Financial institutions have just delivered their best value-creation year since the global financial crisis, even beating technology stocks. But the real message of BCG’s latest «Future of Finance» report is not triumph. It is a warning.
Central Banking District (Image: Unsplash)
Banks have repaired profitability, but they have not yet convinced investors that they can grow. The next battle will be fought over AI-driven productivity, capital allocation, M&A discipline, and the future perimeter of banking itself.
In 2025, banks, asset managers and payments companies did something few would have expected only a few years ago: they topped the global value-creation league. According to BCG’s latest report, financial institutions generated a total shareholder return of 30.2 percent, ahead of information technology and all other major sectors. After years of post-crisis underperformance, the industry has finally regained the right to sound confident.
But confidence is not the same as conviction. The market has rewarded the sector for better profitability and stronger balance sheets, yet it still refuses to award banks a proper growth multiple. Price-to-book ratios have improved, but price-to-earnings multiples remain stubbornly low.
BCG’s most uncomfortable finding is that financial institutions still trade at roughly a 40 percent discount to the market average on forward P/E. Investors believe the earnings. They do not yet believe the story.
Recovery is Real – Rerating Not
That distinction matters. Since late 2022, banks’ market capitalization has risen by around $5.5 trillion, capturing a large part of the value opportunity BCG identified in its previous report. Much of this rebound reflects a genuine recovery in return on equity, helped by the normalization of interest rates, disciplined cost management, improved risk controls, and better balance-sheet management.
The problem is that the old playbook is running out of road. Higher rates, positive jaws and buybacks can repair valuations, but they cannot by themselves create a compounding equity story. For banks trading above book value, the logic has changed: growth is no longer automatically value-destructive. Properly deployed, capital can now create value. But only if it is invested in scalable businesses with superior unit economics.
AI is Not a Tool
This is where BCG’s report becomes most relevant for bank CEOs. The industry has spent heavily on digital transformation, but productivity has barely moved. Operating expenses relative to assets have improved only marginally, while global financial-sector headcount has continued to rise. In other words, many banks have digitized the old machine without redesigning it.
BCG’s argument is sharper than the usual AI optimism. The point is not to add copilots to broken workflows. The point is to rebuild banking around AI-first processes. In underwriting, BCG cites productivity uplifts of 50 percent. In wealth management, it points to a 30 percent lift in fee income.
In technology and engineering, productivity gains can reach 60 percent for top-performing cohorts. In customer onboarding, AI-enabled redesign can make processes four to five times faster.
Winners Won’t Count Use Cases
The most important lesson is that value comes from end-to-end redesign, not from isolated pilots. A bank that uses AI to draft emails has improved a task. A bank that uses agentic AI to rethink client onboarding, credit assessment, fraud screening, servicing, and relationship management has changed its economics.
This is why digital attackers matter. Revolut’s customer base rose from 50 million in November 2024 to more than 70 million by January 2026, while the company expanded from payments into banking, wealth management, trading and mortgages. The message for incumbents is not that every challenger will win. It is that scalable, technology-led growth is possible in banking – and customers will move when the proposition is sufficiently superior.
Growth is Back
BCG expects ordinary growth in core banking to remain respectable but insufficient. Retail and business banking may grow around 4 percent annually through 2030 in a business-as-usual scenario, commercial banking around 6 percent, and corporate and investment banking around 5 percent. But these trajectories alone are unlikely to produce the P/E rerating investors are withholding.
The more interesting opportunity is that AI expands the addressable market. Lower cost-to-serve could make mass-affluent wealth advice, small-ticket lending in emerging markets, midmarket treasury services, and more personalized pricing economically attractive for the first time. BCG estimates that personalized pricing alone can generate an incremental revenue uplift of roughly 2 to 3 percent across retail banking products.
Banking License May Become Platform License
This is one of the report’s most provocative implications. If banks can combine trust, regulatory permissions, data, payments, financing and AI-enabled advice, they may be able to widen the perimeter of banking rather than merely defend it. BCG points to opportunities ranging from digital assets and hyperlocal commerce to subscription-based financial ecosystems.
For banks, this requires a different capital-allocation mindset. After years in which buybacks and dividends were often the cleanest way to create value, the sector now has to choose where to invest for growth. That means shifting capital toward technology, new revenue pools and disciplined acquisitions – not because growth is fashionable, but because the valuation math has changed.
M&A is No Longer Just Defensive
BCG argues that, for the first time in more than a decade, valuations, capital headroom and investor expectations are aligned in favour of active portfolio reshaping. The report identifies three routes: scale up in the core, expand into attractive pockets of value, or divest businesses that no longer fit the strategic portfolio.
The catch is execution. Banking M&A has a long record of disappointing investors when integration is slow, synergies are vague, or cultural differences are underestimated. AI can improve sourcing, due diligence, and synergy tracking, but it cannot replace strategic judgment. The best acquirers will not simply get bigger. They will get sharper.
Nonbanks Are No Longer Outsiders
The competitive map is also changing. Nonbank financial institutions (NBFI) have moved from being challengers at the edge of the system to becoming structural participants in it. In corporate and investment banking, BCG says NBFIs now account for around 20 percent of global revenue pools, up from 9 percent in 2019 and 16 percent in 2024, with a base-case path toward 22 percent by 2030. Nonbank liquidity providers already capture roughly 26 percent of global trading revenues.
This is not a simple story of banks versus nonbanks. In private credit, for example, banks are increasingly becoming financing partners to asset managers rather than merely losing share to them. The danger is opacity: exposures can migrate from direct lending books into less transparent interconnections with private funds, leverage structures, and capital-market channels.
Digital Assets Are Becoming Infrastructure
The digital-asset discussion has also matured. BCG’s base case is not that crypto replaces banking. It is that stablecoins, tokenized deposits and real-world asset tokenization become part of the financial plumbing in specific use cases, such as tokenized fund settlement, cross-border business payments, treasury solutions and securities settlement.
The upside scenario is more radical. BCG cites a potential rise in stablecoin market capitalization from around $300 billion in 2025 to about $2 trillion by 2030, while tokenized real-world assets could reach approximately $87 trillion by 2035. If that happens, the winners will be institutions able to connect traditional fiat systems with tokenized finance safely, compliantly and at scale.
Real Disruption is at the Intersection
The report’s most valuable insight is that AI, nonbanks and digital assets should not be analysed separately. Their real power emerges when they converge. Agentic AI can make financial decisions and execute transactions. Digital assets can provide programmable settlement rails. Nonbanks can package yield, credit, and investment access in new ways.
BCG sketches three possible futures: an age of specialization, in which category-specific scale matters more than universal scale; hypergranularity, in which finance becomes more customized and connected; and a disruption of consumer savings, in which deposits face competition from tokenized, yield-bearing alternatives. These are not forecasts. They are strategic stress tests.
The CEO Can’t Delegate This
The practical conclusion is blunt. Banks do not need more AI experimentation. They need fewer, larger, and more accountable bets. BCG argues that winning institutions should focus on six to eight high-impact AI priorities, selected for value impact, competitive advantage, reusability, and time horizon. They also need five foundations at scale: technology, data, risk and compliance, operating model, and talent.
The next banking leaders will therefore be judged less by how much they spend on technology than by whether they can redesign the institution around intelligence. The shift is from AI-enabled to AI-first. That means measuring outcomes through unit economics, revenue growth, risk reduction and capital productivity – not through the number of pilots launched.
The Right to be Bold
BCG’s title asks whether it is time to shift gears. The answer is yes –but not into reckless expansion. The industry has repaired its profitability, rebuilt investor confidence, and regained strategic optionality. That creates a rare window in which banks can transform from a position of strength rather than desperation.
The risk is that management teams mistake the recovery for the destination. The market has already paid banks for better earnings. It will pay the next premium only for credible growth. The banks that use this moment to rebuild productivity, redeploy capital, and take positions where AI, nonbanks, and digital assets intersect will define the next phase of finance.
Those that settle for buybacks, pilots and incrementalism may discover that the recovery was real – but temporary.
