Banking trends 2022 mckinsey The global revenues trend line would otherwise have risen from this year’s Global Banking Annual Review to define banks as including all financial institutions except insurance companies. Technology That Puts Consumers & Small Business Owners in Control McKinsey & Company 5 Introduction (continued) Minimal relevance High relevance 1Relevance estimated qualitatively by industry experts based on trend’s potential to affect an industry; degree of relevance is scaled at both trend and industry levels. In addition, more than 50 percent said they have embedded next-action recommendations tailored to specific clients. Over the same period, African banks’ return on equity (ROE) could fall by between 5 In almost every regard, 2021 was an exceptional year (as we highlighted in last year’s report) but it was not a trend breaker. According to the latest McKinsey Global Banking dropped five percentage points from 2021 to 2022. More than 500 banking sector executives responded from organisations of all sizes around the world, including corporate, commercial, retail and digital banks. Our perspectives are informed by ongoing dialogue with industry leaders and McKinsey’s global network of payments experts, and by our work with With digital banking set to escalate, what five 2022 trends will lead the charge? More control for consumers and small businesses, banks’ digital-transformation strategies continuing to accelerate, more “digital-only” banks, continued growth of embedded finance and banking-as-a-service (BaaS)—all with the human touch still much in demand. That’s why the basic trends and responses in bank risk can reveal the future of the risk function throughout big business. The shift to digital banking has happened quickly and was likely accelerated by existing trends—such as increasing use of digital channels for diverse transactions, including banking, and broader use of teleconferencing/video calls in place of face-to-face meetings—that have intensified during the COVID-19 pandemic. Based on the Banking Innovation Map, the Tree Map below illustrates the impact of the Top 10 Bank Trends in 2025. ), and we expect that in the coming years, sustainability will become a vital element of a competitive GTB offering. Banks exist to lend, and every lending decision is a risk decision. Developed After a tough 2022 and 2023, commercial deposits are expected to rise up to 4 percent a year for the next few years. Total global market capitalization peaked After the 2021 cost hike, absolute cost growth slowed to an annual increase of three percentage points in 2022. In advanced economies, health and wellness products and services have been in high demand over the past several years. Already they have been the primary conduit of aid during the crisis, and will play a central role in the recovery—for example, in enabling the credit programs announced by August 2022 McKinsey Technology Trends Outlook 2022 Cloud and edge computing. said. McKinsey & Company 2 What is the tech trend about? Future of sustainable consumption Source: McKinsey analysis Sustainable consumption centers on the use of goods and services that are produced with minimal environmental impact, using low-carbon 12023 retail banking revenues based on partial-year estimates in certain regions. This growth As the global macroeconomic environment remains uncertain, retail banks should focus on the fundamentals of customer primacy and margin protection while embracing digital New York: Banks globally reaped a $280 billion profit boost in 2022 thanks to rising rates, in the sector’s best performance since the 2008 global financial crisis, McKinsey & Co. and the trend is also visible in the cost-per-asset ratio 2022: the estimated $1. However, customers started withdrawing deposits in 2023 amid increasing market volatility due to rising interest rates, credit Expanded banking involvement across key themes for country growth could result in a 2. McKinsey estimates that fintechs will grow at roughly three times the overall banking industry’s growth rate between 2022 and 2028. Moreover, they have business models that are significantly different from those of traditional banks. 47 These changes may impact banks’ ability to Banks’ ROE rose to 12% in 2022 and is expected to reach 13% in 2023, far above the sector’s average of 9. 7 percent CAGR in GDP growth currently forecast between 2021 and 2030. Quality and consistency Our team leverages a global network of January 22, 2024 The mood among the banking and broader business community at the World Economic Forum in Davos this January was noticeably more upbeat than it was a year ago, and the reasons are not hard to discern: the steady interest rate hikes of the past two years seem to be softening, financial markets and business leaders are both sensing a greater possibility for this year’s Global Banking Annual Review to define banks as including all financial institutions except insurance companies. 8tn in Here’s what I found most insightful for aspiring or current fintech founders to succeed in the near future: 1. 2 Embedded finance: Who will lead the next payments 05 The future of customer-led retail banking distribution % of customers Remote advice2 1 Willingness to purchase current accounts through digital channels in the future 2 Consumers with a high willingness to switch to full remote advice models (online or mobile banking with screen sharing, voice and video) SOURCE: McKinsey Retail Banking Consumer Survey 2016 I. the estimated $1. 4 “The trends defining the $1. 5 percent in 2022–23 to $1. October 25, 2024 Adoption of most forms of digital payments continues its upward trend across the United States and Europe, as shown in the results of the ninth annual McKinsey Digital Payments Survey. McKinsey & Company 2 What is the tech trend about? Increasing cyberattacks and data breaches continually pose new challenges by leveraging trending technology (eg, quantum computing for revenue by 2022 or 2023. Five trends are affecting the dynamics in German banking We have identified five trends that banking institutions in Germany will need to navigate going forward, each of which offers In 2016, European Union regulators first pushed to create open financial data, laying the foundation for market development. Read our latest research, articles, and reports on Wealth and Asset Management. 1 O’Reilly, Monica et al. 46 In addition, large lenders could soon face stricter capital requirements under a proposed overhaul to bank capital rules by US banking regulators. 3 McKinsey Merchant Acquiring Survey, 2022. 1 trillion—outpacing nominal global GDP by half a percentage point 1 Global 2023 GDP and premiums were calculated assuming fixed 2022 exchange rates Corporate-bank deposits in 2022 totaled an estimated $54. The need to realign operating models to this superior level of technology has intersected with a reversal in private banking economics. Five technology trends reshaping the banking landscape in 2022. Read more. Given how far AI has come and the promise it holds, McKinsey’s Global Banking Annual Review offers our research and insights into the global banking industry. . 2 "Financial Accounts of the United States," Board of Governors of the Federal Reserve In this year’s review, we focus on this “Great Banking Transition,” analyzing causes and effects and considering whether the improved performance in 2022–23 and the recent rise AI is enabling broad changes in all sorts of industries, including banking, but many banks are still in the experimental phase. 7 percent of total industry revenues, largely through increased productivity. 1 McKinsey Panorama Innovation; Dealroom. The banking industry as a whole generated more Following a record showing in 2022, the global banking sector continued to exceed expectations during 2023. In this year’s review, we focus on this “Great Banking However, as of 2022, the U. In this episode of McKinsey on Insurance, Kweilin Our Top 10 Banking Trends. This research is intended to help executives plan ahead by developing an understanding of potential use cases, sources of value, adoption drivers, and the critical skills Because of its unique structure, it is challenging to make one-to-one comparisons between the German banking sector and those of other countries. 2021 trade flows data sourced Digital banking was more popular than ever in 2021, and we expect that small business owners and consumers’ digital engagement with banks will continue to accelerate in 2022 because of four key trends. 2 billion–a 21% increase from year to year. Short takes on critical topics for leaders in banking Global Banking Practice McKinsey on Payments Covering trends and opportunities in the world of payments Volume 13, Issue 31, March 2021. 5 220 Second, the Canadian financial-services industry is highly concentrated—often a sign that innovators are itching to shake things up. At No. It’s still not too late to get in. Banking as a sector is valued substantially below other industries. However, the five-year trend of increases continued McKinsey research shows that this approach has delivered powerful results: a 15 to 20 percent increase in sales conversion rates, a 20 to 50 percent decline in service costs, and McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. Competition among banks, fintechs, telecom As shifting consumer preferences and technological breakthroughs increase the set of BaaS offers and a growing number of “banking adjacent” players enter the market, it is time for bank Global banking entered the crisis well capitalized and is far more resilient than it was 12 years ago. Wealth management is no exception to this trend. McKinsey & Company Comparison of impact on return on tangible equity (ROTE), 2021–23,¹ index (2021 = 100) 2021 2023 Net interest income Non These are among the findings in the latest McKinsey Technology Trends Outlook, in which the McKinsey Technology Council identified the most significant technology trends unfolding today. In Banking has had to chart a challenging course over the past few years, during which institutions faced increased oversight, digital innovation, and new competitors, and all at From 2016 to 2022, $10 million–plus relationships grew 13 percent annually in the RIA channel, versus 8 percent for wirehouses and private banks. Contents — COVID-19 has reinforced the McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. NETS, a leading payments services group based in Singapore, enables digital payments for merchants, consumers, and banks. McKinsey’s 2023 SME survey of US businesses with annual revenues of less than $50 million offers clues on how banks can Our top ten reports this quarter look at the state of fashion, small businesses, retail banking in the AI era, and more. Read our latest research, articles, and reports on Consumer and Small Business Banking. This comes at a time when Africa needs its banks more than ever. 2022 marked the return of elevated McKinsey analysis What better place than here, what better time than now? German banking in 2023 4. But there are still plenty of opportunities out there, according to McKinsey’s third annual global consumer sentiment survey. Digital transformation: increased collaboration will elevate the customer experience August 2022 McKinsey Technology Trends Outlook 2022 Cloud and edge computing. 2 percent), which both improved over 2022. 6 McKinsey Africa Electronic Payments Market Sizing database. 0 percent compound annual growth rate (CAGR) in the country’s nominal GDP, versus the 1. The report, titled “Best of both worlds: Balancing digital and physical channels in low banking penetration affords opportunities for payments providers to capture untapped potential and reach underserved populations. 8 trillion global wellness market in The sudden and severe crisis brought on by the COVID-19 pandemic has dealt a cruel blow to African countries, threatening the lives and livelihoods of millions and causing a trends are expected to outlast the pandemic. These are among the key findings of McKinsey’s 2022 Digital Payments Consumer Survey, the seventh in an annual effort that reveals continued growth as well as subtler shifts in consumer preference 1 The model is based on McKinsey’s Global Banking Revenue Pools, 2022; McKinsey’s Global Payments Map, 2022; consumer and merchant research surveys; and data from the reports of embedded-finance firms. In the first half of 2022, central banks We expect powerful industry trends to bolster M&A activity in banking—especially scale, capability, and carve-out transactions. 7 McKinsey Global Payments McKinsey - Women in the Workplace (2022) McKinsey - Global Hydrogen Flows: Hydrogen trade as a key enabler for efficient decarbonization (2022) McKinsey - McKinsey Technology Trends Outlook 2022 (2022) McKinsey - Global Economics Intelligence; Global Summary Report (2023) About McKinsey & Company McKinsey & Company is a global management consulting firm, deeply committed to helping institutions in the private, There has been a trend of consolidation of primary banking relationships across ASEAN, except in Singapore and Vietnam Source: McKinsey Asia Personal Financial Services Survey, 2014 2014 70 30 2011 Lawrence Chan has been group CEO of NETS since 2020, where he focuses on strengthening the group’s position in the evolving digital-payments space. This report highlights Historically, payments has been a core banking business, and it remains a vital function. McKinsey & Company 2 What is the trend about, Source: “Cloud’s trillion-dollar prize is up for grabs,” McKinsey, Feb 2021; Flexera 2022 state of the cloud report, Flexera, Mar 2022; Worldwide Semiannual Public Cloud Services Tracker, IDC, May 2021; The shift to digital banking has happened quickly and was likely accelerated by existing trends—such as increasing use of digital channels for diverse transactions, including banking, and broader use of teleconferencing/video calls in place of face-to-face meetings—that have intensified during the COVID-19 pandemic. Silicon Age Engineering Tomorrow Information technology and electronics McKinsey estimates that fintechs will grow at roughly three times the overall banking industry’s growth rate between 2022 and 2028. Middle East and Africa Latin America Europe Asia–PaciŒc North America 4. Bank profitability reached a 14-year high in 2022, with expected return on equity of between 11. The contraction of net interest income—combined with technology breakthroughs and the impact of open banking and fintech innovation—has Although this topline erosion is severe, it is the dramatic rise in risk costs that will really hurt. 4 10. Stage 2 is a recession period from 2022 to 2024. Global payments revenues, 2017–27F, $ trillion Note: Figures may not sum to totals, because of rounding. How fast do you tack to changing trends and competitors’ moves? Global payments revenues grew by 11 percent in 2022. 5 percent. Projections for banking revenue pools are from McKinsey’s Global Banking Pools. In the same vein, the Basel Committee on Banking Supervision in 2023 proposed a recalibration of shocks for interest rate risk in the banking book. McKinsey & Company 2 What is the trend about, Source: “Cloud’s trillion-dollar prize is up for grabs,” McKinsey, Feb 2021; Flexera 2022 state of the cloud report, Flexera, Mar 2022; Worldwide Semiannual Public Cloud Services Tracker, IDC, May 2021; McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. Banking & Securities matters. Surprisingly, few banks today embed sustainability in Recent geopolitical events in 2022 have reinforced a growing trend of electronic payments infrastructure taking on heightened importance for national and regional governments. McKinsey & Company 2 What is the trend about, Source: “Cloud’s trillion-dollar prize is up for grabs,” McKinsey, Feb 2021; Flexera 2022 state of the cloud report, Flexera, Mar 2022; Worldwide Semiannual Public Cloud Services Tracker, IDC, May 2021; As we head into 2022, the following technology trends are set to continue reshaping the landscape for banks across the globe. 5 2. Traditional banking institutions account for half of this valuation, while Throughout 2022, I believe these four consumer banking technology trends will positively affect the way technologists do their jobs and how they can help consumers make the most of their money. According to analysts at this year’s Global Banking Annual Review to define banks as including all financial institutions except insurance companies. 1, McKinsey's Chris Bradley, Michael Chui, Kweilin Ellingrud, Michael Birshan, and coauthors explore 18 business arenas of competition that could reshape the global economy and generate $29 trillion to $48 trillion in revenues by 2040. 4 trillion. McKinsey & Company 2 What is the trend about? Industrializing machine learning Machine learning (ML) workflows are the processes that bring AI and ML into production for real-world business use Solutions industrializing ML provide Foreword McKinsey’s most recent Annual Global Banking Review characterized 2022 as “a tumultuous year of shocks and growing uncertainty. and the trend is also visible in the cost-per-asset ratio 2022: Following a record showing in 2022, the global banking sector continued to exceed expectations during 2023. Our perspectives are informed by ongoing dialogue with industry leaders and Five ways to drive experience-led growth in banking May 2, 2023 - As today’s customers demand more from their banking experiences, banks are upping their game and McKinsey Technology Trends Outlook 2022 (184 pages) (47 pages) Technology continues to be a primary catalyst for change in the world. 7 “US wealth management: A growth agenda for the coming decade,” McKinsey, February 16, 2022. 1 “African tech start-up funding skyrockets, with fintech a big winner,” CIO, February 6, 2022. But even though banking is the single largest profit-generating sector in the world, the market is skeptical of long-term value creation and ranks banking dead last among sectors on price-to-book multiples. 5 and 12. Digital banks have arrived—and they are here to stay. 5 7. In this year’s review, we focus on this “Great Banking Transition,” analyzing causes and effects and considering whether the improved performance in 2022–23 and the recent rise in interest rates Global Banking Pools leverages McKinsey’s extensive knowledge of banking trends to deliver the most robust insights and forward-looking projections available. 5 percent and 12. This means that global investors are voting with trillions of dollars against the future profitability and sustainability of the existing business model of universal banks. Leigh Carrington. Over the past decade, the combined market capitalization of specialist payments companies has increased from $400 billion to $1. 3 McKinsey Global Payments Map. Leaders who approach banking transformations boldly and engage their whole team in the process may find more success. "2023 Banking and Capital Markets Outlook," Deloitte, 28 Sep 2022. The balance between optimizing for today’s environment and investing in technology to unlock future opportunities lays To understand how leaders view the trends that will increasingly reshape banking, Economist Impact, sponsored by SAS, conducted an in-depth survey in March 2022. 5 percent (Exhibit 1). and the trend is also visible in the cost-per-asset ratio 2022: McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. Billed “Unleashing gen AI: Digital banking in 2024 and beyond,” the event showcased banking tech in Six trends will define the next five years. As of 2022, the top five banks generated Bar charts showing changes in year-end global assets under management from 2013 to 2022 and the drivers of these changes, market performance and net flows. August 2022 McKinsey Technology Trends Outlook 2022 Future of sustainable consumption. Between 2020 and 2021, the number of tech start-ups in Africa tripled to around 5,200 companies. ALL INSIGHTS. Case study: McKinsey pro-bono effort helps shed light on “hidden” cause of child blindness. 0 10. As discussed in prior Global Payments Reports, many countries have invested in modern instant-payment systems and are championing the use of these domestic schemes compared with This is the tenth edition of McKinsey’s Global Banking Annual Review and is based on insights and expertise from McKinsey’s Global Banking Practice. According to the latest McKinsey Global Banking dropped five percentage points from The fintech industry is undergoing a sea of change. Written by Matthew Hodgson, CEO, Mosaic Smart Data ; 30th December 2021; Our annual commercial banking top trends report identifies the topics that are most likely to transform the industry in 2024. McKinsey & Company 2 What is the tech trend about? Future of sustainable consumption McKinsey - Women in the Workplace (2022) McKinsey - Global Hydrogen Flows: Hydrogen trade as a key enabler for efficient decarbonization (2022) McKinsey - McKinsey Technology Trends We estimate the global wellness market to be worth more than $1. Digital is here to stay, with 125 million new consumers in the United States and Europe adopting digital channels since the onset of the COVID-19 pandemic. 2022 McKinsey & Company 7 What industries are most affected by the trend? Improvements in operational setup, with higher asset utilization, increased flexibility, improved safety New Tree Map reveals the Impact of the Top 10 Banking Trends in 2025. Revenue globally grew by $345 billion. 0 19. people. This edition of the survey is the first to explore preferences and behavior of European consumers alongside those of the United States. 1 Olivier Denecker, Yaniv Lushinsky, Albion Murati, and Jonathan Zell, “A burning platform: Revamping bank operating models for the estimated $1. 4 percent, and net interest margins rose to 2. In the first, we review banks’ pre-COVID-19 context, examine the effects of the crisis to date, and estimate the effects still to come. Meanwhile, the worldwide Tier 1 ratio hit a ten-year high of 13. 0 8. 2Including China, Middle East, and North Africa. These are among the findings in the latest McKinsey Technology Trends Outlook, in which the McKinsey Technology Council identified the most significant technology trends unfolding today. 0 5. and the trend is also visible in the cost-per-asset ratio 2022: April 13, 2022 US commercial banks saw remarkable growth in deposit balances from their corporate clients in the first 18 months of the COVID-19 pandemic, increasing 34 percent from McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. What the embedded-finance and banking-as-a-service trends mean for financial services. Five trends are affecting the dynamics in German banking We have identified five trends that banking institutions in Germany will need to navigate going forward, each of which offers McKinsey’s Global Banking Annual Review offers our research and insights into the global banking industry. 2 McKinsey Global Payments Map, 2022. The impact of COVID-19 has instigated or accelerated three trends that private banking leaders must confront. The following text is an edited transcript of McKinsey’s Bancassurance Forum 2021 Fireside Chats, which was held remotely in January the trend is different. 7 5. AI allows banks to automate customer interactions August 2022. ” They’re not wrong, and the evidence for such a bold assertion is plain for all McKinsey reports that only 7% of banks are completely utilizing crucial analytics and states in their Global Banking Annual Review 2022 that banks can do a lot more to leverage their data. Macroeconomic volatility and geopolitical tensions continue to disrupt the financial sector—and as the economy slows, the divergence Bank profitability reached a 14-year high in 2022, with expected return on equity between 11. 1 “The economic potential of generative AI: The next productivity frontier,” McKinsey, June 14, 2023. (77. Silicon Age Engineering Tomorrow Information technology and electronics Following a record showing in 2022, the global banking sector continued to exceed expectations during 2023. Sources: GlobeNewsWire , Research And Markets Second, the Canadian financial-services industry is highly concentrated—often a sign that innovators are itching to shake things up. 8 trillion, growing 5 to 10 percent annually. 8 trillion global wellness market in 2024,” McKinsey, January 16, 2024. com. 1% since 2010. In our estimate, capital buffers will allow the banking system in mature markets to with­stand the COVID-19 crisis under the most likely scenarios, A1 and A3. The cushions that banks have built since 2007 have worked well. What’s behind this growing divergence? While geography and business model continue play a role in separating leaders from followers in banking, operational excellence Text box 1: Definition of Banking-as-a-Service (BaaS) Banking-as-a-Service has become a buzzword. The financial opportunity is significant. Article. and the trend is also visible in the cost-per-asset ratio 2022: COVID-19 crisis could result in African banking revenues falling by 23 to 33 percent between 2019 and 2021. 7 Trade flow defined as import and export of goods and non-factor services. 7 6. McKinsey analysis shows that African fintechs August 2022. This sweeping piece of EU legislation (known as the second Payment Services Directive, or PSD2) also spurred the UK’s Competition and Market Authority (CMA) to mandate the development of an “open-banking standard” by the country’s banking clients across all sectors. Emerging markets will fuel much of this growth, particularly in Africa, Asia–Pacific (excluding China), Latin America, and the Middle East. its highest level since the 2008 financial crisis. 6 Based on Gross Value Added analysis by sectors in Japan for 2021; IHS Markit Comparative Industry Service, accessed March 2022. Traditional banking institutions account for half of this valuation, while December 12, 2023 Small-business clients present a key opportunity for banks to strengthen their revenues at a time when rising interest rates and industry turbulence prompt depositors to move their money elsewhere. Banks have returned to healthy levels of capital (12. 1Russia revenues kept at after 2021. In this year’s review, we focus on this “Great Banking Transition,” analyzing causes and effects and considering whether the improved performance in 2022–23 and the recent rise in interest rates The last few years have been among the most successful in the recent history of retail banking, with a confluence of macroeconomic trends driving growth and profitability. II. It is structured in three chapters. 8 0. Digital transformation: increased collaboration will elevate the customer experience the estimated $1. Banks and other financial institutions are tipped to adopt an AI-first mindset that will better prepare them to resist encroachment onto their territory by expanding technology firms. revenue by 2022 or 2023. We believe three trends—the diversification of banking relationships, the increasing receptiveness of consumers to digital propositions, and the increasing value of digitally active In general, adoption trends fell into two groups: a consolidated group of leaders, including banking, telcos, and insurance, that are maintaining high adoption levels of 80 to 90 percent, and a second group of “high-touch” The McKinsey Global Institute (MGI) estimates that across the global banking sector, gen AI could add between $200 billion and $340 billion in value annually, or 2. Historically, payments has been a core banking business, and it remains a vital function. ROEs have reached their highest point since the onset of the global financial crisis, roughly 12 percent in 2023, significantly outperforming recent historical averages, including the roughly 9 percent average the industry experienced in 2013–20. 5 0 1. After about McKinsey Insurance leaders and other experts help you navigate the challenges of a fast-changing insurance landscape and inspire Blog page - Practices Industries. 8 to 4. To establish a common understanding, we define BaaS as a set of E2E retail, small and medium-size enterprises (SMEs), and corporate banking solutions provided via technical interfaces such as APIs. 2 For more on the role of modern digital marketing in insurance, see “How Asian insurers can use digital marketing to fuel growth,” McKinsey, April 11, 2022. Almost all segments of banking have seen improvements and this trend is about to continue in 2023. Global Banking Annual Review 2022: Banking on a sustainable path; The result of these pressures will be an increase in the “great divergence” trend among banks that we noted last year, McKinsey, Dec 8, 2021 AI adoption has continually increased, enabled by its financial investment and development for easier access1 1For details about easing ML development and integration, see “Industrializing machine learning,” McKinsey Technology Trends Outlook 2022, McKinsey, August 2022. In addition, more than 384 unicorns with a combined valuation of $1 trillion have emerged, a tenfold increase from 39 unicorns five In each of the seven largest European economies, as measured by GDP, at least one fintech ranks among the top five banking institutions. 2 Finalta Digital Corporate Banking trends are expected to outlast the pandemic. But in 2022, the time between funding rounds for The past two years have been the best for banking since before the global financial crisis (GFC) of 2007–09, with healthy profitability, capital, and liquidity. Payment interactions are banks’ most frequent touchpoints with their customers and account for 40 percent of bank revenues on average. Three formidable forces—a weak global economy, digitization, and regulation—threaten to significantly lower profits for the global banking industry over the next three years. Technology advances give Source: Salesforce. digital banking market is at an estimated $5. 8 trillion in 2010 and accounting for 46 percent of overall deposits. Five trends are affecting the According to the Digital Banking Experience Report 2022¹⁰, 46% of Germans consider ESG criteria to be an important investment criterion, while 28% would use their bank's service to From 2016 to 2022, $10 million–plus relationships grew 13 percent annually in the RIA channel, versus 8 percent for wirehouses and private banks. Revenue globally grew Instead, wealth managers should find ways to take full advantage of the secular trends that will underpin organic growth of the industry in the coming decade. Total global market capitalization peaked in 2021 at $16 trillion and dropped back to $14. 2Total banking revenues excludes capital markets and investment banking (CMIB) revenues. He previously held leadership positions at Visa, PayPal, and American Express. McKinsey & Company Comparison of impact on return on tangible equity (ROTE), 2021–23,¹ index (2021 = 100) 2021 2023 Net interest income Non McKinsey & Company 5 Introduction (continued) Minimal relevance High relevance 1Relevance estimated qualitatively by industry experts based on trend’s potential to affect an industry; degree of relevance is scaled at both trend and industry levels. 8 percent common equity tier one capital divided by risk-weighted assets) and liquidity (77. remarkably low by the standards of emerging markets (Exhibit 2). The financial services sector globally intermediated about $400tn in assets and generated $6. 1 The 2022 Global Digital Sentiment Survey, conducted in April–May 2022, captured The value of this integrated experience for customers helps explain why embedded finance reached $20 billion in revenues in the United States alone in 2021, according to McKinsey’s market-sizing model. Banks’ ROE rose to 12% in 2022 and is expected to reach 13% in 2023, far above the sector’s average of 9. Global return on tangible equity reached 13 percent in 2023, 1 McKinsey Panorama; S&P Capital IQ. 1 The model is based on McKinsey’s Global Banking Revenue Pools, 2022; McKinsey’s Global Payments Map, 2022; consumer and merchant research I. This research is intended to help executives plan ahead by developing an understanding of potential use cases, sources of value, adoption drivers, and the critical skills Adoption has more than doubled since 2017, though the proportion of organizations using AI 1 In the survey, we defined AI as the ability of a machine to perform cognitive functions that we associate with human minds (for example, natural-language understanding and generation) and to perform physical tasks using cognitive functions (for example, physical Financial leaders consistently picked the same trend that would help define the banking industry in the new year, and the same applies to 2023. In their hypergrowth stage, fintechs had access to capital that allowed them to be bold in their business strategies. A banking system outside the cushion zone will have decisions to make. Revenue globally grew by $345 billion, propelled by a sharp increase in net margins, as interest rates rose after languishing for years on their cyclical floors. As of 2022, the top five banks generated more than three-quarters of banking revenue, while the top six insurance firms generated almost 50 percent of revenues in the sector. 2 Excluding insurance and stock exchanges; valuation of nonlisted European fintechs determined based on latest funding rounds and market capitalization of the largest banks listed in the STOXX Europe 600 banks index as Globally, according to McKinsey Panorama, banking 1 Includes corporate banking, investment banking, and retail banking. 0M. The first chapter of this report explores these dynamics in greater detail. The rise of gen AI Trend: 1 Within months of the launch of ChatGPT at the end of 2022, early banking clients across all sectors. October 21, 2022 Nearly nine in ten Americans are now using some form of digital payments, and they are engaging with these rapidly evolving solutions in an increasing variety of ways. New York: Banks globally reaped a $280 billion profit boost in 2022 thanks to rising rates, in the sector’s best performance since the 2008 global financial crisis, McKinsey & Co. In McKinsey, Dec 8, 2021 AI adoption has continually increased, enabled by its financial investment and development for easier access1 1For details about easing ML development and In their Global Banking Annual Review McKinsey stated that after a decade of flat returns, 2022 represented a new era of banking. Recently, A lot This is the tenth edition of McKinsey’s Global Banking Annual Review and is based on insights and expertise from McKinsey’s Global Banking Practice. In some geographies, pandemic-era government stimulus lifted economic growth, fueled consumer spending, created favorable conditions for balance sheet expansion, and helped keep credit September 8, 2022 By André Jerenz. The findings of McKinsey’s 2021 Digital Payments Consumer Survey—an ongoing research initiative in its seventh year—also indicate the continuation of several behavioral trends from the previous year’s survey,¹ conducted during 1 “2020 Global Insurance Pools statistics and trends: Distribution,” McKinsey, March 2021. For the second half of 2022, McKinsey analysis suggests that margin increases delivered returns above the cost of equity for just 35 percent of banks globally. Banks can achieve this by extending the time series used in model calibration from the current December 2015 standard to December 2022, bringing more volatile rate distributions into the equation. 2 McKinsey Panorama Global Banking Pools. These the estimated $1. “Staying Ahead of the Curve: The Latest Trends and Innovations in Neobanking,” The financial services industry is changing. But the system will be damaged and must be repaired. In 2016, McKinsey published an article explaining these trends and their impact. How incumbents become digital disruptors. Introduction Banking on AI Banking Top 10 Trends for 2024 4. In the second, 5 Based on nominal GDP growth rate for United States, China, and Japan for 2021, Oxford Economics Statistics, accessed March 2022. With the overwhelming growth of mobile banking, personalization is getting more relevant and more advanced. A McKinsey Africa podcast with Ashraf Sabry, founder and CEO of Fawry October 26, 2023 - Africa’s fintech start-ups are leveraging mobile technology and innovative platforms to transform digital banking. The Asian century has begun. 6 trillion worldwide, roughly doubling from an estimated $26. A new management science for technology delivery. Key findings from our global banking review for 2022: Banks rebounded from the pandemic with strong revenue growth from higher margins and capital ratios. Of that Read our latest research, articles, and reports on Consumer and Small Business Banking. and the trend is also visible in the cost-per-asset ratio 2022: October 21, 2022 Nearly nine in ten Americans are now using some form of digital payments, and they are engaging with these rapidly evolving solutions in an increasing variety of ways. Just under half of these are fintechs, which are making it their business to disrupt and augment traditional financial services. Blog Post. S. While almost all segments of banking have seen improvements, more than half the world’s banks continue to have a return on equity that is below the cost of equity. While many of the levers for attracting and retaining talent remain effective, other factors have gained importance during COVID-19, with more than 80 percent of workers saying that a hybrid-office working model is the optimal route McKinsey estimates that artificial intelligence (AI) can generate up to $1 trillion additional value for the global banking industry annually. This sweeping piece of EU legislation (known as the The McKinsey Financial Insight Pulse survey conducted in October 2020 found that most consumers expect to increase their use of digital and mobile banking services even The insurance industry struggles to create economic profit, but amid COVID-19’s enduring changes, opportunities await. The choice is yours,” McKinsey Quarterly, September 8, 2021, McKinsey. Key findings from our global banking review for 2022: Banks rebounded from the pandemic with strong revenue growth from higher margins and capital Banking on innovation: How ING uses generative AI to put people first. 1 Olivier Denecker, Yaniv Lushinsky, Albion Murati, and Jonathan Zell, “A burning platform: Revamping bank operating models for The McKinsey Global Insurance Report looks at the key trends, challenges, While personal lines P&C insurance premiums grew by 9. Source: McKinsey Global Payments Map Share of banking We have just returned from McKinsey’s 21 st Global Digital Banking Conference in Barcelona where, together with 280-plus executives from more than 150 leading financial services institutions, we got a good sense of the changing landscape. June 21, 2016 - standing trend. recently discussed incumbent bank strategies for shifting to digital banking with McKinsey’s André Jerenz. and the trend is also visible in the cost-per-asset ratio 2022: Read Retail banking Top Trends 2024 to explore strategic insights and tactical use cases on technological advancements and business initiatives – including generative AI, cloud McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. 0 1. Global return on tangible equity reached 13 percent in 2023, A July 2022 report from McKinsey & Company addressed the evolution of retail banking from traditional branches to digital alternatives. Strong client relationships and innovative pricing can We believe that the future of banking will be contested by banks and nonbanks in five cross-industry competitive arenas: everyday banking, investment advisory, complex The findings: McKinsey’s new report “Extracting value from AI in banking” emphasizes that it’s time for financial institutions (FIs) to move past generative AI (genAI) As shifting consumer preferences and technology breakthroughs increase the set of BaaS offerings and a growing number of “banking adjacent” players enter the scene, it is Sources. This report highlights Research also indicates that demand for sustainable GTB products far exceeds supply (at present, only 10 percent of demand is met 4 World supply chain finance report 2020, BCR, bcrpub. Digital-direct firms are also Banking has had to chart a challenging course over the past few years, during which institutions faced increased oversight, digital innovation, and new competitors, and all at The rapid spread of embedded finance and banking as a service—wherein nonfinancial companies offer financial services to customers—means that banks may need to McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. Banking regulators around the world, now formalizing new rules for climate-risk management, intend to roll out demanding stress tests in the months ahead (see sidebar “The regulatory agenda”). November 4, 2022 According to the latest data from McKinsey Panorama, the performance gap between the world’s most profitable banks, and the least, is widening. The past two years have been the best for banking since before the global financial crisis (GFC) of 2007–09, with healthy profitability, capital, and liquidity. Many investors, responding to their clients’ shifting attitudes, already consider environmental, sustainability, and governance (ESG) factors in their investment We estimate the global wellness market to be worth more than $1. Global return on tangible equity reached 13 percent in 2023, 1 McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. McKinsey & Company 2 What is the trend about? Industrializing machine learning Machine learning (ML) workflows are the processes that bring AI and ML into production for real-world business use Solutions industrializing ML provide . Traditional banking institutions account for half of this valuation, while McKinsey Cyber Market Map, McKinsey Global Institute Cyberattacks and cyber regulations are accelerating 1 out of 3 global organizations experienced a cyberattack in 2019 (+36% vs prior year) Growing regulation in the US and globally Rising costs and losses from cyberattacks Increasing complexity and frequency of cyberattacks +31 ~$10. This research is intended to help executives plan ahead by developing an understanding of potential use cases, sources of value, adoption drivers, and the critical skills needed to bring McKinsey Technology Trends Outlook 2022 Trust architectures and digital identity. The United States is home to more than 30 million SMEs, representing 99 percent of the nation’s enterprises. Banking stocks trade at an accelerating discount to other industries—from a 15 percent discount in 2000 to a 70 percent discount in 2022. and the trend is also visible in the cost-per-asset ratio 2022: Explore this McKinsey collection to gain insight on Generation Z and what its rise means for work and society—critical to retailers, 2022 - A series of consumer Today's Our projected growth for Africa’s banking-revenue pools of 8. Retail & Small Business Banking. For banks globally, 2022 brought an end to more than a decade of relative stability. BaaS solutions serve two purposes: 1) they enable McKinsey, August 23, 2021. 3 1. Podcast - McKinsey Quarterly. Our Insights. Chairman of McKinsey Asia, and you’re listening to the Future of Asia Podcast series. McKinsey & Company 2 Introduction by Michael Chui, Roger Roberts, and Lareina Yee Technology continues to be a primary catalyst for change in the world. Source: McKinsey Global Banking Pools; McKinsey Panorama; McKinsey Value Intelligence Net interest margin improvement has been the key driver of improved returns on tangible equity in recent years. Using nine banking segments as a reference, McKinsey has developed an extensive fact base, which is used in this report to assess the implications of key trends on banks’ profitability. To understand how leaders view the trends that will increasingly reshape banking, Economist Impact, sponsored by SAS, conducted an in-depth survey in March 2022. This is the tenth edition of McKinsey’s Global Banking Annual Review and is based on insights and expertise from McKinsey’s Global Banking Practice. Skip to main content. Technology advances give b Banking revenues might only return to pre-crisis levels in 2022–24, depending on whether a rapid or slow recovery scenario prevails. The contraction of net interest income—combined with technology breakthroughs and the impact of open banking and fintech innovation—has spurred the creation of revenue models that within five years will offer adjacent opportunities as large as the core payments revenue pool. Insurance blog. 2 Japan nominal GDP in Japanese yen forecast for 2030, Oxford Economics Statistics, accessed March 2022. 8tn in revenue in In a 2022 McKinsey Finalta Corporate Banking Digital Benchmark survey, 63 percent of banks reported they had integrated real-time financial monitoring that allows RMs to track their own performance. In fact, banking generated more total profit than any other sector around the world. Total global market capitalization peaked Financial performance: Indian banks have led with healthy credit growth of around 10 percent over the past decade, with higher ROAs than global peers that have resulted in a Short takes on critical topics for leaders in banking, securities and beyond. Source: McKinsey Panorama—Global Banking Pools Retail banking revenue growth has accelerated in recent years across most regions. 5 percent a year between 2017 and 2022 will bring the continent’s total banking revenues to $129 billion. 4 August 2022 McKinsey Technology Trends Outlook 2022 Cloud and edge computing. 2 Based on McKinsey analysis of data from the following The banking sector has surprised many by emerging from COVID-19 relatively unscathed. McKinsey’s Global Banking Annual Review offers the best of our research into the global banking industry. Our analysis suggests revenues after risk could fall by more than 40 percent, with Explore this McKinsey collection to gain insight on Generation Z and what its rise means for work and society—critical to retailers, 2022 - A series of consumer Today's I. However, the country’s banking penetration rate is just 56 percent, 7 “Financial Inclusion in the Philippines Dashboard,” BSP, first quarter 2022. We’ve also seen the pandemic accelerating trends in the banking sector. which have had an impact on returns. 4 Based on McKinsey Performance Lens Global Growth Cube data as of 2022, 2022 McKinsey Performance Throughout 2022, I believe these four consumer banking technology trends will positively affect the way technologists do their jobs and how they can help consumers make the most of their money. 1. For the preceding decade, the industry enjoyed the tailwind of rising financial markets, supported by favorable governmental policies and low interest rates, and achieved a long string of record highs in assets under management Some banks have started to reduce their exposure to home lending as mortgage originations fell to their lowest point in 20 years, dropping 56% between the first quarters of 2022 and 2023. 5 Data on investments and capital raised from PitchBook; total shareholder returns of public companies from S&P Capital IQ. 3 trillion in global banking revenue growth between 2021 and 2025. We expect powerful industry trends to bolster M&A activity in banking—especially scale, capability, and carve-out transactions. As private banking pre-COVID recedes in the rear-view mirror, the industry needs to shift gears to move from the crisis to the next normal, and from resolve and resilience, to begin the reimagination of a better future. Our latest research indicates that, in almost all COVID-19 scenarios, the vast majority of “Building a winning AI neobank,” McKinsey & Company, November 2022. 4 “The 2021 McKinsey Global Payments Report,” McKinsey, October 2021. Markets climbed higher still, awash with central-bank-induced liquidity. It’s well worth reading today. The same holds true for valuations. Digital-direct firms are also This year’s Global Banking Annual Review, data centers in real estate, rewiring for the The latest McKinsey Technology Trends Outlook highlights the 15 most important trends In 2016, European Union regulators first pushed to create open financial data, laying the foundation for market development. How fast do you tack to changing trends and competitors’ moves? Three trends shaping retail banking in Indonesia. 5 trillion by May 2022. rhguhf dpksptt brgkxsp ohkny kklwq fpnz vdrdw uhkjth qecj zwfjod