Jack Henry highlights six community banking trends to watch for in 2025

Jack Henry highlighted six trends as opportunities for regional and community financial institutions for next year:.Stabilizing deposit growth: Consumer deposit outflows have slowed, and small business deposits are showing signs of growth. Still, financial institutions must prepare for a wave of short-term CDs that will soon mature while consumers remain yield-hungry, which will continue to challenge deposit growth. To attract and retain customers, institutions must optimize mobile-only account opening to capture Gen Z, prioritize personalization, deepen relationships, remain flexible with pricing and terms, and offer new products and services — especially faster and easier payment acceptance for small businesses. Community and regional financial institutions may also use open banking as an opportunity to gather more data on customers and prospects and use that intelligence to track and reverse deposit attrition as well as provide superior personal service at scale in digital contexts.Lending that competes and differentiates: Lenders face pressure to adopt artificial intelligence (AI) to improve efficiency, speed, and scale in areas like financial analysis, underwriting and risk identification. Collaborating with vendors can help banks and credit unions overcome their concerns around AI and compete with fintech lenders and big banks. By combining relationship-based strengths with AI, community financial institutions can efficiently and quickly fund loans, achieving scale without losing their personal touch. This is especially important because banks and credit unions are known for adapting lending models to provide quick, flexible financing during cash crunches or emergencies, supporting their communities in times of need.Collaboration in the fight against fraud: Scams are increasingly exploiting financial institutions' blind spots, with fraudsters targeting accountholders through social media, text messages and fake investment apps. Financial institutions often absorb the losses. Deepfakes and AI-generated synthetic identities further compound these vulnerabilities. Strengthening cross-sector collaboration among law enforcement, telecom providers, social media and regulatory bodies is critical for enhancing visibility and mitigating scams. These efforts can also drive the adoption of stronger identification verification systems.Payment solutions aid in financial health: Small businesses will rely on real-time payments to expedite receivables, optimize just-in-time payables, and gain more accurate insights and forecasts on cash flow. Bank bill pay and pay-by-bank will also give financial institutions the visibility to help accountholders manage their cash flow and avoid debt cycles. As demand drives these advanced solutions, financial institutions will continue to leverage data to improve user experiences and financial health.No data, no AI: Most financial institutions have only a fraction of their account holders' total financial data on hand. Due to financial fragmentation — U.S. adults have relationships with 10 or more financial service providers and apps — most banks and credit unions have less than 25 percent of their account holders' financial data. Without a preponderance of an accountholder's data, many of the most promising and compelling AI use cases fall short. AI-based real-time fraud detection/prevention as well as AI-based next-best product/service recommendations are difficult to achieve without a fuller complement of financial data. And this is why the most successful financial institutions will be proactive in securing permissions to aggregate more of their account holders' financial data back to the institution using open-banking rails. More data, less fraud. More data, better service. More data, higher margins. 2025 will be the year that many institutions get serious and smart about data strategy, plugging data deficits on both existing accountholders and prospects.Open banking and data management mature: Strategic financial institutions will go beyond regulatory requirements by creating data management strategies that give both consumers and businesses more control of their financial information. Providing a central hub for accountholders to manage data and privacy settings will make a financial institution the focal point of the account holders' financial lives. This supports the goal of the open-banking movement: to enable flexible data-sharing options that provide more transparency and better financial decisions informed by a comprehensive view of the accountholder's finances. Institutions that invest early can gain dividends in data and deepen relationships.."Banking advancements in 2025 will be fueled by industry and fintech collaboration, enabling community and regional institutions to combine new technology with their signature personal service to differentiate and grow," said Jennifer Geis, senior analyst, corporate strategy at Jack Henry. "We're seeing more banks and credit unions apply data, AI and other emerging technologies in significant ways. It will be an exciting era for banking, one where we realize new levels of personalized service and money management that changes lives and strengthens communities."