New report reveals combating payment fraud, strengthening client relationships and enhancing commercial banking experience are top trends for financial institutions
Q2 Holdings, a leading provider of digital transformation solutions for financial services, announced it has released its State of Commercial Banking January 2025 Market Analysis report. Key findings from the annual report reveal major trends in the commercial banking industry, in addition to the challenges and opportunities banks and credit unions will face in the coming year.
“The commercial banking industry demonstrated resilience and adaptability in 2024, successfully rebuilding liquidity to near pre-crisis levels”
“The commercial banking industry demonstrated resilience and adaptability in 2024, successfully rebuilding liquidity to near pre-crisis levels,” said Q2’s Senior Strategic Business Advisor Gita Thollesson. “2025 will present its own challenges and opportunities, including combating payment fraud and strengthening primacy in a competitive digital landscape. For banks and credit unions to maintain their edge, they should strategically leverage digital offerings to enhance profitability and meet customer demands for efficiency and innovation.”
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This report is based on findings from Q2 PrecisionLender’s proprietary database of 2024 commercial lending deal flow, along with economic data from several public sources, including the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve, and industry research. Q2 PrecisionLender data reflects commercial relationships from more than 140 geographically diverse banks and credit unions in North America, ranging in size from small community banks to top 10 U.S. institutions. This report also references data from Q2’s Centrix Exact TMS positive pay solution and live polling conducted during Q2 webinars in 2024.
Key Takeaways from the Report:
- Liquidity has improved but has become more costly, squeezing net interest margins – Financial institutions have emerged from the liquidity crisis with a solid foundation of deposits, approaching pre-crisis levels.
- Federal Reserve rate cuts have reshaped the commercial loan pricing landscape – The 100 basis points in Federal Reserve rate cuts between September and December 2024 contributed to a shallowing of the inverted yield curve, with short-term rates declining while mid-term rates spiked.
- Pockets of credit stress reside in the commercial real estate sector – Credit performance has exceeded expectations across much of the market, with only a modest increase in delinquencies and a decline in commercial and industrial (C&I) downgrades.
- Fraud continues to concern bank and credit union executives – By embracing collaboration, advanced technologies like AI, and a centralized approach, banks and credit unions can be a strong ally for business customers in the ongoing battle against fraud.
- Data and digital technology drive the acquisition and growth of small business relationships – The underserved small and medium-sized business (SMB) market presents an opportunity for banks and credit unions to grow deposits.
- Efficiency and user experience are becoming even more pivotal for midsize and large companies – Commercial clients are looking to their banks and credit unions to help them manage their business more efficiently.
Q2 is a leading provider of digital transformation solutions for financial services, serving banks, credit unions, alternative finance companies, and fintechs in the U.S. and internationally. Q2 enables its financial institutions and fintech customers to provide comprehensive, data-driven digital engagement solutions for consumers, small businesses and corporate clients. Headquartered in Austin, Texas, Q2 has offices worldwide and is publicly traded on the NYSE under the stock symbol QTWO.
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