A comprehensive 2025 Lending outlook

Since we’re in January 2025, it's the perfect time to reflect on the key trends and developments that shaped 2024 and to start planning for what lies ahead in 2025, if you haven’t already. Our Lending leaders have come together to share their insights, offering a rewind on 2024’s lessons and how we can position ourselves for success in 2025. This article presents an outlook for both retail and corporate lending, providing a comprehensive view of the lending landscape. Watch our video version of the 2025 lending outlook here.

Corporate lending

2024 highlights

Join us in our newest outlook article, where Andrew Bateman, EVP of Lending, and Veena Rao, Head of Corporate Lending, dive deep into the key highlights and trends for Lending and Corporate Banking in 2025, and review the most influential factors of 2024. As we explore the standout achievements and milestones that have shaped the industry in 2024, there are three key trends to be noted: simplification of our user experience, interoperability and cloud transformation. Keep scrolling for valuable insights for 2025.

“It’s about segments which have been historically underserved” – Veena Rao

The simplification of user experience, driven by the new demographic workforce's expectations around digitization and simplicity are coming into play, and our latest product launch, Simplified Servicing, is the best example in this sense, as we encompassed the rich functionality of Loan IQ that caters the need for efficiency when serving bilateral loans or SME loans. Another critical aspect is the need for interoperability. Whether our customers deploy our software in their environments or in our cloud, creating integrated, end-to-end workflows is essential. This year, we've made significant strides in providing open APIs, making integration simpler, faster, cheaper, and standardized. And of course we cannot omit cloud transformation, as it continues to be a pivotal focus, with our cloud journeys in our products marking a major highlight for the year.

“Evolution and ideation of AI” – Veena Rao

Digital transformation is also at the forefront, with advancements in AI and Sustainable Finance. On the AI front, we've seen a shift towards internal productivity and automation use cases, which are now successfully launching into production. Externally, we've enhanced how customers and their teams interact with our software, making documentation more readable and consumable.

“ESG KPIs are very custom, very bespoke to every contract.” – Veena Rao

Our first ESG and sustainable finance offering, a cloud-native solution, addresses sustainability-linked lending, helping banks track KPIs and engage customers in the sustainability agenda. One of the greatest headwinds regarding SF is the lack of standardization, so gathering that data and making sure the compliance is really measured accurately and objectively is one of the challenges. As the industry evolves, whether it's in the EU and the standards coming in or across the world where there's a lot more governance and regulation around greenwashing, I think these standards will very quickly settle down. And that's going to drive the next level of ESG for us now.

“Regulation is our friend” – Veena Rao

Lastly, we discuss the challenges faced by the sector in 2024, including the complex economic and regulatory landscape. SWIFT MX changes and the impact on Corporate Banking and DORA (Digital Operational Resilience Act) are driving a lot of change and upgrade behavior in our customers. While it does mean it consumes a lot of the capacity on our roadmaps, it also means our customers are staying current with our software, like it or not. I think one of our key highlights is that we're able to deliver this compliance year after year on time for customers to upgrade safely and still be compliant. SWIFT has been one of our biggest repetitive changes year after year and we've now very successfully delivered the MTM exchanges, as our customers should be ready to go live on time in November 2025 and we're getting them all there lined up for it.

The second challenge our customers are really worried about is the operational resilience and every with everything that's happening in the world today on cybersecurity and the risks that we create for our customers through the cyber-attacks. Our software needs to be right up there in terms of technology adoption and the latest in fraud prevention, security detection, ID verification and be resilient and safe for our customers.

Looking ahead to 2025

As we look ahead to 2025 sustainable finance, cloud adoption, the rise of SMEs and the combination of AI in the UI are key trends to watch.

“It’s been overcast, but not really raining” – Veena Rao

Long time FIs systems have been partially deployed in cloud. In 2025 cloud adoption is going to be a major trend, with more customers transforming and moving their workloads to the cloud. This shift allows for faster innovation rollouts, shorter regulatory update cycles, and reduced risk to customer environments. The interoperability through APIs also plays a crucial role in this transformation, making integrations more resilient and cost-effective.

“I think every conversation today with customers begins and ends with GenAI” – Veena Rao

GenAI is set to have a profound impact on the industry in 2025. From improving user experiences to enabling real-time data insights, AI-driven developments are transforming how we interact with technology. Our Academy.AI initiative is a testament to this, offering digital, self-service training that is intuitive and accessible, helping customers adopt our software more efficiently. So gone are the days when we had those 25 screens and 30 tabs opening up. Can we just automate the entire flow? Can we upload documents, scan them and prefilled documents?

With the help of GenAI, at Finastra we challenge the idea of T+0 time of implementation for our customers who want to start a project, and sooner or later we’d be having T-1, so that the systems are ready even before they know it.

Retail lending

2024 overview

Andrew Bateman, EVP of Lending, along with Lucas Mitch, Head of Retail Lending, and Michael Kinney, Head of Sales in Retail Lending, delve into the dynamic shifts and standout milestones that defined Retail Lending in 2024, and what we should focus our efforts onwards in 2025. This year was pivotal, marked by significant digital transformations and the introduction of innovative technologies. We explore the evolving role of digital transformation within retail lending, highlighting how advancements like cloud-enabled functionality and API integration are reshaping the landscape. As financial institutions embrace AI for internal applications, the potential for 24/7 lending and enhanced customer support is becoming a reality. With a focus on meeting diverse customer needs, especially in a multilingual market, both written and activated by voice, the future holds exciting prospects for GenAI applications.

“We want to be ahead of this regulation to ease our clients’ transition” - Andrew Bateman

The US economic climate has also influenced the retail lending sector, with SMEs expressing optimism about the new administration's potential for growth. Lower inflation and interest rates are set to boost consumer confidence, creating a favorable environment for lending. However, this optimism is tempered by the challenges posed by M&A activities, which may strain existing systems and processes. Besides the regulatory burden that our clients are facing, they’re also noticing shifts in the business model, such as the changing demographics, more specifically to attract younger demographics, but also the way that they have to service the customers is changing. Our Solution Store's successful launch and the introduction of the 1071 module showcase our commitment of being at the forefront of improving customer engagement and easing regulatory transitions, as well as adapting more easily shifting demographics and service expectations.

“The first free dollar that they have should really be spent around technology” - Lucas Mitch

At Finastra and for our clients, 2024 was a year of expansion and innovation. Aiming to enhance the digital experiences of our clients through cloud migration and workflow automation, we’ve also introduced a couple of modules for LaserPro, more specifically Exchange, Conductor, and AI assistant. It’s very important for our customers to continue expanding their digital experience, so we’re using cloud platforms to drive agility and speed/efficiency and provide a 30-minute migration from on prem to cloud.

Looking ahead to 2025

The emphasis on technology investment remains critical, particularly for community banks and credit unions looking to optimize their operations and stay competitive. As interest rates decline, the push towards cloud adoption and GenAI integration for both internal and external use cases will drive significant advancements in workflow efficiencies and customer experience.

“FIs need to try and use GenAI not only in internal use cases, but also external to drive innovation” - Michael Kinney

FIs should prioritize investing their initial funds in advancing technology, especially as interest rates decline. Community banks and credit unions need to innovate rapidly to stay competitive. Transitioning from on-premise software to cloud-based solutions and utilizing APIs will enhance workflow efficiencies. Additionally, leveraging GenAI for both internal and external applications will drive innovation. In 2025, the focus will be on modernizing, improving data quality, and embracing the cloud. Collaborating with technology partners to create robust system integrations will be crucial for enhancing customer experience, improving loan turnaround times, and meeting regulatory requirements, thus unlocking new revenue streams and enabling scalability.

“Many FIs are still taking the ‘wait and see’ approach with respect to outward facing client use cases”- Michael Kinney

Looking ahead to 2025, retail lending faces opportunities and challenges, especially in the realm of AI and GenAI. With the new administration's stance on AI regulation uncertain, the upcoming year could be pivotal for technology adoption. Despite concerns about costs, data quality, and security, the benefits of AI in areas such as decision-making, risk model documentation, and customer engagement are undeniable. As community banks and credit unions modernize and embrace new technologies, they will rely on robust integrations to enhance customer experiences, improve loan turnaround times, and adapt to regulatory demands.