s a look at the top 5 things we will be watching closely as 2025 gets underway:

1. Industry response to the final 1033 rule

The Kentucky Bankers Association and the Bank Policy Institute filed a lawsuit in October against the Consumer Financial Protection Bureau’s (CFPB’s) open banking rule rehashing some of the banking industry’s concerns, at least some of which the final rule appeared to acknowledge and address. It’s not yet clear how the Trump Administration’s CFPB will approach enforcement, but the clock is ticking for compliance. The final rule exempted financial institutions (FIs) with less than $850 million in assets, but the list still includes about 1,500. About 90% of them have under $10 billion in assets.

How FIs react will depend on their strategy toward open banking and their development capabilities. It would probably make the most sense to see the smallest buy an open banking solution bundled with their core or digital banking platform. But depending on their in-house expertise and development capabilities, FIs may also write their own APIs or work directly with an aggregator. Customer demand — and a creative mindset — may drive whether FIs see open banking as a burden or an opportunity.

2. The big AI evolution

As we’ve written, AI is not a new field, but it is going through a massive evolution. This is largely off the back of the advent of generative AI, which catapulted onto the scene two years ago with the launch of ChatGPT. Since then, companies across industries, including financial services, have been talking about how to leverage it. Heading into 2025, that conversation may increasingly turn to action. In particular, we expect to see greater use of generative AI internally at FIs of all sizes. This could include through general-purpose tools from established partners, for example, Microsoft’s Copilot, or through purpose-built solutions. We expect heavy emphasis on use cases like knowledge management and content creation, especially in sales and marketing. The technology is not likely to be allowed to interact directly with customers just yet due to hallucination concerns.

This year we also expect to hear more about a potential new subset of AI — agentic AI. While generative AI is useful for creating data and content for informational purposes, agentic AI will take that a step further to include the ability to act on a user’s behalf. The actual use of this technology in banking is probably still a long way off, especially without a human in the loop, but it is likely to creep into the chatter more and more.  

3. Approaches to FedNow adoption

FedNow went live with 35 early-adopter FIs in July 2023 and has since grown by 38x in the last year and a half to 1,337 at the beginning of December. That’s about 15% of insured FIs in the US today. Responses to our recent survey suggest near-universal adoption of real-time payments is possible, but at this pace of linear growth, it would take FedNow a decade to reach that level. Before then, some FIs may simply conclude that their customers’ demand for real-time payments is too low (our conversations suggest that perception is holding back some FIs’ adoption today), or that real-time payments’ technological or operational costs are too high. Another detail to watch is how many community banks rely on correspondents for their connection to the Fed and what effect that has on their real-time payments capabilities.

For FIs that take the plunge, the trend to watch is which of them go live with both send and receive and at what time. Current data about who has gone live with FedNow “send” is hard to come by. But anecdotally, bankers are taking their time to build up the right operational capabilities and plan which customer segments to roll it out to and in what order. Receiving FedNow payments is very low-risk, but in conversations we’ve had, managing the risk of push-payment fraud is top of mind.

4. Action on operational risk

Early in 2024, the OCC reportedly cited nearly a dozen large banks for operational deficiencies. There was also a major outage around the globe due to a bug in popular software, which affected multiple industries. One estimate pegged losses for the banking industry at $1.94 billion and correlated downtime made headlines. This was a wakeup call for how fragile business-critical infrastructure can be. But change can also be paralyzing without a framework to evaluate technology risk and a clear IT roadmap, and it may feel easier to go with the flow of software patches and vendor upgrades.

We’re waiting to see if the fear of operational failures and the risk of regulators’ attention spur action, especially after the Synapse and Evolve meltdown. In one study, the largest proportions of bankers predicted regulatory activity will rise related to cyber risk and data governance — it may make sense to start there. Building robust risk management related to a bank’s operations can take a long time, though, and in a period as short as a year, strategy may not yet turn into execution.

5. A potential fintech resurgence

As the new administration prepares to take office, there is already discussion within the financial services industry about the potential for a fintech resurgence. In fact, we may already be seeing the buds of this — two exits were announced recently, one for MoneyLion and the other for Brigit. The Trump Administration has indicated that it will take a pro-innovation approach to regulation, including in areas like crypto and AI. As this sinks in with investors, we may start to see fintech funding pick up steam in the new year. We could also see more companies headed for an IPO.