In recent years, there has been a significant increase in competition, regulatory pressures, evolving customer expectations, and the constant demand for innovation. To remain competitive in this dynamic environment, digitization or digital transformation has become crucial for banks.
As a result, this shift has prompted many banks and financial institutions across the globe to turn to managed services as a solution to better organize, operate, and safeguard their business against emerging challenges.
Managed services are different from traditional outsourcing that banks up until now relied upon to maximize their resource efficiency. In 2024 and upcoming years, managed services will continue to play a crucial role in transforming banks.
Below, we discussed the top 10 managed services trends that are reshaping the banking and financial services industry in 2024.
1. Talent Scarcity and Workforce Challenges
Advancements in technology and market shifts have increased the demand for skilled professionals in banking and financial services. Roles such as data scientists, AI specialists, cybersecurity experts, and compliance professionals are in high demand. However, availability is increasingly limited. Thus, banks and financial institutions are facing intense competition for scarce top-tier expensive talent and professionals capable of bridging the gap between business and technology.
One key trend shaping talent availability is the demand for flexible workplaces, with employees expecting hybrid or remote work options. In a Deloitte survey, 94% of respondents cited flexibility as crucial to their well-being and work-life balance.
That’s where managed services come in. Banks and financial institutions are turning to managed services to get access to specialized expertise, flexible workforce arrangements, talent development programs, and remote work solutions. This is helping banks and financial institutions overcome the talent shortage.
However, the success of this approach hinges on choosing the right Managed Services Provider (MSP) for your financial services needs.
2. Cloud Migration and Optimization
Cloud technology has been one of the most disruptive forces in the banking and financial services industry during the past decade, and its impact continues to grow. And thus,we see cloud computing moving from a nice to have to a must-have in 2024.
Although banks and other financial institutions are increasingly migrating to cloud infrastructure, this cloud-first trend has lately shifted from simple cloud migration support to optimization.
Managed service providers (MSPs) for financial services are now helping banks fine-tune their cloud and on-premises environments for seamless integration to ensure they get the most value from their investments. This includes:
- Improving scalability
- Enhancing security
- Optimizing costs
- Ensuring compliance
In recent times, there has been a rise in multi-cloud strategies. MSPs also assist banks and financial institutions in managing their complex hybrid environments across different platforms.This includes optimizing cloud operations through practices like FinOps, which ensures cost efficiency, governance, and performance across cloud services.
3. Enhanced Cybersecurity as a Service
Cybersecurity remains a top priority for financial institutions and banks worldwide, especially with the increasing sophistication of cyber threats and fraud schemes.
Managed security services are continuously evolving to offer financial institutions more advanced, proactive protection. This includes services for 24/7 monitoring, threat hunting and incident response, such as:
- Security Operations Centers (SOCs)
- Managed Detection and Response (MDR)
- Business Continuity and Disaster Recovery (BCDR)
With regulatory requirements for business continuity becoming more stringent, banks are turning to MSPs for solutions that ensure resilience and compliance.
4. Rise of GenAI and Automation-Powered Services
Generative AI or GenAI is a subset of Artificial intelligence (AI) which is transforming many aspects of banking.
According to a report, Generative AI in banking is going to gain the most— potentially experiencing a productivity surge of 22-30%—when compared to other industries.
In 2024, managed services offering solutions powered by emerging technologies, such as AI, machine and learning, have become more prevalent helping banks intelligently automate their routine tasks such as,
- IT support
- Customer service
- Fraud detection, such as deepfake fraud
- Transaction monitoring
- Suspicious activity report (SAR) filing, and more
This shift has enabled banks to significantly reduce their operational costs, improve efficiency, and free up resources for more important and strategic initiatives.
5. Compliance and Regulatory Management
Banking regulations have ballooned since the 2008 financial crisis. With the rise of AI, there have been new legislations addressing AI and sustainability across jurisdictions. However, complying with these continuously evolving regulations is a challenging task for banks and financial institutions. It’s extremely complicated, resource-intensive, and expensive, especially with new rules and regulations being introduced regularly.
MSPs offer specialized compliance services and regulatory technology (RegTech) solutions to help banks navigate these complexities. These services include:
- Automated regulatory reporting
- Risk assessments
- Audit preparation
MSPs stay up-to-date with the latest regulatory changes and ensure that banks remain compliant with minimal disruption to their operations. By outsourcing compliance management, banks can reduce their regulatory burden and focus on their core business.
6. Core Banking as a Service (BaaS)
The rise of digital-first banking and the evolving financial landscape has led to increased demand for flexible and scalable core banking systems.
Banking as a Service (BaaS) has emerged as a crucial strategy and is gaining momentum as banks seek to modernize their legacy systems.
Some of the leading banks leverage BaaS to transform the onboarding journey, automated data aggregation, and open banking APIs for secure account linking.
MSPs provide cloud-based, modular core banking platforms that offer greater flexibility, faster deployment, and reduced maintenance costs. This allows banks to innovate more quickly, launch new products faster, and respond to changing market conditions.
7. Sustainability and Green IT Initiatives
Sustainability is becoming a key focus for banks, as 45% of banks adopt green initiatives, aligning investments with environmental and social factors.
For example, HSBC has committed to providing up to $1 trillion in green finance by 2030. In addition, according to Deutsche Bank ESG Trends for 2024, the focus will continue to grow on transition plans as more companies pledge to attain net zero targets.
In 2024, MSPs are playing a critical role in supporting green IT initiatives for sustainable banking.
Managed services providers are helping banks reduce their environmental footprint by optimizing energy consumption in data centers, promoting cloud-based solutions that require less hardware, and implementing remote work technologies.
Additionally, MSPs are assisting banks in achieving sustainability goals through carbon footprint tracking and reporting. This not only helps banks meet regulatory requirements but also enhances their reputation with environmentally conscious consumers.
Conclusion
As the banking landscape continues to evolve, managed services will become an essential part—enabling banks to stay competitive and efficient.
By partnering with managed services providers in the financial landscape, banks can have immediate access to specialized expertise and cutting-edge technologies that they can leverage to address key challenges, innovate faster, and focus on delivering exceptional customer experiences.
Curious about how the managed services model can benefit your business? Drop a comment to start the conversation!
