2020 banking and capital markets outlook

A new wave of disruption more forceful and more pervasive than what we have seen in recent years will likely unfold in the next decade. While the roots of this disruption—technological, economic, geopolitical, demographic or environmental—may remain the same, the unique convergence of these factors should unleash unprecedented change in the broader society and economy, and, consequently, in the banking industry as well.

Foremost among the drivers of disruption should still be technology. The fusion of current technologies, such as machine learning and blockchain, and emerging ones such as quantum computing, could not only create new opportunities, perhaps greater in scale than ever before, but also engender new risks. Additionally, technology will also radically change work as we know it, as well as who is doing the work, and where it gets done.

The combined effects of technological disruption, sweeping changes to the nature of work, demographic shifts, climate change, and possible Japanification could have serious implications for the banking industry. The low-growth scenario could result in a drastic reduction in banking capacity, with fewer banks than we have today able to recover their cost of equity. Institutions that lack scale or differentiated capabilities, in most cases, will likely be challenged.

These forces can also change how banking is done. Banking should become more open, transparent, real-time, intelligent, tailored, secure, seamless, and deeply integrated into consumers’ lives and institutional clients’ operations. And while banking is changing, so, too, could the purpose of banks. Banks will likely increasingly cater to a greater good, placing themselves at the forefront of tackling large socioeconomic issues, such as climate change or social equity.

With this disruption, though, comes endless opportunity. As the cusp of the next decade nears, bank leaders should reexamine their aspirations considering this new reality and fortify their banks’ core foundation. Don’t let short-termism distract from developing a larger, bolder vision. Instead of shying away from change, leaders should imagine the possibilities for how best to ride this wave of disruption.