What banks will win and lose in the age of AI? This report offers the data and strategies needed to create long-term success in a global marketplace.
As we enter 2025, the banking sector faces a critical juncture, balancing a unique confluence of new challenges and opportunities that will define its evolution over the next decade. Over the past 15 years, the aftershocks of the 2008 Global Financial Crisis, ever-tightening regulatory pressures, low interest rates, and fierce market competition have hampered banks’ competitiveness. This convergence has created an environment where profitability is under pressure, cost-to-income ratios are elevated, and price-to-book ratios remain strained. The stage is set for a showdown: banks able to adapt will thrive, while others risk being left further behind.
Yet, in the midst of these challenges, one undeniable trend is emerging as the game changer: artificial intelligence. AI is rapidly becoming the foundation of banking strategies, redesigning operational transformation and the reinvention of business models in the pursuit of healthier financial outcomes while addressing risk and compliance requirements.
The 2025 Global Outlook for Banking and Financial Markets offers key insights into these pivotal shifts and provides the framework for strategic action that can elevate financial performance in this rapidly changing landscape. For banking leaders, this is more than just a guide—it is a call to action.
Five business and technology actions
Explore five business and technology actions that position your institution to accelerate initiatives geared at elevating financial and operational performance at the intersection of enterprise-wide transformations.
- Adjust the business model to take advantage of the digitalization of financial services.Banking business models aren’t keeping up with client demand and AI-led innovation. Revise your business strategies by transforming how you cater to clients. Expand your capability to serve clients with embedded finance, allowing them to do banking anywhere, anytime. Enhance advisory propositions with AI to capture new service fees, both for consumers and businesses. Reconsider payment initiatives as the backbone for new data to fortify AI-powered risk management across ecosystems.
- Drive operational efficiency leveraging AI.Despite efforts to control costs, banks’ efficiencies remain weak. Focus on high-impact workloads to streamline and enhance offerings, making them seamlessly digital-friendly. Embrace AI to reimagine processes end-to-end, driving efficiency and innovation. Design for hybrid cloud to optimize costs and simplify operations. By reimagining your cloud approach, you can effectively address application dependencies, help ensure compliance with regulatory requirements, and unlock the benefits of cross-departmental collaboration, transforming how your teams work in the cloud environment. Generative AI serves as a valuable ally, enabling automated app re-architecting and dependency analysis for smarter, more efficient cloud solutions.
- Renew your risk management culture—one where every banker becomes an AI risk manager.Banking profits rely on adept risk management. Accelerate software development with AI, but don’t overlook the risk of increased complexity—invest in clear platform governance to manage security, compliance, and resiliency as innovation scales. Prioritize data governance to safeguard confidentiality, integrity, and availability, ensuring AI models are built on robust frameworks to mitigate risks like data breaches, legal uncertainties, and model biases. Make risk management a core responsibility for every employee, from approving loans to managing IT operations, focusing on creating sustainable, risk-adjusted value with every decision. Adherence to industry architectural standards mitigates the risk of unnecessary customization and enables more seamless ecosystem participation across borders.
- Implement savvy education programs that keep pace with technological advances.Automation is blind to the color of bankers’ collars. Our perspective is that AI is an automation advantage as well as an augmentation opportunity—empowering bankers to reimagine their contributions in a digitally transformed industry. This equally applies to both business domains and technology departments. Banks might find it difficult to find the skills required and cannot postpone investments to reskill a workforce that is too often trapped in routine tasks and can’t always evolve with the speed of innovation.
- Lead with AI or be left behind.AI mastery is a Darwinian process for banks—those that lead will outpace and outlive competitors who lag behind. Banks must articulate their business strategy clearly to distinguish themselves from competitors in the age of AI—technological innovation alone is not enough. Moving from innovating with AI to innovating based on AI demands an “AI-first” approach, where the AI platform becomes central to all business and operational strategies. By scaling through an “AI factory” model, banks can accelerate development cycles, control costs, and embed AI confidence across the organization. The future belongs to banks that position AI as the core driver of innovation, transforming it from a tool into the foundation of their business model.
- Embrace AI as a core enabler of banking transformation.
- Balance innovation and risk to regain momentum in capital markets.
- Position institutions globally on a banking performance quadrant.
- Reduce costs and improve profitability in the age of AI.
- Use AI to manage risk and compliance as a catalyst for innovation.
Originally published 27 January 2025
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Meet the authors
Shanker Ramamurthy, Managing Partner, Global Banking and Financial Markets, IBM ConsultingPaolo Sironi, Global Research Leader, Banking and Financial Markets, IBM Institute for Business Value
Download report translations
Download report translations
Download report translations
Meet the authors
Shanker Ramamurthy, Managing Partner, Global Banking and Financial Markets, IBM ConsultingPaolo Sironi, Global Research Leader, Banking and Financial Markets, IBM Institute for Business Value
Originally published 27 January 2025
