Banks could see their global profit pools shrink by $170 billion over the next decade if they fail to adapt to rapid technological change.
According to McKinsey & Company’s Global Banking Annual Review 2025, artificial intelligence promises major efficiency gains, but its impact will not be evenly distributed. Early adopters of agentic and generative AI could see returns on tangible equity rise by up to four percentage points, while slower movers risk long-term profit erosion.
McKinsey describes AI as a double-edged sword: it offers banks the potential to cut operating costs by up to 20 percent, yet could also disrupt traditional profit pools as customers use AI tools to manage their finances more efficiently. The firm predicts that agentic AI, which allows autonomous systems to perform complex decision-making, could spark a tipping point within three to five years, reshaping how banks operate and interact with consumers.
Under pressure
The review argues that despite years of record-breaking financial performance, the global banking industry faces mounting pressure. Between 2019 and 2024, funds intermediated by banks and nonbank providers surged by $122 trillion, or roughly 40 percent, and revenues hit $5.5 trillion in 2024.
Net income reached an unprecedented $1.2 trillion. Yet, market valuations have not kept pace. Investors remain skeptical, with banking stocks trading at valuations 67 percent below the average for other industries.
McKinsey attributes the gap to fading tailwinds such as high interest rates and low credit risk, alongside intensifying competition from fintechs and private credit. The report cautions that traditional, scale-driven models are no longer sufficient. To catch the next growth curve, banks must shift from relying on traditional, time-worn approaches to precision strategies that generate value in more challenging conditions, it says.
The next chapter
The 2025 review emphasizes “precision, not heft” as the defining characteristic of the next era of banking success. It outlines a “precision toolbox” across four dimensions: focusing technology investments on the most impactful areas; offering hyperpersonalized products based on real-time data; applying micro-level capital efficiency to free up trapped capital; and pursuing targeted mergers that deliver specific strategic capabilities rather than size alone.
“Precision, not heft, is the great equalizer,” the report adds, suggesting that even smaller banks can outperform if they embed focus and discipline into every part of their strategy.
The analysis also highlights a sharp transformation in consumer behavior. Loyalty to incumbent banks has fallen dramatically: in the United States, only 4 percent of new checking account openings now come from existing customers, down from 25 percent in 2018. More than half of consumers already use generative AI tools, and nearly all say they would switch providers if their bank failed to keep up with these innovations.
McKinsey concludes that banks must urgently embed AI into their customer journeys and strengthen mobile-first engagement to remain relevant. Those that integrate AI-powered insights with human connection can build trust and loyalty, while laggards risk being displaced by emerging fintech challengers.
Ultimately, the report suggests that the next growth wave in banking will not be driven by size but by precision — by institutions that combine technological focus, data-driven consumer understanding, disciplined capital allocation, and targeted growth strategies to create lasting value.
In the fintech sector, the Canadian government has unveiled a plan to combat financial crime and online fraud, including the creation of a new Financial Crimes Agency.
