2024 banking and capital Banks’ strategic choices will be tested as

they contend with multiple fundamental

markets outlook challenges to their business models. They must

demonstrate conviction and agility to thrive.

Deloitte Center for Financial Services

2024 banking and capital markets outlook

i
 03 . . . Navigating the changing contours of the global economy
Table of contents

11 . . . Forces shaping the future of the B&CM industry

15 . . . Retail banking: Fortifying customer relationships and

owning a greater share of wallet

21 . . . Consumer payments: Grabbing a bigger slice of the

revenue pie in a fast-evolving ecosystem

28 . . . Wealth management: Revamping the advice engine for the

future of wealth

32 . . . Corporate and transaction banking: Enabling efficient

money flows through digitization

39 . . . Investment banking and capital markets: Rejiggering

business models and leading with cutting-edge technology

44 . . . Market infrastructure: Reinventing business models and

becoming more indispensable to clients
2024 banking and capital markets outlook

49 . . . Endnotes
 KEY MESSAGES

• A slowing global economy, coupled with • The exponential pace of new technologies, • Investment banking and sales and trading
a divergent economic landscape, will and the confluence of multiple trends, are businesses will need to adapt to new
challenge the banking industry in 2024. influencing how banks operate and serve competitive dynamics. Forces like the
Banks’ ability to generate income and customer needs. The impact of generative growth of private capital will challenge this
manage costs will be tested in new ways. AI, industry convergence, embedded sector to offer more value to both corporate
finance, open data, digitization of money, and buy-side clients.
• Multiple disruptive forces are reshaping the decarbonization, digital identity, and fraud
foundational architecture of the banking will grow in 2024. • Early 2023 shocks to global banking have
and capital markets industry. Higher galvanized the industry to reassess their
interest rates, reduced money supply, more • Banks, in general, are on sound footing, strategies. While bank leaders focus on
assertive regulations, climate change, and but revenue models will be tested. Organic proposed regulatory changes to capital,
geopolitical tensions are key drivers behind growth will be modest, forcing institutions liquidity, and risk management for US banks,
this transformation. to pursue new sources of value in a capital- there is much to be done to evolve business
scarce environment. models.

2
Navigating the changing contours
of the global economy

A
slowing global economy coupled with Global inflation is expected to drop to 5.2% in 2024,
a divergent economic landscape will from a high of 8.7% in 2022, as per the IMF. In coun-
challenge the banking industry in new tries such as the United States, the labor market and
ways in 2024. Although recent efforts consumer spending are showing signs of deceleration
to combat inflation are showing signs but are still elevated, challenging the targets set by
of success in many countries, the risks central banks. In fact, the IMF predicts that inflation
brought to light by supply chain disruptions, rewiring in almost all countries will remain above target rates.4
of trade relationships, and ongoing geopolitical tensions
will complicate economic growth worldwide. Extreme Central banks will be fine-tuning their monetary poli-
weather-related events, such as floods, heatwaves, and cies through 2024 (figure 1). The federal funds rate in
hurricanes, may also cause severe economic disruption. the United States is expected to remain elevated at or
above 550 basis points going into 2024 but may drop
With this backdrop, the International Monetary Fund to between 450 and 500 basis points in the second
(IMF) expects the world economy to grow at no half of 2024, according to latest FOMC projections.5
more than 3.0% in 2024.1 Advanced economies—i.e., The European Central Bank (ECB) is expected to begin
the United States, the Euro area, Japan, the United decreasing interest rates; in August 2023, the ECB
Kingdom, and Canada—are forecast to experience tepid policy rate stood at 3.75%, matching the peak in 2001.6
growth at 1.4% in 2024.2 But many emerging econo-
mies should see higher growth on the back of strong Meanwhile, the Bank of England is expected to lower
consumer demand, younger demographics, and improv- the policy rate in the first half of 2024 after reaching a
ing trade balances. In particular, India is expected to peak of 5.75% at the end of 2023.7 The story is similar to
have one of the strongest growth rates: 6.3% in 2024.3 the Bank of Canada: Rates should decline in the second
half of 2024 after surpassing 5%, as per the Canadian
On the other hand, China is facing a potential economic Economic Quarterly Forecast by TD Economics.8 In
slowdown with weak consumer demand and distressed contrast to other central banks, the Bank of Japan has
property markets. The weakness in Chinese exports and kept the policy rate near zero, but its July 2023 meeting
imports will not only impact its trading partners, but may indicated that it would tweak the bond yield curve control
well challenge supply chain dynamics and further weaken schemes to respond more nimbly to price pressures.9
global recovery. Recent efforts to revive consumer and
2024 banking and capital markets outlook

corporate confidence in China could influence economic But generally, central banks’ quantitative tightening
growth in other countries, particularly in Asia. measures will contract global money supply. In fact, in
the United States, money supply, as measured by M2, has
been falling at its fastest rate since the 1930s.10

3
 Figure 1

Interest rates should start to drop in 2024

Policy interest rates across different geographies

United States Canada United Kingdom European Union Australia

Forecasts
7%
6%
5%
4%
3%
2%
1%
0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Deloitte Center for Financial Services analysis of Economist database, August 2023.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

These challenges will result in divergent and sporadic However, elevated rates will continue to push fund-
economic growth. Some economies will face a brighter ing costs higher and squeeze margins. The pace and
future, while others will still be fighting stickier inflation steepness of the current rate cycles have dramatically
and low growth. boosted the cost of interest-bearing deposits for US
banks. But these costs have risen more sharply for
How will the macroeconomic environment in regional and midsize banks. For instance, deposit
2024 impact the banking industry? costs for the largest banks stood at 2.2% in Q2
2023, compared to 2.5% for the smaller banks.12
Banks globally will face a unique mix of challenges in This is a similar pattern in other countries that have
2024. Each of these hurdles will impact banks’ ability to experienced rate hikes.
generate income and manage costs (both interest costs
and operational expenses). Going forward, the global banking industry may
be hard-pressed to bring down high deposit costs
Deposit costs are here to stay—for now (and lower deposit betas) even as interest rates drop.
Customer expectations of higher rates, coupled with
Higher interest rates have been a boon to the bank- increased market competition, will force many banks
ing industry. In 2022, net interest income increased to offer higher deposit rates to retain customers and
significantly in many jurisdictions, with American and shore up liquidity. The situation will vary by region,
Canadian banks posting a rise of 18% year over year though. European banks may be able to decrease
(YoY), followed by their European peers at 11%.11 deposit costs more rapidly, for instance. The European

4
banking industry has not faced as much competition REAL ESTATE JITTERS
from money market funds, unlike in the United States.
During the banking turmoil in March 2023, inflows Residential mortgage origination in the United States may see a
into Europe’s money market funds totaled US$19.3 robust increase in contrast to other advanced economies such
billion, dwarfing in comparison to US$367 billion into as the United Kingdom, Germany, and Australia. However, the
the US money market funds.13 Similarly, Asian banks, commercial real estate (CRE) sector in the United States will
in India, for instance, may sustain higher rates in the continue to be stressed, and this will particularly affect regional
wake of stronger economic growth. In fact, banks in and midsize banks that may be overexposed to office space. In
the Asia-Pacific (APAC) region are expected to outpace light of higher uncertainty, inflated property prices, and concerns
global peers in generating stronger net interest income. about debt repayments, banks will be more selective in their new
CRE originations and refinancing. Banks could also be forced to
realize losses on certain loan portfolios if there are fire sales or
Loans growth will be modest, at best foreclosures at a large scale. CRE loan delinquencies are already
rising. The delinquency rate (90+ days past due) in the United
In terms of loan growth, we expect demand to be modest States has increased, from 1.84% in Q4 2022 to 3.3% in Q1 2023.15
given the macroeconomic conditions and high borrowing
costs. Banks will also likely continue their restrictive The European CRE market appears to be more resilient than
credit lending policies. According to the recent bank the US market. European CRE loans are largely concentrated
lending surveys conducted by the Federal Reserve and the among the larger banks that are well-capitalized.16
ECB, many banks have already tightened credit standards The APAC region is also expected to follow a smoother trajectory;
across all product categories. They anticipate further tight- demand from the hospitality sector should support growth in
ening due to a less favorable economic outlook and likely CRE loans, while multifamily residential mortgages will likely
deterioration in collateral values and credit quality.14 see a continued uptick.

However, the impact of the macroeconomic environ-

ment will be disparate across loan categories. Consumer
spending has remained robust in major economies, but Climate change should also play an important role in
as consumer savings deplete, demand for credit card loan demand and credit availability. According to a
and auto loans should remain strong. At the same time, recent EU Bank survey,17 over the next 12 months, banks
across the United States and Europe, bank loan demand expect a stronger credit tightening due to climate risks
2024 banking and capital markets outlook

from firms has decreased significantly. Bank loans to on credit standards for loans to “brown” firms, while a
corporates may weaken in the short term but could pick net easing impact is expected for green firms and firms
up later in 2024. (See sidebar, “Real estate jitters” for transitioning to decarbonization. Firm-specific climate-re-
commentary on commercial real estate loans.) lated transition risks and physical risks should have a
much larger role in credit disbursements going forward.18

5
 The combination of higher deposit costs, lower policy Noninterest income is expected to grow meaningfully
rates, and somewhat constrained loan potential can in the next few years (figure 3). Most banks will seek
adversely impact banks’ ability to generate strong net to raise fee income through a variety of channels, but
interest margin (NIM) in 2024. In fact, banks’ NIMs may they may face some constraints in doing so. Consumer-
already have peaked, as suggested by recent bank earn- focused fees, such as overdraft fees, nonsufficient funds
ings. US and European banks should experience a decline fees, and credit card late fees, could attract regulatory
in net interest margins in 2024 (figure 2). APAC banks scrutiny.
are more likely to enjoy stronger net interest income next
year with a higher—and possibly rising—rate environ- However, banks with stronger advisory, underwriting,
ment in many developing countries. These new factors and corporate banking franchises should have more
will likely force banks to reassess the true cost of deposits room to grow their fee income. Clearer valuations and
and how they may be deployed. a backlog of deals should lead to higher M&A and
issuance activities in the United States, boosting fees.
However, reduced volatility across different products will
More noninterest income crimp revenue growth in both equities and FICC (fixed
sources will be sought out income, commodities, and currencies) trading.

Banks should prioritize noninterest income in 2024

to make up for the shortfall in net interest income.

Figure 2

NIM will decline for most banks as deposit betas catch up

NIM for select countries
United States Canada United Kingdom Germany Japan Australia

Forecasts
4%

3%

2%

1%

0%
2019 2020 2021 2022 2023 2024 2025

Source: Deloitte Center for Financial Services forecast based on S&P Market Intelligence database.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

6
 Figure 3

Noninterest income should grow modestly due to higher fee-based income

Noninterest income/assets for select countries
United States Canada United Kingdom Germany Japan Australia

Forecasts
1.2%

1.0%

0.8%

0.6%

0.4%

0.2%

0.0%
2019 2020 2021 2022 2023 2024 2025

Source: Deloitte Center for Financial Services forecast based on S&P Market Intelligence database.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

Sharpening the cost discipline expenses. Many banks will also continue to invest in
technology to remain competitive. Attracting talent in
With the rising pressure on revenue generation, cost disci- specialized areas such as artificial intelligence, cloud, data
pline will become even more of a priority, and possibly a science, and cybersecurity should bump up compensa-
competitive differentiator for banks. Efficiency ratio has tion expenses, even as banks rationalize in other areas.
been improving in the last few years globally (Figure 4), In addition, tight labor markets and accelerated wage
but it is expected to inch higher in 2024, due to sluggish growth in traditional offshore locations should add to
revenue growth and high operating and compensation the industry’s cost pressures.

2024 banking and capital markets outlook

7
 Figure 4

Efficiency ratios have improved among many banks but will likely face
stiff challenges
Efficiency ratio for select countries

2020 2021 2022

75%

70%

65%

60%

55%

50%
United Canada United Germany Japan Australia
States Kingdom

Source: Deloitte Center for Financial Services analysis based on S&P Market Intelligence database.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

Guarding against loan losses Similarly, corporate default rates in the speculative grade
may also increase.
In the first half of 2023, many banks raised their provi-
sions for future credit losses, anticipating elevated While credit quality is decreasing and showing
loan defaults from a pandemic-era low. For instance, stress in specific segments, credit quality as a whole
in Q2 2023, cumulative provisions for the top 10 US appears to be normalizing to prepandemic levels.
banks rose by 26% quarter over quarter (QoQ).19 Banks are continuing to build reserves to restore
Credit quality is expected to deteriorate as custom- reduced balances over the last few years. Most large
ers’ ability to pay off loan diminishes, and the banks, globally, seem to have adequate liquidity and
full impact of inflation and monetary tighten- strong capital buffers to withstand a severe down-
ing is felt by businesses and consumers. There is turn, as evidenced by recent stress test results by the
already evidence of rising delinquencies in certain Federal Reserve, the ECB, and the Bank of England.21
loan categories, such as credit cards and CRE.20 ,

8
US BASEL III ENDGAME IMPLICATIONS

The US federal banking regulators recently released changes, including the application of AOCI, G-SIB The new rules will also require banks to factor in
a notice of proposed rulemaking (NPR) on Basel surcharge, and dual-RWA requirements, will unrealized gains and losses in capital ratios to comply
III final reforms. The proposed changes are aimed lead to higher operational burdens, requiring with the supplementary leverage ratio requirement
at improving the “strength and resiliency” of the significant investment in risk management, data, and the countercyclical capital buffer. In the short
US banking system and will impact the regulatory controls, compliance, and validation infrastructure. term, some banks may look at diminished buybacks.
capital frameworks for banks above US$100 billion They could also impact investments in technology
in assets (about 36 banks). Smaller banks with The impact on banks with large recurring and and market expansion strategies.
significant trading activity will also be subject to the fee-based businesses, such as credit card fees
new risk framework. These changes are estimated and investment banking fees, as per the Federal The Basel III NPR allows a transition period of three
to result in a 16% increase to CET1 (common equity Reserve will be “exacerbated by the use of an internal years, starting July 1, 2025.24 The proposed rules
tier 1) capital levels and a 20% increase to RWA (risk- loss multiplier that may result in an excessive will undoubtedly evolve in the future, but it will
weighted assets) for large bank-holding companies.22 overall capital charge for operational risk.”23 be important for banks to assess existing internal
The new provisions will reduce fee margins for infrastructure and potential strategic implications,
Higher capital requirements are likely to disadvantage securities underwriting and could materially reduce and engage in continuous conversations with
global banks domiciled in the United States and the depth of banks’ products. This could further regulators.25
constrain lending, capital markets, and trading increase transfer of services and associated risks
activities of all banks, possibly benefitting to nonbanks/unregulated sectors.
nonbanks and smaller institutions. These expansive

Figure 5

Bank profitability will be challenged in 2024

ROAE for select countries
United States Canada United Kingdom Germany Japan Australia

Forecasts
15%

12%

9%

6%

3%
2024 banking and capital markets outlook

0%
2019 2020 2021 2022 2023 2024 2025

Source: Deloitte Center for Financial Services forecast based on S&P Market Intelligence database.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

9
 Bank profitability in many regions will be tested in 2024 seen fundamental shifts with Chinese and American banks
due to higher funding costs and sluggish revenue growth dominating the global rankings. Figure 6 shows the changes
(figure 5). However, banks with more diversified reve- in size (as measured by assets) and the number of banks
nue streams and a strong cost discipline should be able from each country in the top global 100 banks. Over the
to boost their profitability, and possibly their market next decade, more banks from India and the Middle East
valuation, more than most. are expected to join the ranks of the top 100, tilting the
balance toward Asia and the Middle East. Indian banks
will grow their balance sheets as the economy grows and
The tilt toward Asia huge investments are made in domestic infrastructure, but
they may struggle to break outside their domestic markets.
Going forward, the size and scope of global banking will Meanwhile, sovereign wealth funds in the Middle East will
change even more. The global banking industry has already likely exert strong influence on global money flows.

Figure 6

Asian and Middle Eastern banks are growing at a quicker pace

Top 100 banks in total assets

15%
China
Belgium
United States
Canada of America
10% India
CAGR change in total assets from 2019 to 2022

Singapore
South Korea
France
5% United Kingdom
Switzerland
Spain
Italy Sweden
Brazil Japan
0% Netherlands
0 Germany 5 10 15 20 25

-5% Australia

-10%
Number of banks in Top 100

Notes: The size of bubbles represents the total assets of the top 100 banks in each country; United Arab Emirates, Qatar, Hong Kong, Austria, Norway,
Finland, and Denmark have one bank each in the top 100 by assets.
Source: Deloitte Center for Financial Services analysis of Refinitiv database, August 2023.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

10
Forces shaping the future of the
B&CM industry

I
n addition to the macroeconomic factors high- Not only are competitive dynamics shifting, but the pace
lighted in the previous chapter, the banking and and intensity with which rivals are challenging banks
capital markets industry must contend with vari- is unprecedented. Banks are now more intensely pitted
ous fundamental and disruptive forces challenging against traditional and new rivals as more customers
incumbent institutions’ business models in 2024 become open to having their needs met by nonfinancial
(figure 7). institutions.

Figure 7

Themes highlighted in Deloitte’s 2024 banking and capital markets outlook

Themes

Competition and
ecosystem
Digitization and Macroeconomic
exponential environment
technologies
ness segments
Busi

Data Retail Regulations

banking

Market Consumer
infrastructure payments

Sustainability Generative
and climate AI

Investment Wealth
banking management

Corporate and
Customer transaction Emerging
behavior banking risks
2024 banking and capital markets outlook

Private Talent
capital
M&A

Source: Deloitte Center for Financial Services analysis.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

11
 Deposits, for example, have become a ferocious battle- Concurrently, customers are becoming more vocal about
ground. Retail banks are competing with digital banks their evolving expectations. They want their banks to
offering higher deposit costs. And in the payments arena, balance digital-first experiences without compromising
digital wallets and account-to-account payments are fast the personal touch. Information is also becoming democ-
becoming the de facto payment options in many coun- ratized, with technology and social media empowering
tries, while buy now, pay later (BNPL) is more widely customers in ways not seen before. Banks should heed
accepted as a mainstream offering and alternative to these new demands as retail customers are spoiled for
credit card financing. choice and many will be willing to switch accounts and
diversify their relationships across multiple platforms
Capital markets and investment banking businesses are with a tap on their smartphones. Younger consumers,
not immune to new competitive forces, either. Scale has in particular, are clamoring for a superior experience
helped bulge-bracket investment banks in the United that some technology firms and fintech platforms offer.
States grow market share; however, a resurgence among Wealth management clients are increasingly vocalizing
European banks might be underway as they focus on their desire for omnichannel experiences at lower costs.
specialized services, and boutique firms increasingly And corporate and institutional customers, for their part,
participate in bigger deals. Meanwhile, private capital seem more intent than ever to broaden the number of
could pose a greater threat for credit provisioning and banking relationships to diversify risk.
talent. Hedge funds are also increasingly penetrating
more of investment banks’ value chain. In market infra- On the regulatory front, we continue to observe a diver-
structure, traditional exchanges see increasing compe- gence in laws and policies, with some jurisdictions typi-
tition from niche exchanges and the growth of trading cally charting a more assertive path, as in the EU’s new
venues in emerging markets. AI Act.26 As a result, there is still a lack of a coordinated,
global approach to crypto, digital assets, data privacy,
At the same time, the relationships between banks, artificial intelligence, and even climate risk. But regula-
fintechs, and bigtechs are evolving rapidly. Fintechs are tory scrutiny is on the rise, with governments increasingly
largely no longer seen as adversaries; collaboration with focusing on consumer protection, industry resilience, and
incumbents is now commonplace. With increasing indus- open competition. More regulators and policymakers
try convergence, strategic partnerships of banks with around the world are now probing banks’ lending prac-
franchised brands in technology and other nonfinancial tices and calling on them to do more to help
industries is becoming the norm for customer acquisition consumers.
and retention.

12
In addition, banks, particularly in the United In the technology arena, it is hard not to get caught up
States, could face stricter capital requirements in the excitement surrounding the incredible potential of
under a proposed overhaul to capital rules as generative AI. By all accounts, it can be a hugely trans-
part of Basel III “endgame” starting July 2025.27 formative force. But more broadly, AI and automation
These rules could impact banks’ ability to support some are not new to banking. In fact, machine learning/deep
capital markets activities, such as prop trading. They learning algorithms and natural language processing
could also impede retail banks’ ability to lend in the (NLP) techniques have been widely used for years to
residential mortgage space. help automate trading, modernize risk management,
and conduct investment research. However, despite the
Regulatory pressures will be particularly acute for billions of dollars spent on automating the various func-
regional and small banks, especially those that are tions across the transaction life cycle, there are still a
concentrated in their investment and lending portfolio fair number of tasks that are conducted using precious
and deposit mix. Many banks will spend the bulk of human capital. But large language models (LLMs) could
2024 trying to tighten lending standards and diversify help automate many tasks, from generating marketing
their balance sheets away from risky assets such as CRE products to coding. Generative AI can not only save
loans and even safe assets such as long-term treasuries. money, but also improve worker productivity. It could
also free up resources to spark innovation and enable
Meanwhile, open banking regulations in the United employees to focus more on productively interacting
Kingdom, Europe, Australia, Saudi Arabia, Brazil, with clients.
and Mexico are reducing the barriers for data shar-
ing and offering customers more choice for financial Scaling generative AI will take time. In the short term,
products and services. The US Consumer Financial one of the biggest challenges in 2024 will be to deter-
Protection Bureau (CFPB) is mulling similar rules.28 mine the focus. In assessing the many potential use cases,
US consumer watchdogs are also sounding the alarm leaders should choose the ones that will be the most
on the proliferation of artificial intelligence (AI)-driven impactful. The benefits of LLMs may not be uniform.
chatbots in banking. They should also consider the potential ease of execution
and any associated risks.
Scale and diversification, greater regulatory oversight,
and the desire to shed low-yielding assets should drive
further consolidation and M&A in the banking industry.

2024 banking and capital markets outlook

13
 But for any of these technologies to have maximal precursor to what is likely to be the norm in the future.
impact, having the right data—and making sure it can Banks, as key financial intermediaries, play an important
be accessed and shared across the enterprise—will be role in bending the arc of climate change. But looking
key. While banks have been building out data capabilities beyond, banks have a unique opportunity to support
for years, the pressure to derive insights to gain a more climate innovation through green finance and carbon
holistic view of customers has never been greater. There markets. Not only can they provide early-stage financ-
is a growing appetite among customers for real-time data ing to startups piloting carbon capture and storage and
about their payments, cash positions, trading, and valu- carbon dioxide removal technologies, but they can also
ations. In addition, advances in open banking globally help direct more capital to carbon project developers in
are gradually eroding what was once traditional banks’ emerging economies.
competitive edge. It is becoming increasingly important
for banks to meaningfully harness both traditional and Finally, how well banks manage their talent will one of
alternative datasets, as well as forge new partnerships the most critical success factors in 2024 and beyond. The
with third parties, to create new value in the form of war for talent in technology remains a pressure point
personalized insights, tailored product offerings, and for many banks. Banks may have to pay dearly to hire
enhanced customer experiences. specialized tech talent from outside businesses or train
their own employees to become more tech savvy, espe-
The proliferation of new technologies is opening banks cially as innovations from and within AI expand. Bankers
to risks they may have never had to grapple with before. should be empowered with the knowledge and resources
Open banking and the increase in partnerships with they’ll need to adequately advise clients amid market
technology partners, for example, can expose banks’ uncertainties. As with other industries, banks may also
infrastructure to new vulnerabilities and cyberattacks. have to instill a culture that reconnects employees with
Fourth-party risks are also becoming more of a threat as their corporate identity and creates a sense of belonging
banks engage in more partnerships with service providers that can be a conveyed in a hybrid work environment.
that have their own vendors. The speed with which these
threats take shape is also accelerating. Generative AI has To effectively deal with the forces outlined above, banks
gained the sophistication needed to create “deepfakes,” will likely have to make agility a fundamental attribute.
which makes it more challenging for financial institutions Executives should be bold, decisive, and creative, yet
to differentiate human customers from digital media remain true to their identity as financial intermediaries.
imitating their likenesses. Collectively, this fast-moving
risk environment is proving to be a huge obstacle to In the following chapters, we highlight how these themes
maintaining customer trust. will impact specific segments within banking and capital
markets, including retail banking, consumer payments,
And, of course, one cannot ignore what climate change wealth management, corporate and transaction banking,
is already doing to our planet—the multiple heat waves, investment banking, and market infrastructure.
floods, and wildfires in the first half of 2023 are a

14
Retail banking: Fortifying
customer relationships and
owning a greater share of wallet

Retail banks are grappling with a confluence of pressures,

PRIORITIES FOR RETAIL BANKS IN 2024 AND including higher funding costs, growing competition
BEYOND
from digital banks, and surging demand for increasingly
Retail banking businesses will not only grapple with higher funding personalized services, even as they explore how best to
costs and slower loan growth, but they must also contend with deploy generative AI and strengthen their data analytics
declining loyalty and increasing customer defections. While capabilities. Many of these challenges will be exacerbated
deposit flows should stabilize, it will likely remain challenging by the fact that retail customers are spoiled for choice,
to contain deposit costs even as policy rates decline. Banks and it has become easier for them to switch accounts and
should also expect new rules and regulations in the form of diversify deposits across multiple platforms. In addition,
higher capital and liquidity requirements, as well as heightened the growth of embedded finance and open banking are
scrutiny of risk modeling. In addition, weakening household changing the face of retail banking as customers know it.
finances will continue to pressure banks’ loan books, prompting
further credit tightening. While deposit outflows largely stabilized after a turbu-
lent first half of 2023, many challenges persist. On the
Retail banks should find new ways to forge deeper customer lending side, higher rates continue to lower borrowers’
relationships and instill a greater sense of financial empowerment. appetite, leading to slower pace of growth for new loans
Personalization will be key to demonstrating lifetime value. But and refinancing. Retail customers are running behind on
banks will likely struggle to customize products and services payments, causing more auto, credit card, and consumer
due to legacy systems and their inability to curate tailored loans to head into delinquency. Banks around the world
experiences using customer data. They should strive to adopt are increasing their buffers to prepare for a higher rate
advanced modeling tools that generate predictive insights of defaults. Canada’s five biggest lenders, for example,
and enable the delivery of real-time financial advice. Banks boosted their YoY loan loss provisions 13-fold in the
should also look at how emerging technologies can improve first three months of 2023.29 Banks will likely tighten
risk, compliance, and operations tasks in addition to enhancing credit further heading into 2024 and may even look to
the customer experience. For example, they can consider how sell subprime auto loans and riskier home equity loans
generative AI may accelerate credit risk assessments, instantly to strengthen their balance sheets.
alert mortgage applicants to missing or incomplete documents,
and boost the productivity of customer-facing teams. These mounting challenges will have disparate impacts
on retail banks in 2024. Which banks will be strained the
2024 banking and capital markets outlook

most, and how can they reposition their business models

to deliver more value to their customers? What other
opportunities may be available for banks to recapture
customer loyalty and serve customers beyond the point
of transaction?

15
 The fight for deposits will continue brokerages are beginning to chase “held-away cash” at
retail banks with new services through higher yields.32
Although deposit flows stabilized in Q2 2023, banks will Digital banking is also contributing to this phenomenon.
incur increasingly higher costs to retain deposits. For Digital-only banks, for instance, will likely continue to
instance, the cost of interest-bearing deposits (including offer higher CD rates; they are also offering variations on
certificates of deposit, money market deposit accounts, typical features such as a CD with no early withdrawal
and savings deposits) in the United States rose by 192 penalty. Several online banks, such as Ally Financial and
basis points to 2.1% by the end of 1H 2023, up from Goldman Sachs’ Marcus, bucked the deposit exodus
0.2% a year ago.30 This trend accelerated in the wake trend experienced by some regional and midsize banks
of bank failures, when the goal of retaining deposits and grew their deposit base during the first half of 2023.33
became even more paramount. Going forward, the These digital-only banks and fintechs backed by tradi-
industry should be hard-pressed to bring down their tional banks joined large traditional banks as the winners
deposit costs even as the policy rate declines (figure 8). of March 2023’s flight to safety.34 Choice Financial
Group, which sponsors the fintech Mercury, saw 17%
Retail customers are demanding higher rates on deposit growth that quarter. SoFi and Varo Bank each had
their deposits, and many have already switched their 37% and 43% quarterly deposit growth, respectively.35
cash into higher-yielding time deposits.31 Some US

Figure 8

Deposit betas could fall in the US, despite declining rates

Average deposit cost and deposit betas for the US banking industry
Cost of deposits (left axis) Average federal funds rate (left axis) Deposit beta (right axis)

BPS Percentage
600 104%

94% 100%
500

80%
400

60%
300
46%
43%
40%
200 31%

23%
17% 20%
100 12%
8%
6%

0 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F

Note: The historical Fed funds rate is from FRED; 2024 and 2025 Fed funds rates are sourced from FOMC projections as of March 22, 2023.
Sources: Deloitte Center for Financial Services estimates based on S&P Market Intelligence data, FRED, and FOMC projections.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

16
Similarly, European car manufacturers are increas- books. While many banks have been buoyed by net
ingly looking for alternative sources of funding for interest income, potential rising delinquencies and loan
auto loans, given the soaring costs of corporate loss reserves should start to impact profitability more.
bonds and asset-backed securities. As a result, they The return of student debt payments in the United States
are also emerging as rivals to traditional banks.36 will also add more financial stress and impede spending
These automobile companies are luring depositors with at a time when many consumers are struggling with the
higher interest rates for deposits and money in savings higher cost of living. As a result, it will be increasingly
accounts.37 important for banks to actively engage with customers
and pivot to an advice-based model to help these custom-
European customers are also increasingly withdraw- ers manage their debt.
ing money from banks in search of better terms due
to some lenders’ reluctancy to pay more to retain US banks should also anticipate slower growth and
deposits they believe they can do without. Most of prepare for a rise in consumer loan defaults. Some banks
Europe’s largest banks reported net deposit outflows have started to reduce their exposure to home lending
year over year for the first quarter of 2023.38 as mortgage originations fell to their lowest point in
Money market funds are also popular with European 20 years, dropping 56% between the first quarters of
savers seeking a higher return on their cash in the face 2022 and 2023.42 In addition, large lenders could soon
of persistently high levels of inflation. face stricter capital requirements under a proposed
overhaul to bank capital rules by US banking regu-
New rules and regulations will also pressure retail banks. lators.43 These changes may impact banks’ ability to
In particular, higher capital and liquidity requirements, lend to first-time and underrepresented homebuyers.44
a reevaluation of assumptions about deposit stickiness
by supervisors, and closer scrutiny of how capital and Demand for mortgages and consumer loans in Europe
deposit dynamics should factor into banks’ risk modeling are also expected to falter, while tightening credit
will be priorities on the regulatory agenda. Recent events standards could constrain spending and growth.45
have also reiterated the importance of scale and stabil- Meanwhile, APAC is also struggling with anemic
ity. Some banks may not have the appetite to remain loan demand, prompting many banks to consider
below certain asset thresholds. As a result, more M&A new sources of revenue. Banks in Mainland China,
activity within the banking industry is likely. Entities for example, are trying to spur demand for mortgages
with sticky deposits that lack strong lending platforms by offering relay loans for elderly borrowers that are
may be particularly attractive targets during any upcom- inherited by children if they cannot pay, as well as
ing wave of consolidation.39 Some midsize and regional joint loans for unmarried couples.46 Australia’s major
banks could also seek mergers that will bring in enough lenders are also beginning to divert resources away
outside capital to enable the sale of low-yielding assets.40 from residential mortgages and are weighing moves
into other businesses, such as commercial loans.47
Banks should take steps to remind customers of the
value they provide beyond deposits by broadening the Regulators and policymakers around the world are also
conversation to include additional avenues of support, increasingly scrutinizing banks’ lending practices and
such as wealth management and insurance services. They calling on the sector to do more to help consumers. The
should also use data analytics to identify at-risk account Consumer Financial Protection Bureau is focusing on
holders and create custom product and pricing solutions banking “junk fees” and working to make mortgage
that may be preferable for their unique circumstances.41 servicing and auto lending less risky for borrowers.48
2024 banking and capital markets outlook

Meanwhile, a new UK regulation will bring more trans-

parency to mortgage lending,49 and South Korea has made
Lending pressures will continue it easier for new entrants to compete with large lenders.50
to weigh on banks
Banks should also take steps to help improve their credit
Higher rates, persistent inflation, and weakening house- risk models by making them more inclusive with the
hold finances will continue to pressure banks’ loan addition of more alternative data. Rent payment history,

17
 gig economy income, and utility bill payments may help say they’ve received guidance or advice from their
credit invisibles: consumers with limited information primary bank between January 2022 and January
to demonstrate creditworthiness. In addition, they 2023, even though the financial health of many
can develop more embedded finance tools in lending Americans dropped markedly in that period.51
processes, such as adding technologies that enable instant Customers who received advice and felt it met their
loan approvals at an auto dealership. needs were more likely to reward the bank accordingly:
About half opened a new account with that institution.52

Empowering customers and Banks should look for where they can use customer data
reimagining loyalty to personalize experiences and deepen customer life-
time value. This has been a priority for global banking
Global banks can’t solely rely on brand recognition to leaders for some time, but personalization efforts have
grow their customer base. They should take greater steps been hampered by legacy systems, data privacy concerns,
to redefine what customer loyalty looks like and forge lack of data, and the inability to harness data fully to
deeper relationships by supporting and empowering curate tailored experiences. As a result, two out of three
customers. banks report they are unable to assess the context of a
customer’s situation outside of a single moment in time.53
Banks should strive to be the go-to hub for most of This inability is not only detrimental to the customer
consumers’ financial needs, especially as economic experience; it can also hinder financial performance and
uncertainties weigh on customers more heavily over fraud detection (figure 9).
the coming year. Only 21% of customers surveyed

Figure 9

Lagging on personalization programs can have bankwide implications

Top impacts if personalization objectives aren’t achieved

Increased costs 62%

Slowed business agility 60%

Poor customer experience 56%

Loss of operational (business) resilience 54%

Revenue loss 53%

Hampered brand reach/influence in market 48%

Increased enterprise risk 45%

Hampered ability to improve products/services 40%

Source: Fair Isaac Corporate report, March 2023.

18
Banks should increasingly invest in advanced model- give customers more control of their finances are gain-
ing tools that can parse through transaction data and ing steam in many parts of the world. Regulators and
deliver predictive insights at multiple customer touch- central banks continue lowering the barriers for data
points. They can also use emerging AI capabilities to sharing in the United Kingdom, Europe, Australia, Saudi
provide richer and more targeted advisory services. Arabia, Brazil, and Mexico. The US market may also
Over time, banks should seek to advance hyperper- usher in a wave of open banking soon, as the CFPB
sonalization to the point that customers feel they are mulls a new rule to give customers more rights over
a segment of one.54 For example, if a bank sees that their personal data. The rule could open the door for
an aspiring borrower abandoned a mortgage appli- third-party firms to seek consent for access to customer
cation to check out other lending platforms, it may data through application programming interfaces (APIs),
dispatch an advisor to contact the applicant with a more and provide more tailored services such as budgeting,
competitive rate and offer of personalized support.55 financial management, and lending. This could also
help large banks obtain data from other institutions,
Banks should also shift away from a product-focused such as community banks and credit unions, which
business model to become a consumer-centric organi- may be useful for growing their own business lines.58
zation. As industry lines blur, and customer expecta-
tions are influenced by experiences in other domains, Banks can also develop new methods for issuing and
customers are increasingly expecting banks to replicate authenticating digital identity, especially as more
the services they get elsewhere. Some are also becoming deepfakes emerge that take on the likeness of real
more comfortable having their needs met by nonfinan- or fabricated humans. Greater adoption of digital
cial institutions. Bank leaders can learn from customer wallets is also heightening the need for safeguards.
interactions with entities outside of banking and consider In the Nordics and Canada, many financial institu-
new opportunities to serve them in a more unique or tions garnered a great deal of goodwill and trust by
holistic way. Northwestern Mutual, for example, advancing BankID and Interac Verified systems,59
took a page out of a dating app playbook to design demonstrating their role as credibility agents in the digi-
a matchmaking algorithm that pairs customers with tal economy. Biometrics, including behavioral biometrics
financial advisors that are best suited for their needs.56 that analyze a consumer’s touchscreen behavior, mobile
app navigation, and typing habits, will also become more
Strategic partnerships with franchised brands can and more pivotal in the fight against fraud.
also be a powerful tool for customer acquisition and
retention, especially if the bank works with third-party In addition, in the near term, generative AI will have many
institutions to deliver custom rewards. For exam- benefits for risk, compliance, and operations functions.
ple, hundreds of music fans shared plans on social For instance, banks are evaluating how the technology
media to apply for a Capital One card to gain access can improve mortgage applications by performing faster
to presale tickets for a popular 2023 concert tour.57 and more accurate underwriting processes and enabling
These nontraditional, nonbanking perks are beginning conversational AI tools to instantly alert borrowers to
to play a greater role in customers’ choice of a primary missing or incomplete documents.
financial services provider. However, such brand spon-
sorships could also come with some risks. Some banks are launching pilots to learn how they
can better assist customers with the nascent technol-
ogy. ABN Amro in the Netherlands, for example, is
Forging ahead with tech using generative AI with 200 employees to summarize
advances and innovation
2024 banking and capital markets outlook

their conversations with customers. It is also testing

how it can gather customer data to resolve issues in
Banks should also seize opportunities to use emerging real time.60 Sweden’s Klarna Bank has equipped every
technologies to reduce risk, streamline operations, and employee with access to generative AI language models
build trust with customers by offering new safeguards and asked them to experiment with the technology.61
from fraud. For example, open banking initiatives that JPMorgan Chase estimates that these tools will generate

19
 an additional US$1.5 billion in value by the end of 2023.62 not be providing “timely, straightforward” answers to
Its retail bank has found success in using AI to extend user questions, and expressed concern about the tools’
customized offerings, such as credit card upgrades.63 ability to comply with consumer protection laws.64
But as banks learn to use generative AI safely, they can
Financial institutions are still reluctant to embed AI into make chatbots more sophisticated and easier to under-
customer applications since it can bring about new expo- stand, deliver personalized marketing campaigns custom-
sures to ethical and security risks. In the United States, ized to each target’s content consumption habits, and
the CFPB warned that banks using generative AI may reduce wait times for processes such as mortgage lending.

20
Consumer payments: Grabbing a
bigger slice of the revenue pie in a
fast-evolving ecosystem

PRIORITIES FOR PAYMENTS INSTITUTIONS IN 2024 AND BEYOND

2024 will see an acceleration of several trends payments by expanding financial inclusion, reducing to better understand consumers’ needs and offer
shaping the future of the consumer payments inefficiencies, and fostering competition. The trio of more personalized insights. They should engage
industry. Consumer spending will increasingly shift regulatory, market, and competitive forces will further collaboratively with the ecosystem but choose the
from cash to digital payments. However, growth challenge the economics of the volume-focused right third-party providers (TPPs) that consumers
in digital and real-time payments, along with the business models. Many incumbent institutions trust to lessen concerns around security and
proliferation of artificial intelligence, will also recognize they need to deliver new value beyond privacy. Investing in technology talent and using
make fraud and cyber threats more challenging transaction execution to remain relevant, as the sophisticated AI and biometrics technologies
to prevent and detect. traditional boundaries in the payment ecosystem blur. could help incumbents strengthen fraud detection
models and protect consumer payments and data
Governments, especially in developing economies, Use of proprietary and alternative data and more from malicious actors.
will play a more prominent role in consumer robust analytical models should enable institutions

The world of global consumer payments is evolving economies. Meanwhile, many countries in Europe
rapidly, driven by a multitude of factors. Digital wallets and Asia-Pacific, despite their sizable economies,
and faster payment rails are pushing traditional payment are a bit behind in the use of cashless payments.66
methods further into the background. However, use of
credit cards has stayed resilient and BNPL has further Despite these differences, the resilience in consumer
democratized access to credit at the point of sale, both spending, especially in travel, has translated well for card
in-store and digitally. Governments are actively pushing issuers and payment networks. JPMorgan Chase reported
the bar on financial inclusion with digital faster payments, a 7% increase in credit and debit card transactions and
such as Instant Payment Platform in the United Arab an 18% rise in card loans in Q2 2023, largely attributed
Emirates and Unified Payments Interface (UPI) in India.65 to its US volumes.67 Similarly, Mastercard reported a
12% YoY growth in global gross dollar value of trans-
However, the shift from cash to digital payment meth- actions to US$2.3 trillion in Q2 2023, attributed largely
ods shows a divergence in maturity levels across coun- to international travel and cross-border spending.68
tries and regions. Countries, such as Norway and the
2024 banking and capital markets outlook

Netherlands, have been trailblazers in the use of digi- However, consumers are acquiring more debt, thus
tal payments in the developed world for some years increasing the credit risk for issuers. Credit cards remain
now. Joining them are China, India, and Brazil, lead- the dominant payment method for American consumers,
ing the digital payments revolution from developing encompassing 31% of payments in 2022.69 US consumer

21
 credit card debt surpassed US$1 trillion in Q2 2023, largely financed by swipe fees. The restriction on swipe
reaching a new peak since 2003.70 In the same quar- fees could also reduce issuers’ incentives to issue cards
ter, the 30+ day credit card delinquency rate climbed to consumers with inadequate access to credit.
to 7.2%, a level last seen more than a decade ago in
2012.71 The moratorium on US student loans ending It is also not clear how much retailers’ savings would ulti-
in September 2023 could further deplete consumers’ mately be passed on to consumers, if at all. But increased
savings and constrain their ability to pay their credit price competition would put an additional strain on issu-
card dues on time. ers and networks’ transaction revenues and the card
products they offer to consumers.
Concurrently, institutions in the card value chain must
also grapple with the changing economics of their busi- Swipe fees are not a burning issue in Europe, but in other
ness models. For instance, regulators in the United States countries, such as India, there is a renewed focus on
plan to reduce card swipe fees. Meanwhile, national expanding competition. For instance, the Indian central
governments are building sovereign card rails and forging bank has mandated that card issuers must issue their
bilateral deals to bring more efficiencies to domestic and cards on more than one network beginning in October
cross-border payment flows. Debit volumes are under 2023.73 The move will end exclusive issuance arrange-
pressure with a rise of account-to-account–based real- ments between card networks and leading issuers.
time payments networks. Meanwhile, software players
are bringing payments in-house, eating into the revenue
of merchant acquirers. Government-backed payments systems
cause further fragmentation
Given these mixed dynamics, what should payments
institutions do to increase their share of the revenue pie After building their sovereign card rails to reduce domi-
in 2024 and beyond? How can they reimagine value nance on the international payment plans, national
creation and delivery to remain relevant to consumers governments are exploring modernizing consumer
and bolster their competitiveness? payments to make them more convenient and cost-ef-
fective for their citizens. More than 70 countries
have adopted real-time payments (RTP) rails, with
Economics of card swipe fees face a new threat many solutions having government endorsement and
support. Public-sector involvement is equally import-
Card networks have faced pressure from retailers to ant in addressing inefficiencies in the ~US$650 billion
lower card swipe fees for some years now, but this global remittance market.74 According to the World
issue is finding a new voice in lawmakers’ reform Bank, the global average cost of sending US$200 in
agendas across different jurisdictions. remittance across borders was as steep as 6.25% of
value in Q1 2023, falling disproportionately on the
In the United States, the Credit Card Competition poor.75 The average cost of remittance remains more
Act (CCCA), reintroduced in Congress in June 2023, than twice the United Nations Sustainable Development
proposes more network choices for merchants to Goals target of 3%, which is to be reached by 2030.76
further reduce swipe fees.72 Some retailers are pass-
ing on part of this cost to consumers by imposing a While hopes for a ubiquitous and efficient cross-bor-
surcharge on credit card transactions. Lawmakers are der remittance solution are still alive, national govern-
hoping that additional competition will result in lower ments are initiating bilateral arrangements to make
cost to retailers, and ultimately, to consumers in the their domestic RTP systems interoperable across
form of lower prices. borders one country at a time. India and Singapore
have linked UPI and PayNow, their respective faster
But if this law is passed, it could hamper the ability payment rails, to enable quick and low-cost fund
of incumbent payments networks and card issuers to transfers.77 More recently, India signed a deal with the
offer attractive rewards to consumers, which are UAE’s Mashreq Bank to use UPI to facilitate foreign
remittances from the India diaspora in the region.78

22
Europe also plans to create a unified instant payments
solution with its European Payments Initiative, a
new payment standard for European consumers and
merchants for all types of transactions, including in-store,
online, cash withdrawal, and peer-to-peer (P2P).79 Set to
launch in Belgium, France, and Germany in 2024, this
initiative aims to offer a pan-European bank card, digital
wallet, and P2P payments solution to consumers for
lower friction in cross-border payments.

An increase in such bilateral deals and regional initia-

tives would make the global payments landscape more
fragmented and create different regional payment blocs.
Yet, encouragingly, we are inching closer to a more effi-
cient cross-border payments system, one payment bloc
at a time.

The blurring of product lines and

competition for customers’ wallets

Traditionally, payments institutions stuck to their respec-

tive product lanes, but now they are encroaching into each
other’s businesses to grow revenues. For instance, card
issuers are trying to grab a greater share of account-to-ac-
count (A2A) consumer payments, as domestic RTP offer-
ings expand. In the United States, both large and small
banks have signed up as early adopters of FedNow,80
the Federal Reserve’s real-time A2A payments rail. Even These efforts to expand beyond their core offerings
global card networks are excited about A2A payments suggest card issuers and networks recognize that this
and building multi-rail (e.g., cards, P2P, A2A, and interconnected web of payments, products, and rails will
crypto) value propositions (figure 10). only get more complex as we enter 2024. The innova-
tions and competitive actions threaten their transaction
Blockchain-based and fiat currency-backed stablecoins revenues, and risk diminishing visibility and ownership
are also entering the world of consumer payments. In of consumer data.
some instances, they are further disintermediating the
role of traditional payments institutions by facilitating Additionally, open banking around the world is gradually
the exchange of money in cross-border remittances, eroding what once was payments incumbents’ compet-
P2P payments, and even customer-to-business retail itive edge. With open banking, third-party providers,
payments. including fintechs, bigtechs, and other software provid-
ers, can access customer data in payment providers’
Concurrently, digital wallet and BNPL provider have systems via APIs, embed payments, and help consumers
2024 banking and capital markets outlook

launched card offerings; card issuers, in return, are pay seamlessly within their shopping journeys. This may
launching their own digital wallets81 and integrating be the beginning of open data encompassing nonfinancial
BNPL offerings into their portfolios. Issuers are also interactions as well, such as with telecom and utility play-
working with merchants to offer embedded payments, ers. At the same time, ensuring privacy and security of
allowing nonfinancial companies to offer integrated data will be critical. With this in mind, the EU is consider-
payment solutions to their consumers. ing new regulations for the use and access of open data.82

23
 Figure 10

Card issuers and networks are building a portfolio of payment capabilities

to support consumer payment transactions

BNPL integrations

ACH payments Debit proposition

Card issuers
are branching out to
Cryptocurrencies support varied Digital wallets
consumer payments
options

Credit proposition A2A faster payments

P2P payments app

Card rails

P2P payments A2A noncard network for

International card cross-border payments
rails are targeting to
become a network of
networks

Cryptocurrency payments Global A2A real-time payment rails

Source: Deloitte Center for Financial Services analysis.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

Going forward, card issuers should continue to deliver Choosing the right TPPs that consumers trust would
value beyond payment transactions to remain competi- allow payments incumbents to alleviate consumers’
tive. Much of this may boil down to how well they know concerns around security and privacy while also elevating
their customers and their ability to analyze customers’ their experience with innovative offerings. This growing
proprietary transactional and alternative datasets to offer role of trust in a world where physical and virtual reali-
more personalized advice, such as spending controls, ties are increasingly converging would solidify the push
budgeting advice, and tailored rewards. toward digital identity, making it easier for institutions
to authenticate senders and recipients of money across
Meanwhile, data can be leveraged to help enable value all interactions.
creation, new business models, and new partnerships.

24
RESPONSIBLE BNPL CREDIT TO ELEVATE CONSUMERS’ FINANCIAL WELL-BEING

The proliferation of buy now, pay later (BNPL) in BNPL users were more likely to be highly indebted These regulations, along with institutions’ enhanced
consumer payments has encouraged traditional and rely on many other high-interest credit products risk management, reporting to traditional credit
credit card issuers to include BNPL in their portfolios. compared to BNPL nonusers, according to a CFPB bureaus, and emphasis on the short term, small-
An inflationary environment further heightened the analysis (figure 11). While these credit products ticket size credit, could usher in the next wave of
financial and operational benefits of BNPL over are intended to help consumers in distress, are BNPL maturity. Card issuers and pure-play BNPL
traditional credit products, driving lending volumes. they eventually putting them in more distress? providers can play a significant role to elevate
consumers’ financial well-being by providing advice
While BNPL products have helped many consumers The US regulator’s findings also indicate other and responsible credit. For instance, Klarna launched
access credit, multiple studies suggest that these issues with the BNPL space: inadequate dispute a credit opt-out feature that offers consumers a choice
consumers may be overspending beyond their protections compared to credit cards, bigtech- to opt out of using credit to stay within their budget.86
means. In a recent Pymnts survey of BNPL users, style data surveillance, and slow progress
70% of respondents admitted they spent more among reporting agencies to develop mature Moreover, by providing cash flow tools to consolidate
than they would have, had they paid upfront.83 reporting protocols when it comes to BNPL credit. multiple payment schedules, delivering insights on
Also, according to the CFPB, “[BNPL] firms have budgeting, and supporting customers in achieving
created their own gateways and digital, app-driven As a result, regulators globally plan to supervise financial goals, issuers and BNPL providers in the
marketplaces, powered by personalized behavioral this industry to bolster consumer protection. In May space can encourage customers to save and spend
data, to lure their users into buying more products.”84 2023, Australia announced reforms that recognize more effectively.87 In fact, responsible BNPL credit
Another concern is how BNPL balances seem to be BNPL as a credit product under the Credit Act, can help unserved and underserved consumers
disproportionately accumulated by those heavily and mandate that firms comply with responsible build or rebuild credit.88
dependent on credit for their living. For instance, lending obligations and hardship requirements.85

Figure 11

Percentage of BNPL users and nonusers with high-interest credit

BNPL users BNPL nonusers Difference

Overdraft 42.8% 17.3% 25.5%*

Payday loan 11.5% 2.9% 8.6%*

Pawn loan 8.6% 1.6% 6.9%*

Auto title loan 7.2% 5.0% 2.1%

Any alternative financial service 20.1% 8.7% 11.5%*

Revolving credit card debt 68.9% 41.6% 27.2%*

2024 banking and capital markets outlook

Observations 415 1,621

Notes: Weighted means using sample weights. * Indicates statistical significance at a level of 99%.
Source: MEM survey 2022, Consumer Financial Protection Bureau, “Consumer Use of Buy Now, Pay Later,” press release,
March 2023.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

25
 Traditional acquirers face growing competition The proliferation of generative AI is only expected
from software players and modern acquirers to accelerate the pace at which fraudsters fabri-
cate such synthetic identities to trick consumers
Merchant acquiring and payments processing provid- and businesses to send payments to their imperson-
ers, which are increasingly operating in a commod- ated accounts, commonly referred to as authorized
itized business, recognize the opportunity with small push payments (APP) fraud. In the United Kingdom,
and midsized businesses (SMBs). A 2022 Credit Suisse Faster Payments service has experienced a 6% YoY
study indicated that the US SMB segment comprised increase in APP fraud cases93 on personal accounts,
under 20% of payment flows but accounted for with losses amounting to US$600.1 million in 2022.94
about 55% of potential revenues for acquirers.89

Competition is closely following the money. Software

providers, especially working with SMBs, continue
to bring payment elements in-house (becoming a
“payfac”) to own a larger share of the merchant
acquiring value chain.90 Additionally, modern acquir-
ers are scaling both domestically and internationally,
and expanding beyond payments to offer embedded
finance products to deepen wallet share. For instance,
Adyen began offering business checking accounts and
business lending options for platforms and market-
places in Europe and the United States in late 2022.91

Caught between competition from software providers

and modern acquirers, the incumbent merchant acquirers
should step up their defense. Some acquirers may choose
to partner with or even acquire software firms that
cater to merchants to retain a greater share of the value
chain. Meanwhile, competing with modern acquirers
would demand superior digital and service capabilities.
Incumbent acquirers should not only offer international
presence and omnichannel payments acceptance, but also
provide a single (or few) integration(s) to businesses to
access local processing platforms and payment meth-
ods and to acquire support, among other local services.

Fighting synthetic fraud when fake is as good

as real

Payment firms are in a global arms race with malicious

threat actors, as scams become more sophisticated.
Synthetic fraud is one such example that is notoriously
difficult to detect.92 Many fraudsters concoct entire
personas using a mix of real and fabricated informa-
tion, which are often pinned to social security numbers.

26
To combat these risks, regulators are stepping in with tication and fraud detection models to predict criminals’
measures to bolster consumer protection. The UK next moves and circumvent their advances (figure 12).
Payments System Regulator issued new reimbursement
requirements in which both the payer and payee’s insti- Banks should also work more closely with startups and
tutions need to fully compensate consumers who are established technology firms to develop multimodal
victims of authorized push payment (APP) fraud within biometric security that evaluates several indicators at
Faster Payments.95 once, such as fingerprints, natural speech patterns, and
word choice, to increase fraud-detection outcomes and
The stakes are high for payment institutions; they should reduce false positives. Collaborating with nonfinancial
strengthen their risk-based approaches to minimize or institutions, such as telecoms, mobile network providers,
eliminate fraudulent payment requests. They should and regulators, would also add allies that could analyze
supercharge their anti-fraud skillsets with generative AI consumers’ nonfinancial data to prevent unauthorized
technologies and third-party data to train their authen use of identity.

Figure 12

Generative AI could act as both a sword and a shield

The sword The shield
Risks of generative AI Potential action steps for payment institutions

Authentication risks are evolving with advancements in Integrate deepfake detection techniques into anti-fraud
deepfake technology systems and training

Bad actors can create fraudulent proofs of identification and Utilize third-party consortium data to enhance detection of
synthetic IDs expeditiously synthetic ID schemes

Criminals can create phishing emails and fake messages, Enhance training programs for employees to detect account
calls, or invoices to trick payers takeover, phishing, and business email compromise

The rise of chatbots creates privacy risks, becoming possible Consider data privacy limitations to use of chatbot tools
avenues for data leaks

Gen AI models require model risk management for Document a transparency and explainability framework,
transparency and explainability and test the model regularly

Source: Deloitte Financial Advisory Services.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html
2024 banking and capital markets outlook

27
 Wealth management: Revamping
the advice engine for the future of
wealth

PRIORITIES FOR WEALTH MANAGEMENT INSTITUTIONS IN 2024 AND BEYOND

Wealth management business is at the cusp of Many wealth managers will also look to automate worried about whether their parents will able to
change. While global wealth continues to build and routine tasks through generative AI and advanced attain a comfortable retirement, while those holding
diversify across regions, recent market volatility data analytics. The push to bring about greater the assets are clamoring for broader coaching and
has challenged assets under management (AUM) efficiencies and broaden product offerings by advice. Some of these new concerns are driven
growth. This is prompting wealth managers to acquiring or partnering with third parties will by greater longevity. Succession planning is also
redouble their efforts to provide a richer advice continue to be of interest, although deals may becoming more urgent as the advisor population
experience, which they can then combine with be struck at a slower pace than in previous years. ages in many parts of the world. The next investor
innovative new products. Technology continues to generation will want to sit across the table—
play an important role for wealth firms, especially Intergenerational wealth transfer continues to gather physical or virtual—from someone who looks like
as institutions come to grips with the need to momentum as well. This shift will require advisors them and has the same lived experiences they
develop expertise in, and promote the use of, to develop even more holistic advice capabilities. have. Acquiring and developing younger and more
artificial intelligence to drive greater personalization. Many members of Gen X and other generations are diverse talent could challenge growth, however.

Macroeconomic, geopolitical, and regulatory uncertain- growth prospects in 2024 and beyond? How can they
ties have exacerbated costs and margin pressures for differentiate themselves to create a winning franchise?
global wealth managers, but they remain resilient. Global
wealth is likely to surpass US$500 trillion in 2024, nearly Honing the advice experience
five times the global GDP.96 From a regional perspective,
the biggest portion of this wealth is now in Asia-Pacific With client needs and markets shifting, wealth manag-
(~40%), with China accounting for nearly 20%. North ers cannot rely on bull markets for increased assets
America has about 33% of that total, with Europe at under management. In the previous decade, more than
23%.97 Assets under management should grow at an 70% of the growth in AUM was the result of market
annual pace of around 8% over the next five years,98 performance, with only the remaining 30% coming
more than double the expected growth in global GDP.99 from organic growth.101 Investor satisfaction is a func-
And net financial wealth held by the mass retail market tion of returns. For instance, US investor satisfaction
could almost double to US$22 trillion by 2030.100 with full-service investment advisors tumbled 17 points
in 2022, coinciding with a 20% drop in the S&P 500
Even with these positive expectations, wealth manag- in the same period.102 But wealth managers have little
ers should continue to evaluate their competitive control over market performance, so they should focus
strengths and operating models to support the agil- on improving customer satisfaction through other means.
ity needed in the future. What changes should they These include offering advice beyond invest
consider in their operating models to capitalize on the

28
ments and supporting clients through their life journey. diversity and provide sufficient growth opportunities to
Unfortunately, only 11% of advisors currently take these budding advisors to maximize success. UBS, for example,
additional steps.103 is diversifying its advisor pool in terms of age and race
to better mirror younger generations.107
Further, the shift from accumulation to decumulation
among those holding the greatest share of assets contin- Retooling platforms with a focus on cost takeout
ues. With more baby boomers retiring every day, the and deepening client relationships
boundaries of advice continue to not only expand across
retirement income, but also include health insurance, Wealth managers continue to invest in technology, but
longevity, and even dementia care planning. For good with a greater focus on cost rationalization than before.
reason: A recent survey showed that 80% of Americans Indeed, 68% of wealth managers surveyed consider
age 50 and older were concerned about funding their optimizing cost-to-income ratio and aiding regulatory
own health care costs in retirement.104 The most compliance as their top, near-term business challenges.108
impactful advice propositions will likely emerge around Consequently, there’s a greater inclination to look to
moments that matter, by integrating both financial and third parties: In a recent survey of global wealth manage-
nonfinancial assets and liabilities. ment and private banking clients, 72% of respondents
said they plan to collaborate with fintechs, broker-deal-
Moreover, a recent Deloitte survey of 300 affluent Swiss ers, and custodians to modernize their technology infra-
banking clients revealed that they want it all: supe- structure and free up internal resources and time to focus
rior, omnichannel wealth management experiences at on strategically important products and services that
lower costs.105 Self-service platforms remain a popular enhance client experience.109
approach to serve not just the affluent, but also young,
first-time investors with lower investable assets. Even Firms will invest in forming clear data management
so, the ability for wealth managers to support moments strategies to better use new forms of data and artificial
that impact their clients’ life and wealth journeys can be intelligence. This will help them generate richer insights
a differentiator. A good place to start is by using data while creating agile and scalable operations to keep pace
and analytics to create hyperpersonalization based on with future advice models. The spend on cloud services
an efficient segmentation strategy. for wealth management platforms, including more
wealth management-specific industry cloud solutions,
2024 banking and capital markets outlook

To best serve these younger generations, firms should hire could grow by more than US$10 billion over the next 10
more young talent. Unfortunately, about 37% of advi- years.110 Firms can start today by undertaking small-scale
sors plan to retire during the next decade, but 72% of transformation to help create quick wins that can build
newcomers (those with three or fewer years of advisory confidence and trust on the way to enabling faster time to
experience) fail to stay in the industry.106 Wealth manag- market and operational efficiency. Perpetual know your
ers should adjust their recruitment policies to focus on customer (KYC), for instance, can help provide a more

29
 complete, real-time risk picture, but its success depends
on the unification and quality of firmwide data.111
But security concerns (e.g., cybersecurity, data privacy,
deepfakes, and hallucinations) loom, making it vital
to instill an AI trust framework.112 Regulators are also
becoming increasingly focused on conflicts of interest.
In July, the Securities and Exchange Commission (SEC)
proposed new rules requiring firms to keep investors’
best interests in mind when using AI.113

Next, firms are providing advisors with integrated omni-

channel solutions that support new on-demand conver-
sations. Engagement and collaboration tools like live
chat, secure messenger, and cobrowsing can free them
up to focus on higher-value activities and even increase
the number of clients served.

Generative AI is starting to be used in fraud detection,

anti-money laundering (AML) client communication and
marketing, product fit assessment, memo writing, and report
generation based on research.114 Deutsche Bank is deploying
deep learning to analyze client portfolios for concentration
risk and match individual clients with suitable funds, bonds,
or shares.115 Meanwhile, JPMorgan has recently applied to
trademark IndexGPT, which can analyze and select securities
based on client preferences.116

With private assets becoming more mainstream as regu-

Bridging the offerings gap lations ease, wealth managers could offer products to
clients who are lower on the asset spectrum. For exam-
While exchange-traded funds remain the preferred ple, Luxembourg’s parliament recently passed a bill that
investment vehicle for clients of all sizes, with more than lowers the minimum investment threshold for alternative
US$600 billion in net flows in 2022, direct indexing and funds by about US$27,000 to US$108,500.119 The United
alternative investments continue to gain momentum. In States is also relaxing rules that govern “accredited inves-
fact, alternative investments could increase from 11% of tor” definitions to allow for broader retail participation
consumer household investable assets to 20% by 2026 in alternative products.120 Wealth managers are looking
and generate an additional US$11 trillion in incremental to acquire these capabilities. Recently, MUFG announced
net flows for wealth management firms.117 Ultra-high-net- its intention to buy alternative asset firms to meet client
worth investors expect to be overweighted on private demand.121 Training advisors is crucial since advisors
equity, the largest percentage of any of the alternative typically do not recommend products with which they
asset classes, followed by hedge funds, venture capital, are not familiar.122
and private debt.118 Meanwhile, extreme price volatility
and the recent turmoil in crypto markets seem to have Meanwhile, just 17% of advisors surveyed in the
cooled demand for digital assets. United States are citing ESG factors as a consideration
in their clients’ investment processes, the lowest in
five years.123This could be a function of profit-taking,

30
portfolio rebalancing, underperformance, or, perhaps, a Wealth management M&A to slow down
lack of trust. In a Deloitte survey of about 1,000 retail
investors in the United Kingdom, 69% said they have Owing to the attractiveness of the segment, insurance
or would refrain from investing in a financial asset if companies, hedge funds, and others continue to consider
they did not trust the ESG investment framework used acquisitions in this space.128 Globally, wealth managers
by their provider.124 closed 254 deals last year (figure 13), the highest in a
decade, with North America accounting for 70% of
Industry estimates suggest ESG assets could reach US$50 the deals, followed by Europe (21%) and Asia-Pacific
trillion by 2025.125 Firms should, therefore, continue to (6%). Driven by a buy-and-build strategy, private equi-
support advisors with tools that aid client conversations ty-backed firms Mercer Global Advisors and Wealth
around values-based investing. New regulations, such Enhancement Group, acquired 18 and 11 companies,
as the European Commission’s proposed Green Claims respectively, last year.129 The primary drivers for M&A
Directive, which would require companies to back envi- activity are economies of scale, cost reduction, new
ronmental claims with a comprehensive assessment,126 services, and talent acquisition. However, the number
along with the SEC’s new rules for company disclosures on of deals are down by 26% YoY to 84 in the first half of
ESG policies,127 would require firms to put guardrails in 2023. This slower pace may continue even in 2024 as
place to avert the perception of greenwashing. These may macroeconomic conditions weigh on buyer sentiment.
include third-party certifications and compliance checks.

Figure 13

Global wealth management M&A activity may slow down

Deal count

247 247 254

231 226
217
206 204
188
178
169

84

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1H

Notes: Only completed deals have been considered. Deal count is as of July 15, 2023.
2024 banking and capital markets outlook

Source: Deloitte Center for Financial Services analysis of S&P Capital IQ database.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

31
 Corporate and transaction
banking: Enabling efficient money
flows through digitization

PRIORITIES FOR CORPORATE AND TRANSACTION BANKS IN 2024 AND BEYOND130

Corporate and transaction banking businesses There is enormous pressure for banks to pick Growth opportunities are emerging, however. From
are looking at a confluence of priorities. While up the pace of digitization to elevate customer digital asset custody to green transition strategy
commercial loan growth held steady for most of experience and strengthen relationships, while advice, corporate bankers should remain agile to
last year and the start of 2023, banks are looking at also managing costs. Digital solutions in loan support their clients’ more complex needs. They
a more muted outlook for the next several quarters origination and underwriting, cash management, should work constructively with borrowers and
along with tightening lending standards and the B2B payments, trade finance, and asset servicing champion an advice-based model to strengthen
increasing risk of CRE loan portfolios. De-risking should help institutions unlock new efficiencies the personal touch, while also empowering clients
is also on the minds of many corporate clients, and address customers’ pain points. with a self-service model to address their direct,
who seek more optionality with respect to their simple needs.
banking relationships.

The current state of lending to corporates and SMBs of European banks reported tighter credit standards for
has shown strength globally despite the economic chal- commercial real estate in H1 2023, compared to 25%
lenges in the past year. US banks’ outstanding exposure in H2 2022.136
of C&I loans rose 6% YoY to US$2.8 trillion in May
2023.131 At the same time, their outstanding exposure The office CRE debt market continues to show signs
to total CRE loans rose 11% YoY to US$2.9 trillion,132 of weakness due to declining values and rising vacancy
much of it held by banks with less than US$100 billion rates, particularly in the United States.137 Of the total
in assets. US office property loans maturing in 2024 that are
held by banks and with investors as commercial mort-
Bank lending to corporates in the Eurozone grew 3% gage-backed securities (CMBS), 17.4% are classified as
YoY to US$6.4 trillion in June 2023.133 European banks’ “troubled” or “potentially troubled/watchlist” as of
NIMs have also benefited from lower deposit costs, and August 2023. This figure stands at 10.5% for retail prop-
institutions continue to demonstrate cost discipline.134 erty loans and 8.5% for multifamily property loans.138

However, a less favorable economic outlook, lower risk As a result, regulatory scrutiny is expected to increase for
tolerance, and the desire to shore up liquidity positions banks with high exposure to the CRE market, especially
have prompted many banks to tighten their credit to small banks with assets under US$10 billion. A Federal
corporate borrowers. In Q2 2023, 68% and 51% of Reserve analysis indicated that small banks’ CRE loans
surveyed US banks reported tighter standards for CRE as a percentage of risk-based capital stood at 357% in
and C&I loans, respectively.135 Meanwhile, only 30% Q1 2023, compared to 131% for the overall banking

32
industry and 300% regulatory threshold.139 SMBs with in real time). Refining customer segmentation models
heavy CRE exposure could become M&A targets in 2024 around structural archetypes (e.g., capital-intensive
as they seek to shore up their balance sheets. Meanwhile, businesses, transaction-heavy businesses, and cash flow
regulators have already encouraged banks to work businesses, among others) should allow for more tailored
“constructively” with CRE borrowers by offering loan credit approval processes and risk monitoring.
accommodations and extending repayment arrangements.140
Concurrently, there is enormous pressure for banks to
On the deposits side, corporate clients are reducing their pick up the pace of digitization while managing costs. In
bank concentration and diversifying their deposits across particular, many banks are working to determine how
multiple banks. Banks’ funding costs have increased since best to use AI/machine learning (ML) and APIs to improve
they are paying higher rates to corporate depositors. risk selection and achieve operating efficiencies in the loan
value chain, especially in the SMB loan portfolio. For
With this backdrop, what should corporate banks do instance, UK banks have emerged as trailblazers in SMB
to maintain profitable lending margins in 2024 and lending by fully automating loans up to US$100,000.142
beyond? Given the constraints on NIM growth, how can
they strengthen customer relationships to drive fee-based Banks are also looking at how to use embedded finance
business with corporate and institutional clients? as a distribution channel to increase access, especially to
more SMB customers. Embedding real-time payments,
deposit accounts, and capital loans into corporate
Balancing risk, efficiency, and relationships customers’ existing ERP and accounting systems makes
in a cautious lending environment it more efficient for businesses to access financial services
in a unified ecosystem without needing to directly inter-
Corporate banks will face a unique set of challenges act with banks.
going into 2024. With the global economy recovering at
a divergent pace and the ongoing uncertainties around While product and loan origination has seen a lot of
interest rate trajectories, revenue growth is likely to be digital action, these technologies have not yet unlocked
challenged, especially in the United States. In Europe, the efficiencies in loan servicing (figure 14). Standard, day-to-
mounting political pressure to offer higher deposit rates day loan servicing could be automated, providing a
to customers is beginning to disincentivize investors.141 seamless customer experience and omnichannel support.
Digital systems can also autogenerate workflow notices
2024 banking and capital markets outlook

In such a macroeconomic environment, banks should on actions required by corporate clients. This would
strengthen their risk management with alternative data free up relationship bankers to focus on sales, customer
(such as trading data, bank transaction data and repay- service, managing risks, and handling true exceptions.
ment history, customer ratings and reviews on different
platforms, accounts receivable, and cash-balance data

33
 Doing so will also elevate relationship bankers’ role; they Empowering corporate treasurers with
can focus more time addressing the needs of the clients new tools to better manage finances
and reinforcing the personal touch. Adopting a solu-
tion mindset and honing industry specialization should Events leading up to the US bank failures in early 2023
empower relationship bankers to champion an advice- put many corporate treasurers, especially clients of US
based model. Bankers who complement their industry regional banks, under extreme stress. Fearing conta-
specialization with tech proficiency and cross-industry gion, treasurers worried if their deposits were safe, and
fluency are likely to forge stronger client relationships. how their payroll processing and payments would be
negatively impacted. Corporate treasurers in Europe
Corporate banking units should aim to build agile were also on high alert as the collapse of Credit Suisse
staffing models to support customers’ pain points, for unfolded.
instance, by becoming trusted advisors in their climate
transition strategy. In addition to upskilling existing This experience only reinforced the importance
talent pools on honing solution mindset and industry of capital preservation. Boards of directors also
specialization, banks will need to rejigger their work- recognize the importance. According to Deloitte’s
force and elevate commercial bankers’ profiles to make 2022 Global Treasury survey of corporate exec-
it more attractive for young talent to participate in and utives, 96% of respondents say their boards or
champion this cultural change. chief financial officers view enhancing liquidity risk
management as a critical or important mandate.143

Figure 14

Digital technologies can unlock efficiencies in servicing of loan portfolios

Quality data Robust systems Self-service OCR/ML
AI APIs Workflow and RPA Blockchain

Seamless customer Omnichannel service and

interactions with touchless support
experiences, direct plug-in
Clients

integrations, value-added
tools to optimize cashflow

Monitor covenants, Process service

Service bilateral Reconcile and
collateral, liens and requests
loans report
insurance
Bankers and associates

Lights-out operations for Exception-based processing Smart notifications of the Exception-based processing
standard day-to-day with automatic generation of next-best action to with operational data mart,
bilateral loan servicing workflow notices and relationship managers KPIs and metrics that identify
electronic processing issues or unexpected
Mirror client activities or situations
pick up where client stopped
to complete request with no
rekeying

360° relationship and risk view of the client and single source of the truth

Source: Deloitte Consulting.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

34
There is also anecdotal evidence of “de-risking” by Nearly two-thirds of executives responding to Deloitte’s
corporate clients, who seem quite intent on broadening Treasury survey admit that visibility into global cash
the number of banking relationships.144 It is not uncom- pools and risk exposures is a challenge (figure 15).
mon, especially for large corporates, to have 10 or more Similarly, 83% of respondents said they lack visibil-
banking relationships.This may be true for SMBs as well. ity into FX exposures and unreliable forecasts are the
biggest challenges they face in managing FX risks. It
The net result of such bank diversification by corporate appears that even cash flow forecasting misses the accu-
clients has implications on both sides. For banks, share of racy mark.
wallet could shrink as competition for deposits grows. This
is why superior transaction banking services would be one Corporate treasurers are always looking for digi-
of the strongest levers to attract corporate deposits and tal and automated solutions to help make better and
increase fee income. Looking from the lens of corporate quicker decisions. Advanced analytics and AI should
customers, the flip side of diversification is higher fragmen- allow banks to build agile cash flow forecasting capa-
tation. It may be harder for corporate treasurers to attract bilities and allow customers to see consolidated views
special attention and get a global view of cash pools across from multiple accounts in real time through APIs.145
different subsidiaries and businesses to manage liquidity. As an example, Citi Treasury and Trade Solutions
In the past, treasurers benefited from concentrated deposit expanded its partnership with Treasury Intelligence
portfolios, but it is not as straightforward now to gain Solutions to offer its clients automated workflows to
efficiencies from cash sweeping and rate arbitrage. predict their cash positions and working capital needs.146

Figure 15

More digitization and automation in treasury can address the many

pernicious challenges treasury teams face

Key challenges treasury organizations face

Visibility into global operations, cash, and financial risk exposures 64%

Digital capabilities 59%

Inadequate treasury system infrastructure 53%

Liquidity 48%

FX volatility 45%

Areas in treasury that should become more automated in the next 2–3 years
Cash flow forecasting 78%
2024 banking and capital markets outlook

Cash management 74%

FX and interest-rate risk management 64%

Treasury accounting 59%

Source: 2022 Deloitte Global Treasury survey.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

35
 Modernizing B2B payments for efficiency and ledger-based, account-to-account, cross-border
transparency payments network, has enrolled more than 30 banks
and is facilitating payment flows across 90 countries.149
For decades, trillions in B2B payments, primarily in
checks, have been fraught with inefficiencies. In the Meanwhile, initiatives to modernize B2B payments with
United States alone, check payments accounted for RTP are expanding across different countries. After some
US$8.9 trillion in 2022.147 Meanwhile, ACH payments delay, FedNow is a reality in the United States, although
amounted to US$52.5 trillion in 2022 (increasing adoption is not yet widespread. In a conservative growth
107% over the last 10 years), most of which were scenario, Deloitte predicts that real-time payments could
settled the same day or the next business day.148 replace US$2.7 trillion in ACH and check-based B2B
payments in the United States in 2024 (figure 16). In an
But, slowly, digitization in the B2B space is acceler- aggressive growth scenario, that number could jump to
ating. Payment networks dominant in the consumer US$4.1 trillion (refer to, “Fasten your seat belts: Real-
payments space are expanding beyond the “card” rails time, business-to-business payments are preparing for
to grow their B2B payments volumes. For instance, takeoff,” for more details).
Visa B2B Connect, the card network’s distributed

Figure 16

US businesses will likely shift some payments to real-time payment rails

Expected shift in B2B payments from regular ACH and checks to real-time payment rails, 2024–2028

US$40T
Aggressive adoption
US$37 trillion
US$30T

US$20T
Conservative adoption
US$19 trillion

US$10T

US$0T
2023 2024 2025 2026 2027 2028

Source: Deloitte Center for Financial Services forecasts based on Nacha’s B2B ACH transaction data and the Federal
Reserve’s commercial check transaction data.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

36
Despite the overall general enthusiasm, however, some many banks selective about the loans they approve.152
banking institutions may be conflicted about promot- In particular, SMBs tend to face high rejection rates and
ing RTP, given the risks. While faster payments benefit are often asked to put in valuable collateral and third-
clients, it would also risk banks’ float income in today’s party guarantees in response to banks’ de-risking efforts.
high-rate environment.
Banks could address this challenge by building credit
One incentive for embracing the RTP phenomenon is the models based on alternative data, as in the case of SMB
early-mover advantage—the chance to win a bigger slice loans discussed earlier. Stronger legal enforceability,
of corporate clients’ payments transactions. Additionally, especially around collateral, should provide more secu-
real-time payments would add more transparency to the rity to banks and allow them to ease access to trade
fragmented and unpredictable B2B payments landscape. finance, at least to some degree.
Many RTP systems, including FedNow, use ISO 20022
messaging standards that enable two-way communi- Digitization of trade finance should make some of these
cation, such as “request for payment,” “request for underwriting processes more efficient. For instance, digi-
information,” and “confirmation of payment.” These tal data validation with AI could help with KYC/AML
standards should allow banks to overlay richer insights checks. Some banks have also been exploring blockchain
and value-added services and help modernize B2B to replace paper invoices and to identify if these trades
transactions end to end, such as automated matching of are financed by other financial institutions. However,
purchase orders to invoices, virtual account services, e-in- standardization of trade and finance terms remain critical
voices for payment initiation, and account reconciliation. challenges, along with the lack of sophisticated systems
at SMBs to provide visibility of their trades for effective
Banks should prepare to support direct integration of blockchain integration.
transaction data into clients’ enterprise resource plan-
ning and other back-office systems to offer real-time or Successful digitization in trade finance also depends on
near real-time insights on payments transactions and digitization of trade. To date, companies across many
liquidity positions. countries still need to present a paper bill of lading153
at shipping ports to unload their containers on the dock.

Challenges to accelerating the Much of international trade has remained manual,

digitization of trade finance not for the lack of digital technologies, but due to the
lack of uniformity in legal frameworks. Fortunately,
Trade finance is another area that is long overdue new regulations could propel the much-awaited
for modernization, particularly given how import- transformation in trade. The International Chamber
ant trade is for the global economy. Domestic and of Commerce (ICC) laid out a road map for digi-
cross-border trade credit comprised more than 40% tal trade in financial services in 2020, and the UN
of the world GDP, or US$35 trillion in 2022.150 Commission on International Trade is leading a new
Model Law on Electronic Records (MLETR) to recog-
But global trade has a US$2 trillion financing gap, especially nize the legal validity of electronic trade records.154
in the emerging economies, among SMBs, and women- Taking inspiration, the United Kingdom became the
led businesses, according to Asian Development Bank.151 first G7 country to sign the Electronic Trade Documents
While this may seem like a rich opportunity for banks, Act into law in July 2023, which recognizes electronic
particularly in developing markets, banks often have documents as the same legal outcome as paper docu-
2024 banking and capital markets outlook

inadequate data to inform trade financing arrange- ments.155 The new regulation is expected to be a big win
ments. In several instances, the complexity and costs for digital trade, not just in the country but globally.156
of complying with AML and KYC regulations make

37
 BOLSTERING REVENUE GROWTH IN ASSET SERVICING

Asset servicing revenues have remained pressured The recent collapse of crypto exchanges has Staffing models would likely change to align with a
in the first half of 2023, mimicking the constrained underscored the importance of having regulated follow-the-sun approach, especially for custodians
revenue growth in asset management in 2023.157 crypto custodians. European banks are ahead of outside North America. Firms should prioritize
With many asset management clients expecting their US competitors in the digital assets custody automation to gain straight-through processing
their assets under management (AUM) to decline game, in part due to a proactive regulatory stance efficiencies, which could also reduce the quantum
or remain flat year over year, servicing revenues are to bolster investor protection.159 In July 2023, of trade exceptions requiring a resolution and
not expected to deviate from this trend. Société Générale became the first bank to get a ultimately lower the rate of settlement fails. But
digital asset service provider license to operate as at the same time, they should build plans to deal
To grow revenues, some back-office and middle- a crypto custodian and trading desk in France.160 with settlement failures and prepare their teams
office-focused firms should continue to move to deal with any regulatory requirements occurring
up the value chain and strengthen their front- Transition to T+1 settlement in the United States, due to settlement failures.
office capabilities. CACEIS, a subsidiary of Crédit Canada, and Mexico by May 2024 will likely consume
Agricole group and Santander, acquired Royal most of custodians’ operational bandwidth, as Custodians would also need to prepare their clients
Bank of Canada’s European asset servicing only about one-third of American and Canadian for this transition. While larger institutions may be
business to expand its front-to-back capabilities.158 custodians in a Citibank survey were ready for ready, SMB clients may require help to modernize
T+1 transition.161 Custodians should participate their systems to send instructions on a timely basis
Digital assets custody is another emerging topline in industrywide testing, which began in August or self-affirm by the required time.
growth opportunity in the asset servicing industry, 2023, to iron out system and process deficiencies.
one that is marked by high price competition.

38
Investment banking and capital
markets: Rejiggering business
models and leading with cutting-
edge technology
PRIORITIES FOR INVESTMENT BANKING AND CAPITAL MARKETS FIRMS IN 2024 AND BEYOND

Investment banking businesses will experience trading arm could see limited growth opportunities investing in AI technologies, large investment banks
modest growth in 2024. As the global economic as lower volatility continues to impair FICC and must fine-tune their input data to differentiate
recovery continues to build steam, restructuring equities trading income. Overall, scale will remain their machine learning models. They may also
services will be highly sought after, particularly important and will benefit larger players who will need to vie for data scientists and AI specialists
in the CRE and technology sectors. As a result, continue to dominate certain markets. Others will in an undersupplied talent pool and consider
refinancing, sustainability-led initiatives, and event- be forced to specialize more than ever and make how large language models (LLMs) can cut down
driven acquisitions should boost issuances and clear strategic choices. on labor costs. Finally, investment banks have a
advisory revenue. But the lack of megadeals and unique opportunity to support climate innovation
a languishing M&A market could shift competitive The investment banking business should selectively by offering products and infrastructure that build
dynamics from large US institutions to smaller experiment with generative AI to boost productivity more credibility into nascent carbon markets.
European banks and boutiques. Meanwhile, the in front and back offices.Since the buy side is also

After a year of disappointing performance, investment Given the current state of investment banking and capital
banking and capital markets businesses should experi- markets, what can we expect going forward in 2024?
ence modest growth in 2024. But this will come with And how should executives adapt to the new competitive
some new challenges, including the need to modernize dynamics, the proliferation of AI, and evolving talent
digital infrastructure, allocate capital more judiciously, models, even as cost and capital pressures increase?
and ensure the full promise of generative AI is realized.

Trading has been a major revenue producer for banks Revival in demand for advisory services
in the last several years, thanks to higher market vola-
tility. Global investment banks pulled in an average of The momentum within the underwriting and advisory
US$150B in FICC and equities revenues in the last three business should continue into the next year, driven by
years, as clients hedged foreign exchange, interest rate, stronger market sentiment, lower volatility, and more
and energy price exposures.162 But as volatility declined attractive valuations—albeit at a slow and varying pace.
2024 banking and capital markets outlook

to prepandemic levels, FICC and equities trading income The rising cost of debt is also expected to drive demand
in the first half of 2023 were down meaningfully.163 for IPOs and other equity issuances. The M&A deal
Underwriting and advisory businesses, on the other pipeline also continues to build up. Excess corporate
hand, are beginning to show signs of improvement. cash and private equity dry powder should also result
in a stronger recovery in M&A fees. Additionally,

39
 as companies adapt to shifts in the global economy, uncertainties as well as lagging recovery in the region.
restructuring services are expected to remain in high In contrast, APAC region should experience stronger
demand, especially in CRE and technology sectors where growth in underwriting and advisory, fueled by rising
clients will look to navigate through unchartered terri- competition in the technology and fintech sectors. The
tory. Much of the 2024 recovery will be triggered by a Middle East is another bright spot for listings where
combination of refinancing, sustainability-led initiatives, several businesses have launched their flotations.
and event-driven acquisitions. For these reasons, reve-
nue from issuances and advisory is expected to outpace
the trading division in the next year (figure 17).164 Shifting competitive dynamics
More stable monetary policies and lower market vola-
tility in many regions should crimp trading revenue The share of big investment banks in the global advi-
growth. Nevertheless, investment banking revenues may sory fee pool has gone up since the financial crisis,
not reach the highs of 2021 in the near term. with US banks leading the charge. However, the top
10 global banks experienced a drop in market share
In the United States, one could expect higher deal and recently—from 41% in 2020 to 35% in 2022.166
issuance activity due to greater valuation certainty Lack of megadeals and a less vibrant global M&A
as rates become more stable, the need for new fund- market may have contributed to this decline. But whether
ing, and a backlog of deals, particularly in the tech- they can recapture their lost market share or whether
nology, consumer, and health care industries.165 European players stage a comeback and boutique firms
However, one can expect a subdued environment continue to nip away at large-value deals is yet to be seen.
in Europe in the short term, given the geopolitical

Figure 17

Advisory and issuances will drive the recovery for most investment banks
Investment banking revenue forecast
FICC Equities Advisory and issuances

Forecasts
US$120B

US$100B

US$80B

US$60B
US$40B

US$20B

US$0B
FY20 FY21 FY22 FY23 FY24 FY25

Source: Deloitte Center for Financial Services analysis of Tricumen data on top 14 global investment banks.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

40
The bulge bracket US investment banks should continue Private capital is another growing competitive threat
to lead the market. Scale has helped these banks grow to banks, from lending to trading activities. US private
market share and earn their share of revenues in a chal- markets raised more than US$250 billion in new capital
lenging environment. Their higher capital levels should in 2022, substantially higher than IPOs.170 These days,
help them weather the ongoing margin squeeze, as they private capital is not limited to small specialty deals.
invest in emerging technologies and retain high-perform- Even as public market issuances pick up in 2024, the
ing bankers. attraction of higher valuations, higher rates, and the
rising demand for sustainable finance will likely push the
However, there could be a resurgence among European demand for private capital. There may also be increased
banks as they focus on specialized services globally. In buyout activity in 2024.
anticipation of deal flow revivals, some European players
are looking to acquire small boutique firms, particu- One should also expect greater penetration by large
larly those that operate in the technology and energy hedge funds to attract talent from traditional invest-
sectors. For instance, Italy’s Mediobanca has agreed to ment banks as well as boost presence in commodities
buy London-based Arma Partners to capture growing trading. This will be particularly challenging for smaller,
corporate demand for advisory services on tech deals.167 less diversified players. Investment banks should look at
The prospects for European banks in the US market look strong partnerships with other private-market partici-
more challenging. Capital constraints, lack of scale, and pants and hedge funds to drive growth and innovation
perhaps not enough service differentiation can limit the and search for potential new revenue streams to their
potential of European banks. Strategic partnerships and clients.
hiring and retaining star talent in selective areas will be
key to expanding their presence, but this will come at a
significant cost. APAC banks are also looking at a larger Generative AI as a productivity
share of the global fee pool, especially with rising M&A tool in the front office
and capital market opportunities in China and India.
Artificial intelligence is not new to investment banking.
Some boutique firms, on the other hand, can be expected Machine learning/deep learning algorithms and natu-
to fight hard and expand their offerings. They have ral language processing techniques have been widely
performed well in the current environment—espe- used for years to help automate trading, modernize
cially in the tightly contested middle-market M&A. risk management, and conduct investment research.
US boutique firms, for instance, featured in most of the Multiple investment banks have begun implementing
high-valued deals in the first half of 2023. Centerview use cases for generative AI, which could well be one of
Partners was one of the top M&A advisors by value.168 the most transformative technologies for the industry.
What they lack in capital, they make up in repeat Our analysis suggests that the use of generative AI can
business, specialized services, and strong talent. Even boost productivity for front-office employees by as much
as deals dried up, they continue to rejigger talent and, as 27%–35% by 2026, after adjusting for inflation.171
in some cases, even expand into new services. Lazard, (Please refer to this Unleashing a new era of productivity
for instance, is looking to expand into underwriting as in investment banking through the power of generative
it looks for new growth.169 The relatively smaller size AI for more details.) This translates to an additional
also helps them manage expenses more efficiently and revenue of US$3 million to US$4 million per front-office
remain competitive to nip off revenue spillover from employee (figure 18).
bulge bracket banks.
2024 banking and capital markets outlook

41
 Figure 18

Generative AI will boost productivity unevenly across investment banking

business lines
Productivity gains per full-time employee (US$ million)
Average 2020–2022 2026 base case scenario 2026 best case scenario

15.3
14.4

11.3

6.5 6.8

5.2
4.3 4.5
3.7 3.9
3.3
2.8

Across all IB FICC Equities Investment

businesses banking division

Note: Investment banking division includes equity and debt issuances, and M&A advisory activities.
Source: Deloitte Center for Financial Services analysis of Tricumen data.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

Generative AI also may alter the dynamics with buy-side the gap among market participants and may put smaller,
clients. As clients embrace this technology, the outputs boutique firms at a disadvantage. Scale and optimal
they are able to generate with greater efficiencies may capital allocation will become even more critical. Banks
reduce dependency on the sell side. Some clients may should focus on areas that have the most potential for
want to independently develop their own value streams transformation through generative AI.
and turn to investment banks only for the most high-val-
ue-adding services. AI may further democratize finance, Such an infusion of AI will most likely come with poten-
reduce barriers to entry, and reduce market inefficiencies, tial legal, reputational, and other operational risks.
leading to shrunken spreads. The input data in such Banks should look for able partners in fintechs and
models could be the differentiating factor. But because vendors. continuously apprise themselves of the tool’s
investments needed to develop such data models and evolving efficacy and introduce it to their value chain in
LLMs are substantial, this technology may also widen a piecemeal fashion.

42
Investing in technology talent and Pursuing innovation amid new
augmenting investment bankers’ tech skills capital constraints

Investment banks have had to pivot their talent New regulatory requirements regarding capital and
strategies from a hiring spree in 2021 to workforce liquidity will be another constraint for investment
reduction plans in 2023. From bulge bracket play- banks—especially their capital-intensive trading arms.
ers to boutique firms, several investment banks have The additional capital required in the recent Basel III
reduced their workforce recently. Some banks are “endgame” rules for banks above US$100B in assets174
also hardening their stance on return-to-office poli- should impact capital allocation to prop trading, tech-
cies; others are rejiggering their compensation pools.172 nology investment, and plans for market expansion.
Furthermore, these rules could materially constrain large
However, these strategies are not uniform across the banks’ ability to support capital markets activities as
spectrum. Layoffs and new compensation policies at counterparties in financial derivatives, which could further
large banks are affording boutiques and smaller play- elevate the cost of capital for the end users as well.175
ers to attract this talent. Banks in the APAC region
are also planning to increase headcounts as they Also, the move to T+1 settlement in several coun-
foresee a stronger deal pipeline. Daiwa Securities,173 tries, including the United States, will require banks to
for instance, plans to hire more staff, and buy boutique prepare for potential increases in settlement risks and
firms as it accelerates its global push. enhance other risk management features. Investment
banks must also continue to monitor and prepare for
Despite the efforts to contain talent costs, the war for regulatory changes for crypto assets. Financial Stability
talent in technology remains a pressure point. Given Board (FSB) recently launched a global framework
the market demands and the need to keep pace with for the oversight and regulation for crypto activi-
technology for competitive differentiation, investment ties, building on the notion that the same activities
banks have little choice but to vie for the brightest—and with similar risks should have similar regulations.176
the most expensive—data scientists and AI specialists.
The demand for these skills has outpaced supply. Recent Focus on cost discipline will be another differentiating
layoffs in the tech sector may have provided some relief factor. Recently, investment banks’ expenses have grown,
on this front, but looking ahead, most employers, includ- largely due to growth in technology support staff, higher
ing banks, will need to pay dearly for such unique talent. fixed compensation, as well as rising costs of key office
locations. There are some signs of improvement, though.
However, one potential avenue to cut back on talent For instance, the proposed move to abolish the banker
costs in the technology area is coding. The stunning capa- bonus cap for Material Risk Taker (MRT) employees
bilities LLMs have in producing and correcting code in the United Kingdom may help banks operating there
should be an opportunity to save labor costs in this area. bring down their current compensation structures.177
Also, the trend toward low-code/no-code environments Technology investments made in the last few years are
may help obviate the need for programming talent, espe- also paying off through additional efficiencies in the front
cially at the junior levels. office and back office.

Also, given the rapid pace of technological changes, At the same time, investment banks will need to
investment bankers should continue becoming more continue financing and supporting climate inno-
tech-savvy, especially as innovations from and within vation. Green finance and carbon markets are
2024 banking and capital markets outlook

artificial intelligence expand. Corporate and buy side ripe for investment banks to step up their role. In
will want to know how such shifts could impact their fact, some banks are investing in platforms that
companies and industry. The rising trend of industry will ease clients’ participation in carbon credits.178
convergence will likely also impact M&A synergies. In addition to providing liquidity, investment banks
Dealmakers should possess strong tech and cross-in- should develop a more robust trade infrastructure
dustry fluency. buttressed by reference and market data, and efficient
settlement platforms. They also must work to securitize
carbon credits and develop tradeable instruments that
provide price signals to other entities.

43
 Market infrastructure:
Reinventing business models and
becoming more indispensable
to clients
PRIORITIES FOR MARKET INFRASTRUCTURE FIRMS IN 2024 AND BEYOND
Traditional exchanges are grappling with intensifying also expected to take market share away from models. Migrating markets to the cloud will also
competition, from niche players to competitors from peers in Japan and the European Union. be imperative to reducing latency, executing orders
other regions. Some new rivals will be specialist faster, and monitoring transactions across market
exchanges that are focused on sustainability, Going forward, the exchanges that have long served participants. Ancillary businesses will become more
corporate governance, and price transparency. as go-to trading hubs will need to attract global important to creating enduring relationships with
Others could come from regions with fast-growing investors with dual listings and support from other customers. As a result, large exchanges should
economies and increasing trading volumes. In fact, members of the trading ecosystem. They should continue expanding services that cater to corporate
it is expected that the market cap of exchanges in also improve how data is packaged and delivered, clients, such as risk monitoring, carbon trading,
emerging markets will exceed that of US exchanges such as with flexible feeds and mobile solutions and infrastructure for digital securities.
by 2030. Canadian and Australian exchanges are that customers can plug into their analytical

Traditional exchanges globally are at a critical junc- Exchanges continue to seek

ture. Strategic choices they make now could determine new ways to evolve
whether they continue to grow—or even retain—market
share and garner higher profits. Over the next several Incumbent exchanges should soon find themselves pitted
years, profitability will be pressured by intensifying against new rivals. Some competitors will be special-
competition from niche exchanges, the growth of trad- ist exchanges that cater to niche areas, such as those
ing venues in emerging markets, and increasing demand focused on sustainability; others will be up-and-coming
for diversified services from clients. At the same time, exchanges in emerging economies. For example, a new
exchanges have a unique opportunity to deepen their exchange called the Green Impact Exchange (GIX) plans
value proposition to customers by improving listing to go live in 2023. The GIX will require companies to
services and migrating markets to the cloud. adopt principles that promote environmental goals and
will delist those that don’t adhere to these principles.179
Entering 2024, exchange leaders should ask themselves: Singapore’s Climate Impact X (CIX), an exchange for
How are customer expectations changing as new entrants the voluntary carbon market, also launched in 2023.180
become more prominent? What business and service lines There is also the Abaxx Exchange, a commodity futures
can we enhance to become indispensable to corporate exchange that focuses on energy markets and natural
clients? How can we use emerging technologies—particu- gas.181
larly data feed infrastructure, cloud-powered computing,
and generative AI—to give traders a competitive edge?

44
Other exchanges that have come to market in recent years London and New York. In 2022, the Americas accounted
include the fee transparency-focused Members Exchange for 27.4% of equity trading volumes, less than half of
(MEMX) and the corporate governance-minded Long- the share of APAC’s volumes.182 And the market cap
Term Stock Exchange (LTSE). Of course, it is hard to tell of exchanges in emerging markets should exceed the
how much market share these new exchanges may take. value of US exchanges as soon as 2030, according to
economists at Goldman Sachs (figure 19).183 The fast
In addition, exchanges in the Asia-Pacific region are pace of economic growth in Mainland China and India
becoming more of a threat to established venues in will help emerging markets command a larger slice of

Figure 19

The value of exchanges in emerging markets should surpass US exchanges

in 2030
Total projected market capitalization of exchanges by region

US markets Non-US developed markets Emerging markets

US$65T
US$119T

US$36T
US$68T

US$42T US$43T
2024 banking and capital markets outlook

2030 2050

Notes: Real-dollar value, 2021.

Source: Goldman Sachs research.

deloitte.com/us/en/insights/research-centers/center-for-financial-services.html

45
 the global equity market. In total, the share of emerging new sources of value using innovative tools and tech-
markets is expected to rise from 27% in 2022 to 35% nologies. In fact, if exchanges lag in making the tech-
by decade’s end. US exchanges, by comparison, could see nology upgrades that alternative trading systems and
their market share shrink from 42% to 35% in that time off-exchange market venues are undertaking, they could
frame. Within developed economies, influence could also soon encounter interoperability issues with brokers and
shift: Canadian and Australian exchanges are poised to traders. The sweet spot—where data licensing, cloud
grow at the expense of peers in Japan and the European computing, and artificial intelligence techniques inter-
Union.184 sect—should be a particularly strong driver of growth
in the coming years.
Going forward, exchanges will have to maintain more
of a global focus, particularly on developing economies Exchanges already derive a sizable share of revenues
as they continue to grow. International issuers already from data services, but there is ample opportunity to
make up about 20% of listings on the New York Stock grow this pie even more. There is not only a large appe-
Exchange (NYSE),185 and NYSE plans to expand its tite for real-time trading data, but more firms are looking
global customer base even further, especially in countries to purchase pricing, reference, and valuation data as
that have a stronger IPO market. It recently joined forces well. In 2022, global spending on market data exceeded
with both the Tel Aviv Stock Exchange (TASE)186 and US$37.3 billion.193 Exchanges also need to continue
the Johannesburg Stock Exchange (JSE)187 to encourage to improve how data is packaged and delivered. Both
dual listings on their respective platforms and collaborate sell-side and buy-side clients increasingly expect more
on the creation of new products. This follows similar convenient and flexible feeds and mobile solutions they
agreements that NYSE made in Indonesia and Singapore can plug into their analytical models for competitive
to establish a bigger presence in the burgeoning Asia- advantage.
Pacific region in 2022.188 The Dubai Financial Market
has also been working to entice foreign companies that Migrating data to the cloud as urgently as possible
may be interested in dual listings on two exchanges.189 will also be key to delivering data-driven, user-centric
Similarly, Cboe, which has traditionally been less focused services. In fact, large exchanges point to cloud-based
on non-US listings, is intent on attracting companies to platforms as “the next generation of how markets will
its European trading venues.190 operate.” The CME Group expects its cloud adoption to
reduce latency. Its investments should also bring massive
The increasing competition is also placing more urgency datasets under one taxonomy that can be tapped for
on efforts to assess how exchanges can make their listing real-time risk mitigation and AI-driven decision-making.
services more appealing to corporate issuers, domes- These efforts will make it easier for client firms to interact
tic and foreign alike. For its part, the Toronto Stock with the Chicago-based exchange.194
Exchange (TSX) is working with banks and investors to
generate more support for domestic companies to list on Similarly, Nasdaq’s cloud systems are designed to
its platform.191 Some governments are even stepping in to analyze multiple markets simultaneously and execute
bring business back to its capital markets. For example, many orders within seconds.195 It expects to migrate
the British Treasury plans to implement “common sense” two markets by the end of 2023 and plans to move the
reforms, such as simplifying prospectuses; easing rules rest in coming years. The exchange’s leaders have also
for buying, holding, and selling shares; and developing noted that its cloud-based risk management business can
a new kind of market that will allow private companies monitor transactions across banks and mitigate financial
to access capital markets without a listing.192 crimes.

Looking over a longer-term horizon, exchanges should

Doubling down on data and technology consider how quantum computing can improve the
performance, speed, and cost of market operations. The
Exchanges have been investing in data capabilities for immense processing power of quantum algorithms should
years, and now they should take bolder steps to unlock make it possible for exchanges and market participants

46
to perform tasks that were previously deemed too the speed and volume of trading on exchanges. It could
complicated, such as tasks in derivatives pricing,196 order also usher in a new demand for new types of market
matching,197 fraud detection and risk management,198 data from exchanges.
and portfolio optimization through natural language
processing.199 A Deutsche Börse pilot, for example, found
that quantum computing could reduce the time required Exchanges want to be more
for a business risk model simulation with 1,000 inputs than just exchanges
from multiple years to less than 24 hours.200 While it
may be a few years before this nascent technology can While listings and market data continue to be prized
be applied to practical trading applications, some large assets, many exchanges are expanding into other areas
financial institutions have started to work backward to of the financial system to create more sticky relation-
identify problems that quantum technology may be best ships with corporates, buy-side, and sell-side firms.
suited to solve.201 These ancillary businesses will become more critical as
exchanges contend with heightened competition, increas-
US banks and financial institutions are also exploring ing fee pressure, and the possibility of stagnated trans-
ways to maximize the value of data repositories they action volumes.
built for the SEC’s Consolidated Audit Trail (CAT),
which became fully operational in 2023. The consoli- Several exchange operators are exploring strategic
dated tape now provides organizations with a coherent acquisitions that can bolster their value proposition.
view of current and historic order and trade life cycle Nasdaq, for example, is accelerating its decade-long
events, which they can mine on cloud-based data plat- push to supplement traditional revenue streams with
forms that support advanced algorithms.202 These tools software-based businesses that primarily offer pretrade
can unlock new insights, for example, by allowing sell- and at-trade risk management and anti-financial-crime
side analysts to review systematic trading patterns and technology. In June 2023, the exchange made its largest
providing a window for them to advise clients on new ever purchase in a US$10.5 billion deal for a fintech
trade opportunities. Over time, merging equities data that will be integrated into its business line dedicated to
with other securities may bring an even more expansive supporting corporate clients.206 About one-third of the
range of trades across asset classes. Nasdaq’s recurring revenues now stem from software
subscriptions, and it is aiming for the share of total reve-
Finally, generative AI will transform securities exchanges nue attributable to its solutions business to grow from
globally. Some institutions are already engaged in pilots 71% to 77% by the end of 2023.207
of various kinds. Nasdaq, for example, is exploring how
the technology can more effectively spot financial crime, a UK exchange operators are also branching into new
capability the company wants to advance as “deepfakes” areas to help set the foundation for future growth. The
become more sophisticated and pervasive.203 It is also London Stock Exchange (LSEG), for example, entered
assessing how generative AI can assist in building code, into a 10-year partnership with Microsoft to catalyze
writing blog posts, and summarizing legal documents.204 the migration of its infrastructure to the cloud. The
partnership also plans to develop products that can be
Meanwhile, this technology also has enormous potential delivered through Microsoft’s offerings, such as data and
to transform trading operations, both on the sell side analytics shared on the Teams messaging platform.208 In
and buy side. In the near term, traders can use LLMs to addition, LSEG is also expanding into green financing;
process large amounts of text to inform trading strate- its recently launched voluntary carbon market sets listing
2024 banking and capital markets outlook

gies. Some big banks, for example, have started using rules for investment funds and businesses to raise capital
generative AI to pick up on trade signals by deciphering for carbon credit-yielding projects.209 Other alternative
speeches and messaging from the Federal Reserve and revenue streams that exchanges can pursue include plat-
other central banks.205 These innovations could impact forms to host fintechs and other ecosystem players, direct
market access that targets specific customers, and smart
contract-based KYC processes.210

47
 Digital assets continue to attract new market infra- fact, the Association for Financial Markets in Europe
structure firms, which can play a unique role in offering predicts that the transition from T+2 to T+1 shortens
proper governance and cross-market risk management. the settlement operations window by 83%.212 This trun-
European institutions will likely have a leg up piloting cated timeline will impact how institutions interact with
digital securities, given the flexibility that some regu- global clients. Large North American firms may adopt
lators are extending to that market. Luxembourg, for the “follow-the-sun” model of assisting clients from
example, adopted a law that expands the definition of multiple global locations, but other institutions may need
financial instruments to include products issued on the to rely on second/staggered shifts. In addition, non-US
blockchain. This will open the door to the greater issu- investors could begin prefunding FX trades to accom-
ance of tokenized securities.211 The Luxembourg Stock modate the T+1 settlement cycle. Investment managers
Exchange (LuxSE) is only issuing tokens rooted in fiat outside the United States may need to sell a day earlier to
currency that qualify as debt financial instruments, but make US funds available for trades, which could impact
exchanges may soon facilitate the launch of other novel their other holdings.213
listings. Exchanges and market infrastructure firms can
instill credibility into blockchain-issued instruments by Costs are widely expected to rise if there is an increase
building out complementary services, such as repo solu- in trade fails, which will require higher margins, more
tions and digital custody. collateral, and increased funding. Firms can bring about
operational efficiencies by working to automate post-
However, expanding revenue streams into nascent trade processes that currently require manual interven-
markets is fraught with some uncertainties. Digital tion and moving to straight-through processing. One
assets and securities tokenization do not have a globally area ripe for automation is the allocation of institutional
consistent regulatory framework. Similarly, voluntary trades; only about 20% of allocations in the United
carbon markets could benefit from greater regulatory States occur when markets are open.214 Increasing trad-
guidance and clarity, not to mention ambiguous legal ing-day allocations can provide more time to process
and accounting standards. Finally, carving out too deep confirmations and execute timely affirmations.215 In addi-
of a niche may subject exchanges to antitrust concerns tion, the industry should update service-level agreements
and/or claims of data monopolization. to improve the consistency and reliability of information
shared between market participants.216 Roughly four out
of 10 trade fails are the result of incomplete or inaccurate
Time’s up for the T+1 transition settlement instructions and unavailable securities.217

The move to an accelerated trade settlement period in There could also be more friction in securities lend-
Canada and the United States continues to be a major ing. Not only will lenders have a shorter time frame to
undertaking. Many firms are scrambling to prepare identify and recall securities, but custodians and agents
before the May 2024 implementation date. The transi- may not receive sufficient notice to return them if batch
tion to T+1 is expected to reduce credit, counterparty, processing limits their access to real-time information.
and operational risks arising from unsettled trades. But This can lead to an uptick in breaks and fails, as well as
crossing the finish line—and adapting to new workflows an increase in penalties. As a result, global firms may be
once the changes take effect—will be a major hurdle. hesitant to extend loans if they believe time zone differ-
ences will prevent them from making a recall on the US
While the shifts to T+3 and T+2 were largely technol- and Canadian trade date, which have the latest market
ogy-driven, accelerated settlement will trigger many closing times among developed economies.218
changes in processes and behaviors. Chief among them
is reduced time available for post-trade operations. In

48
Endnotes
1. IMF, World Economic Outlook Update, July 2023. 28. Rohit Chopra, “Laying the foundation for open banking in the
2. Ibid. United States,” Consumer Finance, June 12, 2023.
3. Ibid. 29. Jaren Kerr, “Canada’s big banks log 13-fold rise in loan loss
4. Ibid. provisions,” Financial Times, May 28, 2023.
5. US Federal Reserve, “FOMC projections materials,” June 14, 30. Tim Partridge, Richard Rosenthal, Val Srinivas, and Abhinav
2023. Chauhan, Higher deposit costs will challenge banks, even after
6. Martin Arnold and George Steer, “ECB raises interest rates interest rates drop, Deloitte Insights, July 27, 2023.
back to record high,” Financial Times, July 27, 2023. 31. Nathan Stovall, Syed Muhammed Ghaznavi, and Zain Tariq,
7. Shaloo Shrivastava, “Bank of England rates set to peak at “CDs jump at US banks as institutions market increasingly
5.75% by year-end: Reuters poll,” Reuters, July 25, 2023. higher rates,” S&P Global Market Intelligence, April 28, 2023.
8. TD Economics, Canadian Quarterly Economic Forecast, June 32. Bernadette Berdychowski, “What’s next for Tampa startup after
15, 2023. its bank collapsed,” Tampa Bay Times, April 3, 2023.
9. Leika Kihara, “BOJ debated prospects of sustained inflation at 33. Gina Heeb, “Online banks winning fight for deposits,” Wall
July meeting – summary,” Reuters, August 7, 2023. Street Journal, June 3, 2023.
10. Federal Reserve Bank of St. Louis, “Board of Governors of the 34. Kate Drew, “BaaS banks outperform regionals in deposit fight,”
Federal Reserve System (US),” August 8, 2023. CCG Insights, May 18, 2023.
11. DCFS analysis of Economist database. 35. Ibid.
12. DCFS analysis of S&P Market Intelligence database. 36. Monica Raymunt, Abhinav Ramnarayan, and Albertina Torsoli,
13. Detlef Glow, “Monday morning memo: A view on the “Europe’s carmakers are competing with retail banks for
European fund flows in money market products,” Refinitiv, deposits,” Bloomberg, July 3, 2023.
May 8, 2023; U.S. Securities and Exchange Commission, “2023 37. Ibid.
Money Market Fund Statistics,” accessed on August 8, 2023. 38. Darragh Riordan and Marissa Ramos, “Deposit outflows
14. European Central Bank (ECB), “July 2023 euro area bank emerge at European banks,” S&P Global Market Intelligence,
lending survey,” July 25, 2023; US Federal Reserve, Senior loan June 15, 2023.
officer opinion survey on bank lending practices, July 2023. 39. Val Srinivas and Abhinav Chauhan, End of cheap deposits:
15. DCFS analysis of S&P Market Intelligence database. Implications for banks’ deposit betas, asset growth, and
16. Allianz SE, European commercial real estate – selectivity funding, Deloitte, 2022, p. 5.
matters!, May 25, 2023. 40. The Economist, “Why America will soon see a wave of bank
17. ECB, “July 2023 euro area bank lending survey.” mergers,” April 20, 2023.
18. Ibid. 41. Srinivas and Chauhan, End of cheap deposits, p. 5.
19. DCFS analysis of S&P Market Intelligence database. 42. ATTOM, “Home-mortgage lending across U.S. falls to more
20. Vaibhav Chakraborty and Xylex Mangulabnan, “CRE loan than 20-year low in first quarter,” press release, June 1, 2023.
delinquency rate at US banks rises sharply,” S&P Global 43. Board of Governors of the Federal Reserve System, “Agencies
Market Intelligence, May 31, 2023; Daria Mosolova, “UK request comment on proposed rules to strengthen capital
lenders report rise in household and company defaults,” requirements for large banks,” press release, July 27, 2023.
Financial Times, April 13, 2023. 44. Paige Smith and Katanga Johnson, “Bank capital rules risk
21. US Federal Reserve, “Federal Reserve Board releases results of shutting out first-time homebuyers,” Bloomberg, July 27, 2023.
annual bank stress test, which demonstrates that large banks 45. Iain Withers, Valentina Za, and Jesús Aguado, “European
are well positioned to weather a severe recession and continue banks flag bad loan risks as global economy falters,” Reuters,
to lend to households and businesses even during a severe July 26, 2023.
recession,” press release, June 28, 2023; Bank of England, 46. Amy Hawkins and Helen Davidson, “Chinese banks try to
“Stress testing the UK banking system: 2022/23 results,” revive housing market with mortgages for 95-year-olds,” The
July 12, 2023. Guardian, March 1, 2023.
22. Center for Regulatory Strategy US, US Basel III Endgame: Key 47. Byron Kaye, “Analysis: Australian banks’ bid to shake
changes, impacts and where to begin, Deloitte, August 2, 2023. mortgage reliance brings new risks,” Reuters, May 16, 2023.
23. US Federal Reserve, “Statement by Governor Michelle W. 48. Rohit Chopra, “The CFPB intends to identify ways to simplify
Bowman,” news release, July 27, 2023. and streamline the existing mortgage servicing rules,” CFPB
2024 banking and capital markets outlook

24. Ibid. blog, June 15, 2023.

25. Center for Regulatory Strategy US, US Basel III Endgame: Key 49. John Marr, “Consumer duty: the journey continues…,” UK
changes, impacts and where to begin. Finance blog, March 8, 2023.
26. European Parliament, “EU AI Act: first regulation on artificial 50. Shinhye Kang, “New players can enter Korea’s banking sector
intelligence,” June 14, 2023. for first time in 30 years,” Bloomberg, July 4, 2023.
27. Center for Regulatory Strategy US, US Basel III Endgame: Key
changes, impacts and where to begin.

49
 51. J.D. Power, “U.S. retail bank customers: stressed and looking to 79. Jean Sideris and Rawad Nasser, “The rise of domestic card
their bank for help, J.D. Power finds,” press release, schemes – taking back control of payments?,” The Paypers,
March 30, 2023. June 16, 2023.
52. Ibid. 80. The Federal Reserve, “Organizations certified as ready for the
53. FICO, “Unlocking hyper-personalization at hyper-scale,” FedNow® service,” June 29, 2023.
accessed September 25, 2023. 81. Rabab Ahsan, “Challenging facing Paze: Jostling for position in
54. Plaid, “Tech Talk: Unlock the future of banking personalization a crowded digital wallet space,” Tearsheet, June 6, 2023.
to win and retain customers,” Plaid blog, July 23, 2023. 82. European Commission, “European data strategy,” accessed
55. Ibid. August 21, 2023.
56. Garret Reich, “8 inspirational ideas for banks from other 83. Pymnts, “Australia reclassifies BNPL as credit while UK and US
industries,” The Financial Brand, January 12, 2022. regulators eye similar actions,” May 26, 2023.
57. Jasmin Baron, “Capital One cardholders can get early access 84. Consumer Financial Protection Bureau, “Director Chopra’s
to Taylor Swift concert tickets — here are the best cards to prepared remarks on the release of the CFPB’s buy now, pay
consider if you want to get in on the presale,” Business Insider, later report,” press release, September 15, 2022.
April 19, 2023. 85. Jarni Blakkarly, “Government announces ‘balanced’ BNPL
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expand eligible data sets,” Bloomberg, April 7, 2023. 86. Klarna, “Klarna launches UK’s first credit ‘opt out’ after
59. Finextra, “Banks must act now to embed themselves in the meeting with MP,” press release, May 23, 2023.
digital identity market,” February 1, 2023. 87. Menes Etingue Kum, Briana Mangialardi, Nakul Lele, and
60. Ryan Browne and MacKenzie Sigalos, “Big banks are talking Marc Bender, “Unlocking the potential of buy now pay later,”
up generative A.I. — but the risks mean they’re not diving in Deloitte Digital, January 27, 2023.
headfirst,” CNBC, June 13, 2023. 88. Ibid.
61. William Shaw and Aisha S. Gani, “Wall Street banks are using 89. Credit Suisse, “The Question 2.0: A framework for answering
AI to rewire the world of finance,” Bloomberg, May 31, 2023. whether scaled incumbent acquirers’ growth can persist,”
62. Catherine Leffert, “JPMorgan Chase aims to create $1.5 billion October 14, 2022.
in value with AI by yearend,” American Banker, May 30, 2023. 90. Credit Suisse, “If software is eating the world… payments is
63. Ibid. taking a bite,” September 7, 2022.
64. Consumer Financial Protection Bureau , “CFPB issue spotlight 91. Will McCurdy, “Adyen moves into embedded finance with
analyzes ‘artificial intelligence’ chatbots in banking,” press dual product launch,” AltFi, October 25, 2022; Jordan McKee,
release, June 6, 2023. “Money 20/20 U.S. highlights: The rise of embedded finance
65. Jean Sideris and Rawad Nasser, “The rise of domestic card and ‘everything’ as a service,” Forbes, November 7, 2022.
schemes – taking back control of payments?,” The Paypers, 92. Satish Lalchand, Val Srinivas, and Jill Gregorie, Using
June 16, 2023. biometrics to fight back against rising synthetic identity fraud,
66. Tsubasa Suruga, “Thailand, Japan and Vietnam lag in Asia’s Deloitte Insights, July 27, 2023.
digital payments rush,” Nikkei Asia, April 12, 2023. 93. Pymnts, “UK APP fraud rules will keep faster payments safer
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July 14, 2023. 94. UK Finance, Annual Fraud report: The definitive overview of
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Conference Call,” July 27, 2023. US dollar conversation rate of 1.2369 in 2022. See: Exchange
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Diary of Consumer Payment choice,” Federal Reserve Bank of 2023,” accessed on September 1, 2023.
San Francisco, May 5, 2023. 95. Payment Systems Regulator, “Fighting authorised push payment
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household debt and credit, August 2023. 96. Anthony Shorrocks et al., Global Wealth Report 2022, Credit
71. Ibid. Suisse Research Institute, September 21, 2022; International
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card fees pits payment companies against retailers,” CNBC, April 2023.
July 30, 2023. 97. Shorrocks et al., Global Wealth Report 2022.
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Mastercard to RuPay or any network soon – What RBI said,” Market Briefing 2023, January 2023.
Financial Express, July 6, 2023. 99. International Monetary Fund, “The global recovery is slowing
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March 2023. Hazuria, Financial services firms can untap global growth by
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77. Firstpost, “After big success at home, how India’s UPI is going 101. Tiburon Strategic Advisors, “Tiburon CEO Summits,” accessed
global,” June 14, 2023. September 25, 2023.
78. Ibid.

50
102. J.D. Power, “Investor satisfaction with full-service financial 125. Banking Exchange, “Global ESG assets to hit $50 trillion by
advisors crumbles as markets fall,” press release, April 4, 2023. 2025,” January 25, 2022.
103. Ibid. 126. Directorate-General for Environment, “Proposal for a directive
104. Angie O’Leary, Griffin Geisler, and Daniel Gottlieb, Taking on green claims,” European Commission, March 22, 2023.
control of health care in retirement, RBC Wealth Management, 127. Richard Satran, “SEC makes ESG issues a top concern in
March 2021. examinations, even before it finalizes new disclosure rules,”
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June 02, 2023. 129. Charles Paikert, “Why Mercer Advisors Is the Leading RIA
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affluent Americans,” July 04, 2023. 130. Corporate and transaction banking businesses comprise
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service and operating models,” July 18, 2023. (CRE) lending; corporate deposits, cash, and treasury services;
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110. Global Market Insights, “Wealth management platform market brokerage; and securities services.
size by advisory mode (Human advisory, robo advisory, 131. St. Louis Federal Reserve, “Commercial and industrial loans, all
hybrid), By deployment model (on-premise, cloud), application, commercial banks,” July 2023.
end-use & global forecast, 2023 – 2032,” accessed 132. St. Louis Federal Reserve, “Real estate loans: Commercial real
August 04, 2023. estate loans, all commercial banks,” July 2023.
111. Keith Berry, “Everything you need to know about pKYC,” 133. Trading Economics, “Euro area loans to non-financial
Corporate Compliance Insights, March 08, 2023. corporations,” accessed August 21, 2023; Euro to US dollar
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clients harness the power of disruptive new AI technology,” “British pound to US dollar spot exchange rates for 2023,”
press release, April 13, 2023. accessed September 1, 2023.
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investors from conflicts of interest associated with the use of 135. Board of Governors of the Federal Reserve System, July 2023
predictive data analytics by broker-dealers and investment senior loan officer opinion survey on bank lending practices,
advisers,” press release, July 26, 2023. July 31, 2023.
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management. Here’s what that means,” Bloomberg, April 21, for the second quarter of 2023,” July 2023.
2023. 137. Allison Nathan, “Top of mind – All about bank (panic)s,”
115. William Shaw and Aisha S. Gani, “Wall Street banks are using Goldman Sachs, April 3, 2023.
AI to rewire the world of finance,” Bloomberg, June 1, 2023. 138. MSCI Real Capital Analytics data, extract as of
116. Hugh Son, “JPMorgan is developing a ChatGPT-like A.I. service September 9, 2023.
that gives investment advice,” CNBC, May 25, 2023. 139. Carl White, “Commercial real estate market stress poses a
117. Tiburon Strategic Advisors, “Tiburon CEO Summits.” challenge to banks,” Federal Reserve Bank of St. Louis,
118. Jacob Wolinsky, “Investors widely prefer small private equity July 6, 2023.
and hedge funds,” Forbes, December 29, 2022. 140. Federal Reserve System, “Policy statement on prudent
119. Ian Heath, “Luxembourg parliament approves bill to boost commercial real estate loan accommodations and workouts,”
retail access to alts fund,” Citywire, July 12, 2023. June 30, 2023.
120. Mark Schoeff Jr., “House unanimously passes bills to expand 141. Cathal McEloy and Cheska Lozano, “European bank stock
accredited investor pool,” Investment News, June 6, 2023. recovery faces test as political pressure on deposit mounts,”
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alternative asset firms to match client flows,” Bloomberg, 142. Interviews with Deloitte experts.
April 20, 2023. 143. Niklas Bergentoft and François-Dominique Doll, “Deloitte
122. Dennis Gallant, “Democratization of alternatives Is coming, global treasury survey,” November 2022.
but it’s not exactly a field of dreams,” ISS Market Intelligence, 144. Tim Partridge and Richa Wadhwani, Commercial Banking
2024 banking and capital markets outlook

January 5, 2023. 2025: Finding a new compass to navigate the future, Deloitte,
123. Savita Subramanian et al., Global Wealth & Investment January 27, 2023.
Management Survey, BoFA Global Research, March 08, 2023. 145. Justin Silsbury, “Maintaining cash flow agility for an evolving
124. Andy Masters, Rohit Sharma, and Francois-Clement treasury function,” The Global Treasurer, November 16, 2022.
Charbonnier, “ESG investing, here to stay,” Deloitte UK, 146. Citigroup, “Citi and TIS launch next generation cash flow
March 22, 2023. forecasting & working capital insights for companies,” press
release, May 1, 2023.
147. Board of Governors of the Federal Reserve System,

51
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annual data,” accessed June 8, 2023. 178. Susanna Twidale and Kirsten Donovan, “Nine global banks
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Growing strong,” accessed June 8, 2023. February 8, 2023.
149. Pymnts, “Visa earnings shine a spotlight on the continuing 179. Green Exchange, “We’re rethinking green investing,” accessed
transformation of B2B payments,” April 26, 2023. August 18, 2023.
150. Arnaud Dornel, Jakob Engel, and Mariem Malouche, “Greasing 180. Climate Impact X, “Who we are,” accessed August 18, 2023.
the wheels of commerce — Trade finance and credit,” World 181. BNN Bloomberg, “Abaxx Technologies goes public and
Bank, February 8, 2023. prepares to launch commodity futures exchange,” video, 8:54,
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finance,” August 2022. 182. World Federation of Exchanges, FY 2022 market highlights,
152. Ibid. March 17, 2023, p. 8.
153. A bill of lading is a legal document issued by a carrier to a 183. Goldman Sachs, “Emerging stock markets projected to overtake
shipper that details the type, quantity, and destination of the the US by 2030,” Goldman Sachs Intelligence,
goods being carried. June 22, 2023.
154. International Chamber of Commerce, “Digital trade roadmap: 184. Ibid.
A communication for policymakers,” May 18, 2020. 185. Ibid.
155. Deepesh Patel and Brian Canup, “Breaking: King signs off the 186. Rick Steves, “NYSE and Tel Aviv Stock Exchange to promote
Electronic Trade Documents Bill,” Trade Finance Global, dual listings,” Finance Feeds, December 7, 2022.
July 20, 2023. 187. Intercontinental Exchange, “The New York Stock Exchange
156. Laura Murray, “Electronic Trade Documents Bill to bring and The Johannesburg Stock Exchange announce collaboration
global trade into the 21st Century,” The Banker, February 2, on dual listings,” press release, October 10, 2022.
2023. 188. Sara Velezmoro, “Exclusive interview with NYSE international
157. Krissy Davis, Julia Cloud, Tony Gaughan, and Doug listings head, Cassandra Seier,” FinanceAsia, April 11, 2023.
Dannemiller, 2023 Investment management outlook, Deloitte 189. Farah Elbahrawy, Archana Narayanan, and Julia Fioretti,
Insights, October 7, 2023. “Dubai Stock Exchange in talks to attract dual listings, CEO
158. Credit Agricole, “CACEIS and Royal Bank of Canada complete says,” Bloomberg, January 23, 2023.
acquisition of RBC Investor Services’ operations in Europe and 190. Nikou Asgari, “Cboe prepares for European stock market
Malaysia,” press release, July 3, 2023. listings grab,” Financial Times, May 24, 2023.
159. Giancarlo, “European Banks overtake US competitors in crypto 191. Geoffrey Morgan, “Toronto Exchange Fights to Keep Stock
custody race,” Blockzeit, July 17, 2023. Listings in Canada Over US,” Bloomberg, April 17, 2023.
160. Emily Nicolle, “Societe Generale Unit gets France’s first crypto 192. HM Treasury, “Chancellor Jeremy Hunt’s Mansion House
license,” Bloomberg, July 19, 2023. speech,” Gov.UK, July 10, 2023.
161. Citigroup, “T+1 – A race against time.” 193. TP ICAP, “Global spend on financial market data totals a
162. DCFS analysis of Tricumen database. record $37.3 billion in 2022, rising 4.7% on demand for
163. Banks Q2 2023 earnings analysis. research, pricing, reference and portfolio management data -
164. DCFS analysis of Tricumen database. new Burton Taylor report,” press release, April 18, 2023.
165. Banks Q2 2023 earnings transcript. 194. Shanny Basar, “CME, Google Cloud Partnership is
166. Refinitiv Eikon Investment banking Q2 2023 report. ‘Transformational’,” Traders Magazine, January 10, 2022.
167. Valentina Za, “Mediobanca buys Arma Partners to boost tech 195. TikTok, “#Nasdaq CEO Adena Friedman opens up about
advisory offer,” Reuters, May 19, 2023. implementing a next generation trading system by moving
168. DCFS analysis of S&P Market intelligence database. #markets to the cloud and using #AI to prevent financial
169. Lauren Thomas, “Lazard launches new arm focused on capital crime. #tech #business #finance #stocks #stock market,” video,
raising,” Wall Street Journal, July 25, 2023. Bloomberg Business, July 19, 2023.
170. JPMorgan, “Is the private markets boom here to stay?,” 196. Shouvanik Chakrabarti, Rajiv Krishnakumar, Guglielmo
February 16, 2023. Mazzola, Nikitas Stamatopoulos, Stefan Woerner, and William
171. DCFS analysis of Tricumen database. J. Zeng, “A threshold for quantum advantage in derivative
172. Simon Foy, “Bankers refusing to return to the office will be pricing,” Quantum 5 (2021): p. 463.
punished, warns JP Morgan,” The Telegraph, April 12, 2023. 197. Rigetti, “Rigetti and Nasdaq team-up to pursue quantum
173. Makiko Yamazaki, “Japan’s Daiwa targets 50% jump in M&A advantage for financial applications,” press release,
advisory with US focus,” Reuters, June 1, 2023. February 15, 2022.
174. Colby Smith, “Regulators announce ‘Basel III endgame’ rules 198. Ibid.
for large US banks,” Financial Times, July 28, 2023. 199. Greg Noone, “Who are the early adopters of quantum
175. Dr. Guowei Zhang, Katie Kolchin, Dr. Peter Ryan, and Carter computers? Big banks, that’s who.,” Tech Monitor,
McDowell, “The Basel III Endgame’s Potential Impacts on January 12, 2023.
Commercial End-Users,” SIFMA, July 11, 2023. 200. Deutsche Börse Group, “Quantum computing opening up new
176. FSB, “FSB finalises global regulatory framework for crypto- business horizons,” press release, March 10, 2023.
asset activities,” press release, July 17, 2023.
177. Craig Coben, “Bonus cap blues,” Financial Times,

52
201. Matt Swayne, “Study: quantum computers can’t match classical 210. David Myers and Robert Walley, Financial markets
computers in derivative pricing…yet,” Quantum Insider, infrastructure case for change: An exchange perspective,
December 29, 2020. October 2019, pp. 9–11.
202. Christopher Stevenson and Andrew McGuigan, Seizing cloud 211. Deloitte Luxembourg, “Luxembourg completes its DLT
opportunities: The consolidated audit trail, Deloitte, 2017, p. 5. framework with Blockchain III Law,” news release,
203. Jeffrey Dastin, “Generative AI comes to Nasdaq, winning over March 27, 2023.
engineers,” Reuters, July 11, 2023. 212. AFME, “T+1 Settlement in Europe: Potential benefits and
204. Ibid. challenges,” September 2022.
205. Ben Wodecki and Deborah Yao, “JPMorgan unveils AI model 213. Bill Meenaghan, “The move to T+1 in the US – who really
to forecast Fed moves,” AI Business, April 28, 2023. benefits?,” S&P Global Intelligence, May 6, 2022.
206. Manya Saini, Anirban Sen, and John Mccrank, “Nasdaq to buy 214. DTCC Connection Staff, “Get ready for May 28, 2024: Top five
fintech firm Adenza for $10.5 billion, rattling some investors,” things to do now,” DTCC, May 24, 2023.
Reuters, June 12, 2023. 215. Ibid.
207. Katherine Doherty and Amy Thomson, “Nasdaq seeks 216. Robert Walley, “Accelerating the settlement cycle: An
predictability in deal to buy Thoma Bravo’s Adenza,” opportunity to modernise across the industry,” Journal of
Bloomberg, June 12, 2023. Securities Operations & Custody 15, no. 1 (Spring 2023):
208. Annabel Smith, “LSEG to spend £2.3 billion on Microsoft pp. 62–67.
cloud partnership as part of expansive 10-year deal with tech 217. Ibid.
giant,” The TRADE, December 12, 2022. 218. Sophie Thomson, “Experts speculate on what T+1 means for
209. London Stock Exchange, “The voluntary carbon market,” securities lending,” Global Investor Group, March 13, 2023.
accessed August 18, 2023.

2024 banking and capital markets outlook

53
 About the authors
Mike Wade Val Srinivas, PhD
[email protected] [email protected]

Mike Wade is a Deloitte vice chair and leader of the US Banking and Val Srinivas is the Banking and Capital Markets research leader at
Capital Markets practice. He is responsible for leading the firm’s the Deloitte Center for Financial Services. He leads the development
overall banking and capital markets sector strategy and aligning of thought leadership initiatives in the banking industry, coordinat-
the firm’s practice areas to optimally serve these clients and the ing the various research efforts and helping to differentiate Deloitte
market. With more than 30 years of experience, he has been a in the marketplace. He has more than 20 years of experience in
trusted adviser to the C-suite of major financial services firms on research and marketing strategy.
topics such as corporate governance, wealth management, and
broker-dealer operations and technology.

Neil Tomlinson
[email protected]

Neil Tomlinson is a Deloitte vice chairman and the global leader

of the Banking and Capital Markets practice. He is also a member
of the firm’s Global Financial Services leadership council and the
leader of the UK firm’s CEO program. He specializes in strategy and
business transformation and has expertise in various areas across
the banking sector, including retail banking, corporate banking,
and wealth management.

54
Acknowledgments
Authors and coauthors Richa Wadhwani, Jill Gregorie, Abhinav Chauhan, Samia Hazuria, and contributing analyst Shivalik Srivastav,
wish to thank the following Deloitte client services professionals for their insights and contributions:

Regional leaders:

APAC
Tony Wood, partner, Deloitte Advisory (Hong Kong) Limited
David Myers, partner, Deloitte Touche Tohmatsu LLC
Yukihiro Otani, partner, Deloitte Touche Tohmatsu LLC

EMEA
Richard Kibble, partner, Deloitte MCS Limited
Alessandra Ceriani, partner, Deloitte Consulting SRL
Juan Perez de Ayala, partner, Deloitte Consulting SLU
Marijn Struben, partner, Deloitte Netherlands

Canada
Raman Rai, partner, Deloitte Canada

Subject matter specialists:

Macroeconomics
Danny Bachman, senior manager, Deloitte Services LP
Ira Kalish, managing director, Deloitte Touche Tohmatsu
Michael Wolf, senior manager, Deloitte Touche Tohmatsu LLC
Shiro Katsufuji, managing director, Deloitte Touche Tohmatsu LLC

Retail banking
Kristin Korzekwa, managing director, Deloitte Consulting LLP
Thomas Nicolosi, principal, Deloitte & Touche LLP
Bill Dworsky, senior manager, Deloitte Consulting LLP
Jeff Todd, partner, Deloitte Canada

Consumer payments
Zachary Aron, principal, Deloitte Consulting LLP
Jade Shopp, partner, Deloitte & Touche LLP
Mike Reichert, partner, Deloitte Tax LLP
Tushar Puranik, managing director, Deloitte Consulting LLP
2024 banking and capital markets outlook

55
 Wealth management
Jean-François Lagassé, partner, Deloitte AG
Kendra Thompson, partner, Consulting, Deloitte Canada
Karl Ehrsam, principal, Deloitte & Touche LLP
Gauthier Vincent, principal, Deloitte Consulting LLP
Jeff Levi, principal, Deloitte Consulting LLP
Thomas Kirk, managing director, Deloitte Consulting LLP
Pascal Martino, partner, Deloitte Tax and Consulting LLP
James Alexander, director, Deloitte MCS Limited
Peyman Pardis, senior manager, Consulting, Deloitte Canada

Corporate and transaction banking

Tim Partridge, principal, Deloitte Consulting LLP
Kris Ferguson, partner, Deloitte MCS Limited
Steven Fricano, managing director, Deloitte Consulting LLP
Stefan Frank, partner, Deloitte Consulting GmbH
Ketan Bhole, partner, Deloitte Canada
Fadl El Laoune, managing director, Deloitte Consulting LLP
Michelle Gauchat, principal, Deloitte Consulting LLP
Nitish Idnani, principal, Deloitte & Touche LLP
Vipul Pal, principal, Deloitte Consulting LLP

Investment banking and capital markets

Sachin Sondhi, principal, Deloitte Consulting LLP
Vishal Vedi, partner, UK, Deloitte LLP
Nina Gopal, partner, UK, Deloitte MCS Limited
Suresh Kanwar, partner, Deloitte MCS Limited, UK
Sriram Gopalakrishnan, principal, Deloitte Consulting LLP
Margaret Doyle, partner, Head of UK Financial Services Insights Center, Deloitte LLP
Alex Lakhanpal, partner, Deloitte & Touche LLP

Market infrastructure
Bob Walley, principal, Deloitte & Touche LLP
Sunil Kapur, managing director, Deloitte & Touche LLP
George Black, principal, Deloitte & Touche LLP

The Deloitte Center for Financial Services, Deloitte Insights, and B&CM practice professionals
Jim Eckenrode, managing director, Deloitte Services LP
Sylvia Gentzsch, senior manager, Deloitte GmbH
Alec Roberts, senior manager, Deloitte & Touche LLP
Patricia Danielecki, senior manager, Deloitte Services LP
Karen Edelman, senior manager, Deloitte Services LP
Paul Kaiser, manager, Deloitte Services LP
Pankaj Kumar Bansal, assistant manager, Deloitte Support Services India Pvt Ltd.
Jayesh Prabhu, assistant manager, Deloitte Support Services India Pvt Ltd.
Margaret Doyle, partner, Head of UK Financial Services Insights Center, Deloitte LLP

56
About the Deloitte Center for Financial Services
The Deloitte Center for Financial Services, which supports the organization’s US Financial Services practice, provides insight and research
to assist senior-level decision-makers within banks, capital markets firms, investment managers, insurance carriers, and real estate orga-
nizations. The center is staffed by a group of professionals with a wide array of in-depth industry experiences as well as cutting-edge
research and analytical skills. Through our research, roundtables, and other forms of engagement, we seek to be a trusted source for
relevant, timely, and reliable insights. Read recent publications and learn more about the center on Deloitte.com.

Connect
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please visit My Deloitte.

Engage
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2024 banking and capital markets outlook

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 Continue the conversation
Industry leadership contacts

Monica O’Reilly
Vice chair, US Financial Services Industry leader | Deloitte & Touche LLP
+1 415 783 5780 | [email protected]

Monica O’Reilly leads the US Financial Services Industry group focused on the banking, capital markets, insurance, investment manage-
ment, and real estate sectors.

Mike Wade
Vice chair | US Banking and Capital Markets Practice leader | Deloitte & Touche LLP
+1 804 697 1537 | [email protected]

Mike Wade is a Deloitte vice chair and leader of Deloitte’s US Banking and Capital Markets practice. With more than 30 years of expe-
rience, he is responsible for leading the firm’s overall banking and capital markets sector strategy.

Neil Tomlinson
Vice chairman | Global Banking and Capital Markets leader | Deloitte MCS Limited
+44 (0)20 7303 2333 | [email protected]

Neil Tomlinson is vice chairman and global leader for retail banking. He is a member of Deloitte’s global banking & capital markets
executive. In the United Kingdom, he leads the CEO program serving all industries.

US Practice contacts
Michelle Gauchat
Principal | US Banking & Capital Markets Consulting leader | Deloitte Consulting LLP
+1 703 251 3949 | [email protected]

Michelle is the leader of Deloitte’s US Consulting banking and capital markets sector, responsible for leading the strategy and bringing
together the right offerings to serve Deloitte’s portfolio of banking and capital markets clients.

Garrett O’Brien
Principal | US Banking & Capital Markets Risk & Financial Advisory leader | Deloitte & Touche LLP
+1 212 436 5250 | [email protected]

Garrett O’Brien leads the US Banking & Capital Markets practice for Deloitte Risk & Financial Advisory.

58
Larry Rosenberg
Partner | US Audit & Assurance Capital Markets leader | Deloitte & Touche LLP
+1 212 436 4869 | [email protected]

Larry Rosenberg is a partner in Deloitte & Touche LLP’s Audit & Assurance practice. He has extensive experience leading global audit
engagements for multinational SEC registrants.

Jason Marmo
Principal | US and Global Banking & Capital Markets Tax leader | Deloitte Tax LLP
+1 212 436 6570 | [email protected]

Jason Marmo is a principal in the Financial Services practice of Deloitte Tax LLP. He focuses on providing consulting, compliance, and
tax accounting services to multinational clients in the financial services industry.

Louis Romeo
Partner | US Banking Audit leader | Deloitte & Touche LLP
+1 212 436 3632 | [email protected]

Louis Romeo has over 23 years’ experience serving clients in banking and capital markets. His experience includes domestic and inter-
national banks, broker-dealers, payment processing companies, leasing companies, fintech, and asset securitization vehicles.

Industry Center contacts

Jim Eckenrode
Managing director | Deloitte Center for Financial Services | Deloitte Services LP
+1 617 585 4877 | [email protected]

Jim Eckenrode is a managing director within Deloitte’s Research & Insights team, responsible for defining and guiding the strategy,
research agenda, and marketplace deployment for the Center for Financial Services and the Center for Regulatory Strategy.

Val Srinivas, PhD

Research leader | Deloitte Center for Financial Services | Deloitte Services LP
+1 212 436 3384 | [email protected]

Val Srinivas is the Banking and Capital Markets research leader at the Deloitte Center for Financial Services. He leads the development
of thought leadership initiatives in the banking industry, coordinating the various research efforts and helping to differentiate Deloitte
in the marketplace.

Contributors
2024 banking and capital markets outlook

Editorial: Karen Edelman, Hannah Bachman, Aditi Gupta, and Cover artwork: Jim Slatton
Emma Downey
Creative: Molly Piersol, Harry Wedel, and Meena Sonar

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Published in collaboration with Deloitte Insights.

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