Focus
Digitalisation is changing how banking services are produced, distributed and used. New providers, including digital-only banks, technology platforms and decentralised finance, still hold less than 2% of banking-system assets, but they are already changing competition, customer expectations and the speed at which stress spreads. We ask who will perform banking’s core functions 10 years from now, and what that means for the profitability, liquidity and solvency of the banking system.
Contribution
We classify some 9,000 banks in more than 150 jurisdictions into three traditional business models, using a new rule-based method applied to 20 years of bank-level data. We set out four scenarios that combine different paths for technology, regulation, consumer preferences and macro-financial conditions: slow transformation, technology acceleration, platform expansion and political uncertainty. A transparent framework turns each scenario into market-share paths. The framework structures expert judgment; it does not produce forecasts. We go beyond asset shares to look at which of the core functions of banks may move to newly emerging business models, ie who earns the income, and who takes the risk.
Findings
Traditional banks retain around three quarters of banking-system assets in all scenarios. However, asset shares understate the shift: new providers may capture payments, lending origination, distribution, advice and fee income, while banks retain the balance sheet. Earnings become more volatile as fees replace interest income, while digital channels allow deposits to leave more quickly, shortening the path from funding stress to capital pressure. Operational and third-party dependencies also increase, adding to existing pressure on mid-sized banks.
Four supervisory priorities apply across all scenarios: reassessing deposit outflow assumptions, strengthening operational and third-party resilience, treating weak earnings as a solvency risk, and improving data on emerging models. Other measures will depend on the scenario that develops but will ultimately also involve the future relationship between banks and non-banks more generally.
Abstract
Who will perform banking’s core functions a decade from now, and how will risks and profitability evolve? Our framework structures expert judgement rather than forecasts. It examines how technology, regulation and consumer preferences could reshape banking models, focusing on profitability, liquidity and solvency. We classify 9,000 banks across more than 150 jurisdictions into three traditional business models and three emerging technology-based models. Across four scenarios, traditional banks retain roughly three-quarters of banking-system assets, while emerging technology-based models capture 3–27%, compared with about 3.5% under the trend baseline at the ten-year horizon. However, the technology-driven business models could contest roughly 40% of the revenue pool, increasing earnings volatility as fee and platform revenues replace net interest income. Digitalisation may also accelerate deposit outflows, increase reliance on data driven risk assessment and weaken customer relationships. Regulation will influence the extent to which intermediation shifts between traditional banks and emerging bank models as well as non-bank providers. Solvency will depend on sustainable profitability, operational resilience and ecosystem dependencies. The framework identifies supervisory priorities that apply across all scenarios, alongside priorities and indicators specific to each scenario.
