Financial Institutions Prepare for Economic Uncertainties and Competition in 2025: Strata Decision Technology Report
Financial institutions nationwide are gearing up to face a year of economic uncertainties and increased competition from non-traditional digital competitors, according to a new report from Strata Decision Technology. The 2025 CFO Outlook for Financial Institutions report highlights the challenges and opportunities that lie ahead for the industry.
One of the key factors impacting financial institutions in 2025 is the uncertainty surrounding interest rate changes and other economic factors such as tariffs on imports. While the Federal Reserve has indicated a potential lowering of interest rates, the extent of this change remains unknown and dependent on broader economic performance.
Despite these challenges, analysts are cautiously optimistic about the industry’s momentum continuing from the previous year. Financial institution leaders will need to navigate shifting market forces, rising competition, and an unclear economic environment to ensure stability for their institutions.
One of the top concerns for industry leaders is the increasing competition from digital-only finance providers like neobanks and buy-now pay-later platforms. In response, financial institutions are prioritizing technology spend in areas such as digital banking, data analytics, and fraud prevention and security.
The report also predicts a rise in mergers and acquisitions within the industry as financial institutions seek to build scale and keep pace with technological advancements. Analysts anticipate increased M&A activity, including non-traditional mergers between credit unions and banks, as well as banks and fintech companies.
Artificial intelligence (AI) is identified as a key factor that will shape the future of financial services, with many institutions planning to expand AI use in areas such as customer service, financial systems, planning, and fraud prevention.
To address interest rate uncertainties, financial institutions are implementing strategies such as focusing on non-interest income, reducing expenses, and adjusting product pricing. Commercial loans are projected to be a top area of profitability growth in 2025, along with mortgage loans, consumer loans, deposits, and small business loans.
Overall, financial institutions are preparing for a year of challenges and opportunities as they navigate economic uncertainties, increased competition, and technological advancements in the industry.
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