The Future of Banking And What It Means For You.

July 3, 2025

Executive Summary

The global banking industry just posted record-breaking revenues and profits, yet investment markets remain skeptical, why? According to the McKinsey & Company Global Banking Annual Review 2025, banks’ accumulated net income reached around US $1.2 trillion in 2024, but their valuations lag behind the broader market by about 70 percent. McKinsey & Company The story here isn’t that banks failed; it’s that the old playbook, grow huge, diversify broadly, is fading. In a world of higher regulation, AI competition, and disrupted customer expectations, the winning banks will be precise, not just big.

The Full Article

If you follow banks like you follow entrepreneurs, you’ll notice something odd: financial institutions are doing well on paper, yet their stock valuations and investor sentiment often tell a different story. That divergence is the theme of 2025.

Industry data reveals that between 2019 and 2024, the global banking system intermediated an additional US $122 trillion in funds, roughly 40 percent growth driven by household and institutional wealth growth. McKinsey & Company Bank revenues excluding risk-cost hit a record US $5.5 trillion in 2024. Yet despite that, banks’ price-to-book multiples hover around 1.0, far below other sectors. The question: Why the disconnect?

One answer: tailwinds are fading. Higher interest rates raised net interest margins, and risk costs remained low. But those benefits are not permanent. McKinsey flags that banks are headed for “reversion to the mean” unless they change their strategic playbook. McKinsey & Company

Another: technology and precision are taking center stage. According to the Boston Consulting Group (BCG), banks are still spending huge amounts on tech, US $176 billion expected in 2025. But about 60 percent of that is going to “run-the-business” activities (maintaining existing systems) rather than “change-the-business” innovations. BCG Global That means the banks that simply keep doing what they always have will fall behind those who use tech and data to gain precision.

Then there’s regulatory and competitive pressure. The world of banking isn’t just traditional risk anymore, it’s open banking, stablecoins, AI, data privacy, cross-border competition. A report on regulatory outlooks warns that banks must prioritize governance, non-financial risk, and global coordination even while regulators loosen some restrictions. Deloitte+1

So for an entrepreneur or investor watching banking, the takeaway is: size still matters, but scale without precision is a liability.

What It Means for Entrepreneurs Building in the Ecosystem

If you’re building a fintech, partnering with a bank, or targeting financial-services customers, here’s what this shift means for you:

Partnership value rises: Banks are willing to partner or acquire firms that bring precision, better data, better credit models, faster innovation. If your startup or brand has that capability, your value is higher.
Niche wins over generic: In banking’s old model, being a large universal bank was the goal. In 2025, being a “precise specialized service” is more profitable. Entrepreneurs who build laser-targeted banking/user-financial solutions (say SMB lending, real-time payments, embedded finance) can beat traditional giants.
Data and tech moat matter: If you can use customer data or process automation to reduce costs or risk, you create a moat banks desperately need. Especially since many banks have tech debt and legacy systems.
Regulation is opportunity: With banks juggling compliance, governance, and tech transition, the gap opens for third-party service providers, niche regulators and fintech enablers. If you can help banks manage risk or implement precision tools, you’re in demand.
Value beyond credit: For entrepreneurs raising capital or building a financial services brand, remember: banks are judged on ROE, cost of capital, and regulatory stress. If you tie your model to alpha rather than just volume, you’ll align with the new banking value drivers.

Closing Thoughts

The banking industry today is like a seasoned athlete realizing the game has changed. It has the muscle, but the moves must be sharper, more agile, more targeted. Whether you’re building a fintech or investing in a bank, your lens should shift: from “how big” to “how precise”. Precision in customer targeting, risk modelling, tech investment and regulatory navigation will define winners in banking’s next chapter.