Financial Services Industry
Execution Now Matters as Much as Scale
Despite technological and economic changes, financial services remain the backbone of economic infrastructure. The competitive landscape, however, has shifted in ways that scale alone can no longer offset, and the gap between the institutions that recognise this and the ones still relying on legacy advantages is widening.
Between 2019 and 2024, funds intermediated by the global banking system grew by $122 trillion, roughly 40 percent, propelled by household and institutional wealth. Bank revenues after risk cost reached a record $5.5 trillion in 2024, pushing net income to $1.2 trillion—the highest total ever recorded for any industry. By most financial measures, the sector is performing well.
Still, the market remains unconvinced. Regardless of recent value creation, the banking sector carries a price-to-book ratio of just 0.9x, trailing the average of all other industries by nearly 70 percent. Labour productivity growth has been mixed, even as banks spend the highest proportion of revenues across any sector on technology. While profitability is real, confidence is not.
The reason is a gap in execution more than lack of ambition. Financial services institutions are being asked to modernise customer journeys, technology platforms, and decision-making systems while simultaneously meeting higher expectations on risk, compliance, and operational reliability. Doing all of that at once, without destabilising what already works, is an execution challenge of genuine complexity—and that is the problem we are built to help solve.
Regulation, Cyber Risk, and New Competition Are Converging
Three forces are converging at the same time, putting pressure on financial services leaders, and each one demands a response that is both operationally disciplined and strategically coherent.
1. Regulatory expectations continue to expand in scope and specificity
Regulatory requirements have moved well beyond capital and liquidity into operational resilience, third-party technology oversight, and consumer data access. The Basel Committee on Banking Supervision revised its Core Principles for Effective Banking Supervision in early 2024 for the first time since 2012, introducing a revised Principle 25 that brings operational risk and operational resilience together under a single supervisory expectation.The updated principles sharpen the focus on governance, operational risk management, business continuity, third-party dependence management, cybersecurity, and information and communication technology.
Under the revised principles, supervisors now expect banks to operate with an adequate operational resilience approach that reflects their risk profile, risk appetite, business environment, and tolerance for disruption to critical operations. That includes policies and processes to identify and protect against threats, respond to disruptive events, and minimise the impact on the delivery of critical operations.
In Europe, the Digital Operational Resilience Act (DORA) came into force in January 2025. Banks are now required to provide detailed reports on their operational resilience measures, including stress testing results, incident recovery times, and cybersecurity controls. While DORA applies directly to EU-regulated institutions, its influence is being felt across global financial services as a signal of where supervisory expectations are heading more broadly.
The implication for leaders is that compliance is no longer separable from transformation. Resilience cannot be delivered as a parallel control layer. It has to be embedded into how change initiatives are designed and executed from the outset.
2. Nonbank competition is gaining structural ground
The more profitable pools in banking are facing competition from focused nonbank attackers—in private credit, payments, and wealth management. These competitors are not constrained by legacy infrastructure or the full weight of prudential regulation. They move faster, design more targeted propositions, and are capturing share in precisely the areas where incumbent margins are strongest.
McKinsey’s analysis of more than 2,000 banks found that local scale still matters in many markets, but that digital cuts both ways and complexity frequently negates the advantages of scale.5 Institutions that are large but operationally complex are not automatically better positioned than focused competitors with cleaner operating models. The advantage that used to come from balance sheet size is now contingent on something more uncomfortable: the ability to execute.
3. Cyber exposure is material and growing
As institutions adopt more cloud, API, and AI-enabled architectures, the attack surface expands. The Basel III framework empowers banks to safeguard personal data and strengthen operational resilience through capital-based incentives, and the Basel Committee has issued guidance on cybersecurity best practices through its Principles for the Sound Management of Operational Risk and its Principles for Operational Resilience.Regulatory expectations on cyber are no longer aspirational—they are embedded in supervisory frameworks and carry direct capital and reporting consequences.
Trends and Insights: Payments, Platforms, and AI Are Rewiring the Customer Interface
The customer-facing layer of financial services is being rebuilt. Institutions that understand this as a structural shift, rather than a technology upgrade, will be the ones best positioned to compete over the next decade.
1. Digital payments have crossed the threshold from trend to baseline expectation
Digital payments are now nearly ubiquitous. The United States reached a record 92 percent adoption rate in 2024, with roughly 90 percent of consumers in both the US and Europe reporting digital payment usage in the past year. Digital wallets have become even more embedded in consumers’ commerce habits, pointing toward a future in which they begin to displace physical wallets entirely and the underlying use cases continue to proliferate. This is not a channel preference. It is a fundamental shift in how financial services are accessed and experienced.
Online shopping remains the largest use case, accounting for more than 70 percent of transactions, but newer channels—in-app and in-store payments—are experiencing the fastest growth. In the US, in-app purchases have surged to 60 percent adoption, an eight-point increase since 2019.
2. Instant payments are growing exponentially and fragmenting the payments value chain
Instant payment systems are now operational in most major markets. In Canada, the Real-Time Rail (RTR) infrastructure is moving through advanced user acceptance testing ahead of its targeted launch timeline, establishing modern real-time clearing and settlement capabilities nationwide. In the European Union, the volume of instant payment transactions is projected to grow from approximately three billion today to nearly 30 billion by 2028, an average annual growth rate of 50 percent.
Account-to-account payments are gaining popularity, particularly through digital wallets, which now account for approximately 30 percent of global point-of-sale volume. As transaction volume shifts toward lower-yield rails such as instant payments, monetisation challenges are rising—particularly in markets with strict regulations on interchange and processing fees.
For incumbent institutions, this creates a dual challenge: investing in infrastructure that supports faster, lower-yield rails while protecting the economics of higher-yield products that still drive profitability. Few institutions have a settled answer to this tension yet.
3. Institutions are responding by bringing technology capability back in-house
A North American leader has retooled itself to create a more personalised experience for its customers, focusing on products like wealth and home equity to run rapid-cycle propositions—as many as four marketing campaigns a month. It has attached that to a segmentation model that drives who answers the phone, the script used, and what kinds of ongoing servicing support the customer experiences. End-to-end customer journey redesign of that kind requires owning the data, the architecture, and the execution capability, not outsourcing them.
The direction is clear. Institutions are no longer competing only on products or balance sheets. They are competing on architecture, data, and execution speed. The advantage increasingly belongs to those that can translate customer insight into product and service change quickly, with appropriate governance and risk controls in place.
Opportunities and Solutions: Prioritise Core Modernisation, Resilience, and Governed AI
The strongest response to the current environment is not to launch more transformation programmes. It is to focus relentlessly on a smaller number of priorities and execute them with discipline.
McKinsey’s analysis of banks that outperformed over the past five to ten years found that the winners combine smart structural positioning with rigorous operational execution across capabilities including analytics, marketing effectiveness, operating model, and technology. The differentiator is not the strategy. It is the execution quality. For most financial services institutions, that means concentrating attention on four areas.
1. Modernise core and data architecture to support faster products and cleaner reporting
Legacy infrastructure is the most consistent constraint on execution speed in financial services. Institutions cannot build personalised customer propositions, respond quickly to competitive threats, or produce clean regulatory reporting when the underlying data architecture is fragmented or outdated. Core modernisation is not a technology project. It is an operating model project. It requires decisions about what to build, what to buy, what to retire, and how to sequence change without disrupting the operations that customers and regulators depend on every day.
2. Embed cyber and operational resilience into every major change initiative
Resilience that is added to transformation programmes as a compliance layer is both expensive and insufficient. It needs to be designed in from the beginning. The final Basel III standards bring significant innovations in operational risk and loss data analysis, strengthening stability and promoting the kind of risk culture that creates a foundation for sustainable resilience in an increasingly digital financial environment. Institutions that treat resilience as a strategic capability—rather than overhead—will have a structural advantage as regulatory expectations continue to climb.
3. Apply AI where there is clear business value and strong governance
The potential effect of AI on financial services is significant. The institutions that will benefit most are not the ones moving fastest. They are the ones moving most deliberately: identifying the highest-value use cases, establishing governance frameworks that can satisfy both internal risk standards and regulatory scrutiny, and building the data and organisational infrastructure that AI actually requires to perform reliably. Fraud detection, customer servicing, credit decisioning, and regulatory reporting are the areas where the business case is clearest and where governance requirements are most tractable today.
4. Redesign customer journeys to reduce friction without weakening trust or control
McKinsey’s digital payments research identifies several opportunities for ecosystem participants—applying an omnichannel view to wallet rewards programmes, scaling shopping marketplaces or aggregated offer portals, and meeting consumers earlier in their shopping journey. The underlying principle is straightforward: customers now expect the experience of financial services to match the experience they have with the best digital platforms in other sectors. Closing that gap requires journey redesign that is as rigorous about risk and control as it is about customer experience, which is harder than the typical CX framing suggests.
Conclusion: Winning Institutions Will Simplify Before They Accelerate
Financial services are not becoming simpler. They are becoming more software-defined, more distributed across platforms and intermediaries, and more dependent on disciplined execution. Banks that win combine careful segment selection, deliberate scale decisions, and rigorous operational execution across analytics, operating model, and technology. Management and execution capability is becoming the differentiator—and the institutions that have not yet treated it as such are the ones most exposed.
The institutions best positioned to win over the next five years will be the ones that can simplify their operating models before attempting to accelerate them. That means making deliberate choices about which initiatives to pursue, designing governance structures that keep execution on track, embedding resilience into change rather than bolting it on, and building the internal capabilities that sustained advantage requires.
Complexity is not the enemy. Unmanaged complexity is. The institutions that learn to execute with clarity and discipline inside a complex environment will set the competitive standard for the decade ahead.
How mBolden Works with Financial Services Leaders
We work with senior leaders in regulated financial institutions on the operational and organisational dimensions of transformation—the operating model decisions, governance structures, leadership alignment, and change approaches that determine whether a strategy actually delivers.
Our work in financial services includes operating model redesigns for institutions navigating regulatory change, governance and decision-right frameworks for complex transformation programmes, leadership alignment work for organisations managing competing priorities under time pressure, and change strategy for organisations managing simultaneous shifts in technology, risk, and customer expectations.
Engagements are typically project-based, ranging from four to twelve weeks, with optional ongoing advisory support.