Forrester reveals 2025 predictions for banking & insurance

Forrester has released its 2025 Predictions reports for the banking and insurance sectors, highlighting significant trends anticipated in the coming years.

In the banking industry, Forrester forecasts that customer experience (CX) quality and customer loyalty are expected to continue their downward trajectory as banks increasingly shift from traditional customer service methods to digital self-service options. According to Forrester, banks globally are moving their customers away from branches and contact centres towards digital platforms and generative AI-enabled support. However, it is suggested that many will implement these strategies in ways that may not generate the emotionally positive experiences crucial for maintaining customer loyalty.

Conversational banking is predicted to gain momentum in 2025. Improvement in AI capabilities is expected to enhance in-app bots, potentially making them smarter and more beneficial for customers. Alyson Clarke, Principal Analyst at Forrester, stated, "It won't be an easy ride, as legacy infrastructures and vexatious regulatory compliance issues will put a damper on the innovation party. But with determination, strategic thinking, and investments in next-generation digital platforms, banks can overcome these obstacles and pave the way for a more innovative and customer-centric banking experience."

Pioneering offerings like "save now, pay later" are also anticipated to surface in western markets, introduced by four major players. The competitive environment for customer savings necessitates banks to innovate continually and seek new strategies to deliver value, avoiding obsolescence similar to what occurred with the "buy now, pay later" phenomenon.

In the insurance sector, tech spending is projected to rise by 8% over the next year, paralleling insurers' efforts to address rising claims expenses and improve profitability. Indranil Bandyopadhyay, Principal Analyst at Forrester, remarked, "In 2025, we predict that insurers will continue to pass on higher costs of rising claims expenses to customers. This improving profitability will translate into increased tech spending as insurers prioritize innovation, data, AI, and automation, but most insurers won't see immediate, material, and direct benefits from AI."

Embedded insurance is expected to expand by over 30%, especially within personal lines, with 32% of global business and technology experts at insurance firms planning increased investments in embedded finance capabilities. By embedding insurance products into platforms with extensive user bases, these channels are seen as becoming dominant and offering access to new customer segments.

The insurance industry's tech spending, particularly regarding super apps, omnichannel experiences, and claims management systems, will accelerate, focusing on data, AI, and analytics to enhance customer experience and operational efficiency. Despite this, less than 5% of insurers are anticipated to achieve substantial, direct benefits from artificial intelligence in the immediate term. Forrester notes that the advancement in adopting real-time AI or generative AI capabilities lags due to challenges like legacy system integrations and the AI skills gap in the current workforce.