2024 Financial Services Trends: BNPL regulation, AI and ‘Finfluencers’

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After a year of economic and industry turmoil, financial services providers will look to break out of stagnation by using new technology to improve efficiency, bolster safety and reach new user demographics next year. Read on for my predictions for how financial institutions will approach 2024.

BNPL providers self-regulate as government action looms

Though the Consumer Financial Protection Bureau (CFPB) signaled intent to regulate the buy now, pay later (BNPL) industry in September 2022, considerable action hasn’t yet followed in the United States. Providers, which are already behaving as if regulation is on the horizon, are likely to beat out government mandates with in-house consumer protection initiatives next year.

It’s likely this regulation will center around consumer protection based on the CFPB’s initial assessment. The Office of the Comptroller of the Currency (OCC), which supervises banks, has already issued guidance to banks offering BNPL, urging them to limit “adverse consumer outcomes,” for example. New operational requirements could combat a pervasive issue in the industry: A large group of BNPL users are struggling financially, posting higher rates of debt across the board and lower financial well-being index scores than adults overall. These challenges are also reflected in data from the New York Federal Reserve and Wells Fargo.

 Regulation that aims to make BNPL safer for consumers could have two impacts on the industry:

1. Increased use. While BNPL spend is on the rise, the share of consumers using the technology monthly has hovered around 1 in 5. And frequency of use remains roughly consistent. Increased transparency or new safeguards that limit the risk of default could entice customers to use the tech more regularly, in turn accelerating stickiness providers are already seeing.

2. New user groups. BNPL users skew younger and underbanked. New regulations could ease concerns among less-penetrated demographics, in turn bringing them into the fold. It could also open the door for new providers — like banks — which might be more appealing to these groups, to bolster installment offerings.

Banks start rolling out more consumer-facing generative AI

Financial institutions have long-employed artificial intelligence and machine learning for back-office use cases. But many consumers aren’t aware of this, and say they prefer to use financial institutions that don’t use the technology. After generative AI’s breakout 2023, it’s likely that financial institutions will begin pushing the technology toward more consumer-facing use cases.

Banks and credit unions are likely to be first adopters, which is a good thing for the industry. Consumers trust these sectors of financial institutions most overall (67% and 66%, respectively), giving them capital they can leverage to unveil new technology. This trust is reflected in sentiments related to AI: Consumers trust banks and credit unions to use AI far more than any other category of financial institution. First-line features will likely include customer service chatbots, which are already underway at banks like JPMorgan Chase and NatWest, and face higher levels of consumer receptivity than other technology.

If these rollouts are successful, banks could substantially improve the digital banking experience. Over half (52%) of consumers already interact with their banks mostly digitally, and an additional 19% use digital sometimes. An improved experience could tighten relationships with consumers in ways that grow engagement and eliminate churn. 

The “finfluencer” economy takes off

Influencers are hugely popular with social media users: Over half (54%) of consumers who use social media say they follow influencers. But there’s a hole in the sector for financial advice, and “finfluencers” like Farnoosh Torabi and John Liang, who provide financial management advice and tips, are booming on social platforms, setting the scene for a flurry of new content (and new partnerships) in the year to come. 

There’s already an appetite for this content among Gen Z adults, who are likelier than other generations to follow influencers in general. And they’re also more likely to be actively seeking out financial advice than they were a few years ago: The share of Gen Zers who said they did not consume any financial advice fell from 63% in November 2021 to 46% in November 2023. 

As this generation ages, money tips will become increasingly important. But where Gen Zers get advice from is likely to look different than older generations. Nearly a third (31%) of Gen Zers said they sought financial advice from social media in November 2023 — the top category outside friends and family. For context, this is nearly double the share of U.S. adults overall, and one of the highest rates of any demographic. That appetite should translate into more creator content that focuses on financial advice, and more engagement.

There’s also vast opportunity for financial institutions, who at times stay away from social media platforms, to partner with finfluencers. Financial institutions that are trying to win over the near-quarter of Gen Zers who are weighing opening new accounts may look to TikTok and Instagram in search of reaching them through virality, replicating the bump seen by brands like NYX and Dollar General this year. Celebrities could be in on it too: Zelle, for example, just tapped Christina Ricci for an anti-fraud campaign. But the rise of influencers could also have unexpected implications, because viral videos could also contribute to spreading doom and gloom that shifts financial goals or erodes Gen Zers’ already volatile financial well-being.