2016 was a big year for fintech. Global funding for fintech firms increased over the last year, and traditional banking institutions experienced disruption as fintechs developed new banking technologies and business models that are driving industry-wide change. It’s an exciting time, and the implications for the future of financial services are promising.

In this rapidly changing climate, industry stakeholders may wonder what to expect in the coming months.

As the year comes to a close, we’ve rounded up our top five predictions for fintech in 2017.

1. Increased adoption of AI banking technologies

Banking is becoming an increasingly digital experience, and 2017 promises to continue the trend of replacing branch visits with convenient, intuitive digital experiences.

This year, there was an explosion of investment in AI-powered banking technologies, particularly banking chatbots. Spurred by recent advancements in artificial intelligence, machine learning, and natural language processing, these smart voice and text interfaces provide banking customers convenient, contextual access to their latest financial information through familiar mobile messaging platforms. These technologies make it possible for consumers to chat with their financial institutions via intelligent virtual assistants 24/7.

In 2016, several large-scale financial institutions developed proprietary chatbots, and numerous fintech start-ups developed third-party chatbots in the hope of either competing with or selling to traditional banking institutions.

In 2017, chatbots and other virtual assistant technologies such as Apple’s Siri, Amazon’s Alexa, and Google Home will become even more prevalent and sophisticated, providing users increasingly convenient and seamless access to their financial information. Rapidly developing technologies such as API’s, voice-activated devices, cloud services, and the Internet of Things (IoT) will catalyze a fundamental shift toward integrating banking into the daily lives of consumers.

2. Partnerships between fintech companies and legacy institutions

Within the last decade, major banking scandals and crises have fundamentally shaken public trust in traditional financial institutions, leaving room for new, non-traditional financial service providers (fintechs) to win over consumers. These new industry players are threatening to siphon banking business away from incumbent institutions by offering customers newer, faster, and more convenient digital banking experiences.

However, traditional financial institutions have something fintech start-ups don’t: large customer bases, compliance with strict industry regulations, and access to an established industry infrastructure. According to a recent Business Intelligence report, although fintechs saw increased funding in 2016, they’re still struggling to become profitable.

At the same time, many traditional banking institutions are struggling to remain competitive against both large-scale industry powerhouses and lightweight fintechs.

In 2017, we’ll likely see increased partnerships between newcomer fintechs and legacy banking institutions. Such partnerships will combine the strengths of each type of financial provider to reduce operational costs, increase customer satisfaction, and optimize growth and ROI.

3. Financial regulation changes

With its rapid pace of development, the fintech industry is shaking up the banking status quo and raising questions about how newcomer institutions fit into the regulatory landscape. Potential regulatory changes and uncertainty around a new US administration are catalyzing major changes for the financial services industry.

In 2017, we’ll likely see reduced or relaxed federal financial regulations, opening up opportunities for emerging fintech companies to compete more directly with traditional banking institutions. In a bid to encourage industry-wide innovation and competition, the US Office of the Comptroller of Currency recently ruled that fintechs can seek bank charters, a move that will allow fintechs to partner more easily with existing institutions or seek their own charters to provide the same kinds of financial services as traditional banks.

Expected to go into effect next year, this regulatory change will encourage industry-wide innovation, competition, and collaboration that will fundamentally alter the financial services industry.

4. Developing a friction-free customer experience

A major catalyst of the emerging fintech industry is a heightened focus on the customer experience. As technology becomes increasingly sophisticated, digitally-savvy banking customers are demanding the same convenient, simple, and elegant experiences they’ve come to expect from major technology providers like Apple and Google. Fintech start-ups like Square, VenMo, and Stripe have all launched highly successful payments platforms that are raising the bar for the digital customer experience. As these newcomers redefine the digital banking experience, traditional financial institutions will be forced to keep pace with innovation or risk losing valuable market share.

According to a recent report, friction in the customer experience is a leading cause of banking customer dissatisfaction and disengagement. The majority of banks surveyed in this report do not offer seamless digital account creation and onboarding across multiple channels.

In the coming year, competition in the fintech industry will center around developing best-in-class digital banking experiences that streamline the customer journey from start to finish. Account aggregation tools, digital account creation and onboarding, and seamless omni-channel experiences will define the new digital banking experience and set the benchmark for customer service among both traditional and non-traditional financial providers.

5. Use of data insights to better serve customer needs

Big data was a major fintech buzzword this year. Advancements in machine learning are making it possible for banking technologies to distill patterns and actionable insights from banking customer data.

In 2017, these technologies will become increasingly refined, as financial providers recognize the value of deep analysis of their client data. This data will allow institutions to better match banking products to individual customers to better serve the needs of their customer base.

One product that will likely receive greater attention in the next year is digital personal financial management (PFM). As customers develop higher expectations of their banks, reporting basic account data is no longer enough. Today’s banking customers are in greater need of financial advice than ever, and internal data silos prevent banks from providing effective and personalized guidance.

Removing these data silos using advanced data analytics and AI-powered banking technologies can provide personalized, contextual PFM tools that empower customers to take control of their finances. These tools will likely see increased development and adoption in the next year, and institutions that implement these tools will have the opportunity to increase customer engagement and loyalty.

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Do you agree with our predictions? Did we miss any of the major trends for 2017?

Let us know in the comments, or send us an email at contact@abe.ai.