Financial Outlook 2025: Trends and Topics for the Year Ahead
At Vested, we’re committed to helping our clients develop and execute integrated marketing campaigns in a balanced approach that considers brand goals in the context of prevailing industry narratives. To this end, we closely monitor trends across financial services sectors, always with an eye to the road ahead.
As 2024 draws to a close, we’re taking an in-depth look at the expectations across financial services industries including banking, crypto, private equity, M&A, and insurance as we make plans to guide our own customers’ marketing strategies in the new year.
Banking Industry 2025 Expectations
2024 demonstrated that the youngest generation of bankable consumers, Gen Z, is of rising importance when it comes to market capture for banks. Seventy-two percent of these consumers have checking accounts, yet they are much more likely than older generations to switch financial institutions (FIs). Expectations around technology options, greater comfort with digital-first banking, and a higher priority on corporate trust and values lead the way in prompting Gen Z bankers to swap out their bank for a new one. With 44% of Gen Z consumers changing their bank between 2023 to 2024, the banking industry will need to pay attention to this critical demographic in 2025 in order to obtain, and retain, their business.
These younger consumers are also less likely to give their business to big banking brands, opting instead for local or online-only banks that provide more flexibility, personalization, and digital tools. Only 61% of Gen Z users bank with major brands, leaving ample opportunities for regional and community banks to attract a consumer base with unique offerings in 2025.
To do this, banks will need to continue to embrace technology and change. Yet with all of the attention given to Generative AI (GenAI) throughout 2024, only 17% of banks have integrated the technology into their processes. 2025 could be a milestone year for banks to garner a competitive advantage and use AI and similar technologies to power consumer satisfaction and engagement, which is essential not only to attract younger consumers but also to retain existing customers across demographics.
The opportunities for GenAI in banking go beyond marketing. The technology can be used to power risk intelligence, detect fraud, streamline internal processes, and provide critical insights that can guide decision making. While there are concerns surrounding security, trust, and ethical use of AI, 69% of financial services leaders believe the technology can be used to underscore trust, especially when paired with transparent practices and a robust ESG program.
2025 may also be shaped by uncertainty as FIs grapple with slowing economic growth expectations and indecision around how political changes will impact consumer behaviors. Concerns around the potential for higher unemployment rates, lower interest rates, and higher consumer good pricing due to shifting tariffs are likely to impact consumer spending and saving patterns.
Diversified banks may have the advantage in 2025 by offering a wider variety of services to hesitant consumers looking for the best combination of products and pricing. While interest income can comprise up to 60-70% of small bank income, increasing noninterest income through higher transaction volume, revised fee structures, or bundled services could help banks maintain their own financial goals through an economically uncertain 2025.
Crypto Market Concerns for 2025
Political change and monetary policies are expected to have an impact beyond the traditional banking sector in 2025. While crypto activity achieved an all-time high in 2024, in part due to the mid-year approval by the SEC for spot ether ETFs, crypto advocates will be looking to the new presidential administration for potential legislative backing. The introduction of clearer, more crypto-friendly regulations could open the door for expansive growth.
An outlier to this conversation is the prospect of cryptocurrency to be included in central bank reserves as an asset. International governments, including the European Union, continue to debate the viability of including crypto in a national reserve, but talk is more positive in the United States where President-elect Trump has campaigned on the idea.
Venture capitalists are also trending toward embracing crypto with backing for organizations promoting blockchain development. Modeling restrictions create a greater sense of uncertainty around these investments, but a trending focus on token allocation and data-driven analysis for these investors is paving the way for increased backing. While new funds raised through Q3 2024 were among the lowest since Q3 2020, crypto-specific valuations are increasing more quickly than the venture capital industry average.
Another twist for 2025 could be the breakout of crypto firms going public via IPO. While stablecoin issuer Circle filed to go public in early 2024, industry watchers believe 2025 could be a year of much stronger IPO activity, again in the wake of regulatory and political change.
Despite reasons for positivity surrounding theoretical potential highs, even crypto advocates are cautioning restraint heading into 2025. Cryptocurrencies may be more mainstream than ever, but the groundwork for policy and compliance needs to be more firmly established.
Private Equity Market 2025 Considerations
As companies continue to navigate the public trading landscape, 2025 could be a landmark year for private markets. Researchers suggest regulatory shifts will even out on the global stage, allowing private equity investors to take advantage of economic growth faster than their public counterparts. Private markets activity slowed somewhat early in the year but continued to exceed IPO deal activity and rally with a late 2024 increase in deal value of 36% compared to 2023.
One catalyst for this shift is private markets’ inevitable embrace of technology. A scant 10% of private funds leveraged AI through 2023, yet industry predictions place AI at the forefront of private equity innovation and differentiation moving forward. Increased use of AI and GenAI solutions for improved investment processes portfolio valuations could be adopted by as many as 25% of firms by 2030. The ability to leverage better data insights and streamline operations can only have a positive impact on the private equity firms bold enough to foray into what evolving technology has to offer.
Diversification will also be a factor for private equity firms through 2025. Traditional approaches to niche investment may benefit from firms expanding into novel investment opportunities. For some, this may take the form of secondaries, which are projected to round out 2024 as the most active period to date. In other instances, diversification may manifest as expansion into new industries through a more risk-adverse portfolio.
While hold periods have remained above long-term averages for private equity firms, 2025 predictions are placing exit activity in a positive light. With lower debt costs promoting exits, and global trends in rate cuts and more optimal financing conditions may be signs of a better environment for private equity firms to conduct increased exit transactions. Estimated exit counts for 2024 are already in excess of both 2022 and 2023 performance.
The M&A Outlook on 2025
Following the trends in private equity activity, mergers and acquisitions are expected to gain momentum through 2025. Estimates indicate total M&A volume to increase 10% next year amid optimism around economic growth and inflation projections. Goldman Sachs CEO David Solomon has even expressed his belief that dealmaking could surpass 10-year averages for 2025.
Megamergers may also have their day in 2025. Notable deals currently under the review of the Federal Trade Commission include the Synopsys acquisition of Ansys and Capital One’s purchase of Discover Financial Services, both of which may clear roadblocks to approval under the new presidential administration. Other stalled mergers include the proposed Tempur Sealy and Mattress Firm transaction and Kroger’s agreement to buy Albertsons.
Not all of the M&A activity will be of this size and scope, but what has everyone optimistic about sector growth appears to be a blend of anticipated political policy change (and easing regulatory restrictions) on the heels of lower interest rates and potential tax reform. One area that may not benefit as greatly is international transactions. The likelihood (or not) of changes to taxation for multinational corporations and the impact of higher tariffs on foreign imports in a domestic interests-forward U.S. presidential administration could stall activity in M&A and be detrimental to valuations.
Mergers and acquisitions are not immune to the shifts and demands technology places on the financial services landscape. In addition to AI driving both internal operations and portfolio diversification, cloud computing and systems integration will propel more than just dealmaking. They will continue to be the cornerstone required for successful mergers as organizations look to combine their data and processes with a single approach.
Insurance with a Spotlight on 2025
Risk averse by nature, the insurance industry experienced an unavoidable sea change following the COVID-19 pandemic and subsequent digitalization efforts. Acceptance and implementation of technology platforms, including automation, analytics, and AI, are expected to continue through 2025 as insurers look to attract and retain consumers while appeasing regulators. Along with the changes in digital offerings comes the need for insurance companies to embrace omnichannel marketing strategies that support personalization and prioritize the user experience.
Another key theme for insurers in 2025 is trust. Consumer trust in everything from home to auto insurance is flagging as corporate ethics, customer service, and perceived fair (or unfair) pricing detract from brand reputation. Insurance adoption is down across life insurance (52% of U.S. adults are insured), homeowners insurance (13.4% do not have a policy), and auto insurance (14% of U.S. drivers are uninsured). To grow their consumer base, insurers will need to focus on distributing messaging, and products, that underscore their position as reliable, secure, and invested providers.
Demonstrating value will be another challenge. Nearly 40% of customers consider canceling an insurance policy believing it is not essential or does not provide value. Insurers can counteract this by providing more consumer education, streamlining communications processes, and offering more personalized services and consultations through simplified distribution. Promoting transparency and thought leadership may help insurance brands stem the tide of cancelations or policy reductions into 2025.
The entire financial services industry is prime with anticipation to see what 2025 will bring. From regulatory and policy changes brought on by the new administration to new advances in technology, Vested will be monitoring each shift and trend to help our customers’ marcomms leaders navigate any situation. As you finalize your own 2025 planning, consider how an integrated marketing strategy and the Vested team could help you underscore trust, communicate critical business news and messaging, and connect with new and existing customers to support your overall business efforts. We’d love to hear from you.
