The financial services industry is on the front lines of rising fraud. Modern fraudsters can easily create synthetic identities to exploit digital systems. With increasingly lifelike deepfakes, they can also fool people over the phone or even on a video call. And if you think fraud is perpetrated only by opportunistic bad actors looking for short-term financial gain, think again. An increasing number of skilled, educated professionals are choosing fraud as a lucrative full-time career.

The cost of inaction is significant. In late 2024, TD Bank, one of Canada’s biggest lenders, agreed to pay a record $3B in fines for failing to properly monitor money laundering by drug cartels. But even small, isolated incidents of fraud can drain profits by triggering months of expensive reporting and remediation effort. 

Many companies are still dreaming of the perfect “mousetrap,” a product they can plug into their systems to find and stop fraud in its tracks. We’ve worked with many customers to select, integrate, and activate third-party fraud prevention products—and this approach can certainly have a big impact. But a product can only respond to what’s happened in the past, and fraud is ever-changing. To truly turn the tide, companies need to address both technology and human behavior. They need to be able to leverage AI to quickly understand what’s happening and why, so they can continue to adapt. 

We believe financial services companies can reduce fraud 50%–90% over a three-year horizon, with additional lift and reduced false positives, by implementing holistic, adaptive systems that combine machine learning to flag potential fraud with LLM-based assistants that expedite decision-making and action. Explainability is a key focus, and synthetic data adds additional leverage to refining models. 

Most expect 2025 to bring some relief to the regulatory pressure on financial institutions, which has risen precipitously since the Silicon Valley Bank failure of early 2023. At the same time, the Fundamental Review of the Trading Book (FRTB) brings the biggest sell-side regulatory change in over two decades, a complete overhaul of the framework for market risks, with implementation by country continuing throughout 2025 and into 2026. 

Regulatory priorities extend far beyond disclosed mandates such as FRTB and Basel. Financial leaders face an evolving array of scrutiny in every area, from consumer protection and cybersecurity to liquidity, credit, and third-party risk management. Data privacy, information security, cloud controls, and end-user computing are also focus areas for the Fed, OCC, and Office of Financial Stability—and are reflected in FFIEC audits.

Each new change or challenge carries with it an urgent demand for specific action, just to stay in business, but savvy leaders are thinking holistically to build modernization programs that drive efficiency across all their risk types. In fact, many companies are in the middle of multiyear modernization roadmaps. If regulations do begin to ease in 2025, these firms will be eager to wrap up early so they can invest elsewhere. Powerful accelerators are here to help.

The compelling opportunity for modernization is to simplify applications and infrastructure, while centralizing data. Purpose-built applications, such as GRC and AML platforms, are being replaced. Instead, their use cases are being integrated into enterprise tools. Shedding applications reduces licensing expenses, complexity, redundant copies of the banking book, and exposure points that drive excessive controls. 

A strong, AI-enabled operational backbone enhances the overall customer experience, creating a more agile and responsive organization. This could eventually lead to AI-enabled call centers evolving into proactive sales centers, significantly changing the way financial services institutions interact with customers. 

Financial services firms will continue accruing AI-powered operational wins in 2025—from supporting financial advisors with GenAI to modern trading solutions that deliver sophisticated analytics capabilities up to 60 times faster while reducing total cost of ownership. As confidence in AI systems grows, attention turns to new customer-facing use cases, such as providing tailored, real-time advice and services. 

Accelerated digital currency adoption will fuel the potential of agentic AI solutions, embedding a seamless digital transaction capability into a range of AI-driven applications. With digital currencies integrated into AI-powered agents, transactions can be automated and optimized in real time across sectors, from finance to customer service and beyond. AI agents could autonomously manage payments, process settlements, and handle complex digital transactions, creating a dynamic ecosystem that enables more personalized, data-driven interactions. This evolution would drive significant efficiencies and unlock new revenue streams, as AI agents with transactional abilities will seamlessly bridge the gap between digital assets and traditional financial services, enhancing the utility and impact of both technologies.

AI will continue to be a hot topic throughout 2025, but organizations must remain mindful of the bigger picture. Gradual adoption, careful testing, and change management are vital to overcoming customer skepticism and employee fears about job displacement. One Gartner survey found that 64% of customers would prefer that companies not use AI for customer service—primarily because they worry it will become more difficult to reach a person when they need it. Leaders can counteract concerns by focusing on enhanced human decision-making and maintaining a strong governance framework. 

At its core, the fusion of financial services with other industries is about integrating the management of finances with the daily activities and needs of consumers. Big tech companies are gaining ground with digital wallets—now the preferred payment method around the world, accounting for more than 50% of global e-commerce—as well as credit and investment services. Meanwhile, financial service providers are getting into tech by turning their in-house IP into digital products, like these examples from CapitalOne and DTCC. They’re also creating new revenue streams by embedding themselves into the operational flow of broader service ecosystems to simplify and automate the movement of money across platforms. For example, banks are working with healthcare payers to facilitate reimbursements to patients, automating thousands of daily transactions. 

Payment systems are particularly vulnerable to inefficiencies that go unnoticed until they start to impact the bottom line. Slalom has provided payments lifecycle health checks for many types of organizations, typically leading to 10 to 100x ROI and often expanding into new opportunities. Leveraging their massive investments in technology infrastructure and regulatory compliance, financial institutions can become critical enablers of complex financial supply chains in any industry.

But there are also significant risks when industry boundaries blur. To expand into sectors like healthcare, firms must navigate complex regulatory environments and ensure robust compliance mechanisms. The potential for regulatory breaches, especially when handling sensitive financial data and moving large sums of money across borders or entities, is high. And failures anywhere in the system—like the widely publicized Synapse failure—can expose organizations to legal risk and reputational damage.

Leaders must strategically assess how and where to extend their business models beyond traditional service offerings. The real differentiator will be how institutions balance innovation with risk. Those that succeed will likely have invested heavily in technology, regulatory compliance, and cross-industry partnerships, while maintaining a customer-centric approach that prioritizes trust and security.

The Federal Reserve and other central banks worldwide have entered a period of recalibration following the rapid hikes seen in 2022 and 2023. In September 2024, the Federal Reserve cut rates for the first time since the early days of the COVID-19 pandemic. Most predictions suggest further cuts in 2025, but unexpected volatility remains well within the scope of possibilities as central banks manage economic recovery alongside potential political and global market pressure. 

Global interest rate policies and geopolitical factors, such as international trade tensions, will also influence capital markets and investor confidence. Historically, lower interest rates lead to an uptick in lending activity, particularly in consumer credit and mortgages. This is good news for banks, as it provides an opportunity to increase business activity, improve liquidity, and reduce pressure on balance sheets. The real challenge is how rapidly rates may change. Those that can quickly adjust lending strategies, pricing models, and product offerings will be better positioned to weather ongoing shifts.

Insurance companies, on the other hand, will face challenges on the investment side as long-term interest rates decline. Insurers, who traditionally benefit from high yields on long-term treasury bonds, may need to look further afield for returns. This could push them into riskier asset classes as they seek to maintain profitability and ensure adequate returns for policyholders. Rebalancing portfolios and managing duration risk will be top priorities in 2025.

For investors, the lower borrowing costs created by rate reductions will likely spark a surge in initial public offerings (IPOs) and new deals as companies look to take advantage of cheaper capital. This represents a shift from the more conservative stance of recent years, when high rates stifled borrowing and investment.

For the payments industry, rates are not likely to get high or low enough to have a major impact on core business, but rate reductions do tend to correlate with an overall shift in mindset and strategy from “wait and see” to “where is our next growth opportunity?”