McKinsey: How the Next Banking Revolution Will Be Won
Global banking has never been more profitable – nor more vulnerable. After a record 1.2 trillion dollars in earnings, the sector faces a turning point. McKinsey’s latest «Global Banking Annual Review 2025» argues that size alone no longer guarantees success. In the age of AI, it is precision that separates winners from laggards.
In 2024, banks across the world generated more profits than any other industry. But while balance sheets swelled, investor confidence waned, strategy consultancy McKinsey reports in its latest «Global Banking Annual Review 2025» issued on Thursday.
Valuations trail other sectors by nearly seventy percent – a sign that markets doubt these profits can last. The surge was built on exceptional tailwinds: high interest rates, inflated wealth cycles, and low-risk costs. Those forces are fading fast.
End of Scale as Strategy
For decades, banks equated scale with safety. Bigger balance sheets meant resilience. Not anymore. McKinsey’s analysis shows that macro-driven growth and digitalization at scale no longer deliver.
Instead, the future belongs to banks that deploy capital, technology, and talent with surgical precision.
Inside the «Precision Toolbox»
The study identifies four levers defining the next growth curve:
- Technology: Invest where impact is measurable – particularly in agentic and generative AI – and cut where it isn’t.
- The New Consumer: Treat each client as a «segment of one» with hyperpersonalized, data-driven offerings.
- Capital Efficiency: Replace sweeping reallocations with micro-level balance sheet discipline, freeing trapped capital line by line.
- M&A: Pursue deals that close specific capability gaps rather than chase size for its own sake.
Banking’s AI Moment
Artificial intelligence is reshaping the industry’s economics. McKinsey forecasts gross cost reductions of up to seventy percent in some categories, translating into a net fifteen to twenty percent fall in total expenses.
Yet much of that benefit will flow to customers as competition intensifies. Agentic AI – autonomous systems capable of executing end-to-end tasks – could redefine the banking workforce and consumer experience alike.
A 9 Percent Shock
AI’s disruption will not be evenly spread. Banks that fail to adapt could see global profit pools shrink by one hundred seventy billion dollars – roughly 9 percent – pushing many below their cost of capital. Early adopters, by contrast, could boost return on tangible equity by up to 4 percentage points and widen the gap further over time.
New Customer Reality
Loyalty is eroding. In the United States, only 4 percent of new checking-account customers now stay with their existing bank without exploring alternatives – down from 25 percent in 2018.
Younger generations expect seamless, mobile-first interactions powered by AI. To stay relevant, banks must meet customers where they already are – on their phones – and integrate personalized insights into every journey.
Precision in Capital and Deals
Only fifteen percent of publicly traded banks created value in 2024 – those that combined tight capital discipline with targeted M&A. Precision capital allocation means knowing, client by client, where each dollar earns the most.
Precision M&A means buying capabilities, not empires. Success stories from DBS, OTP Bank, and Royal Bank of Canada prove that well-timed, focused acquisitions beat headline-grabbing megamergers.
Coming Divide – Clear Message
The next decade will separate leaders from followers. Leaders will embed AI deep into their models, master capital precision, and reinvent customer engagement. Followers will watch margins compress as inertia sets in.
McKinsey’s message is clear: the banking giants of tomorrow won’t necessarily be the biggest – but the sharpest. In the era of agentic AI and hyperpersonalized finance, precision is power.
