Digital tools have made it easier for consumers to manage money and make payments. For the institutions that supply them, and the investors who back those institutions, the picture is messier. Spending on artificial intelligence (AI) has yet to show that it pays for itself. Fraud is growing fast, and war in the Middle East has soured the outlook for wealth managers.
Other parts of the industry are maturing. Digital banks increasingly resemble the incumbents they set out to unseat, and crypto’s latest cycle has again tracked the wider economy. Stablecoins and blockchain, meanwhile, are starting to solve specific problems in cross-border payments and in the identity checks that compliance demands.
Waiting for a return on AI
AI dominates banks’ technology-investment priorities, but it is testing investors’ patience. Returns have so far proved largely elusive, and frustration at the uncertainty is sharpest among retail banks. Acquirers have a stake too, since cost synergies in financial-services deals are increasingly underwritten on the assumption that automation will deliver them.
The effect on jobs is already visible. Bloomberg reported that the tech and financial-services sector shed an average of 28,000 jobs a month in the first half of 2026, more than 160,000 in all, with most of the losses attributed to AI. Standard Chartered plans to cut 15% of its corporate-function roles, or 7,000 jobs, by 2030. Its boss, Bill Winters, later apologized for reportedly talking of replacing “lower-value human capital” with technology.
Such cuts flatter a bank’s cost base but shrink the income-tax take, and a weaker fiscal position tends eventually to find its way back to the banks. Investors should weigh those second-order effects alongside the direct savings.
Fraud goes industrial
Fraud has become systemic. GlobalData’s Retail Banking Sector Scorecard 2025 estimates that 28% of the world’s population experienced fraud in the 18 months preceding the study, up from 18% in 2024. Nasdaq Verafin’s 2026 Global Financial Crime Report puts global losses from scams and bank-fraud schemes at $579 billion in 2025, and Mastercard projects that bank-fraud losses alone could climb by 153%, from around $23 billion in 2025 to $58.3 billion by 2030.
Organized crime has, in effect, discovered software-as-a-service margins. “Fraud-as-a-service” outfits sell ready-made scam kits to low-skilled criminals, while AI turns out convincing fake identities, emails, voice recordings and social-media profiles in bulk.
The damage goes beyond direct losses. GlobalData found that 18% of respondents avoid mobile or wearable payments because of security concerns, a drag on the digital revenue models banks are counting on. Banks are responding with AI-driven monitoring that flags suspicious behavior in real time, backed by alerts and awareness campaigns for customers.
The compliance bill
Financial services made up an estimated 25% of the regtech market in 2024, according to GlobalData, and this is one of the few categories in which demand is compulsory. Specialist systems handle anti-money-laundering checks, trade surveillance, regulatory reporting and stress testing. Most institutions combine outside platforms with in-house development, which suits vendors built to solve one well-defined compliance problem.
Wealth managers lose their nerve
Wealth managers entered 2026 in good spirits after weathering the tariff turmoil of 2025. Their confidence did not survive the first quarter. War in the Middle East, together with disruption in the Strait of Hormuz and the oil shock that followed, replaced tariffs as the main source of anxiety.
GlobalData’s industry poll for the first quarter caught the turn. By March, for the first time, respondents expecting profits to fall in 2026 outnumbered those expecting growth. In America, pessimists (38%) outnumbered optimists (27%) across the quarter. If the mood stays sour, 2026 could prove one of the sector’s worst years since 2022. Because earnings are levered to assets under management, falling asset values would squeeze fee income and, with it, acquisition multiples.
Digital banks grow up
The most successful digital banks are no longer defined chiefly as challengers. Many have obtained banking licenses, expanded their lending and built product ranges that closely mirror those of the incumbents they set out to disrupt. Profitability has often followed, so investors should increasingly judge these businesses on banking metrics, and less on technology-sector multiples.
Financial inclusion still drives much of the growth. Nubank in Brazil, WeBank and MYbank in China, Digibank in India and Ualá in Argentina have built businesses in markets where mobile penetration is high and the banked population low. In America, Chime has around 22 million customers or users and says 75% of them use it as their primary account, a better commercial gauge than sign-ups.
Banking as a service (BaaS) is tipped for a revival led by big incumbents bringing tools and platforms back in-house, which leaves startups in the field at risk of becoming a mere feature of someone else’s platform. For acquirers, digital banks still offer quicker access to underserved customers and to markets where incumbents have little foothold.
Crypto’s macro habit
Crypto’s latest cycle was driven mostly by macroeconomics. The market recovered as central banks paused their rate rises and the dollar weakened, helped by clearer regulation and by the approval of American spot Bitcoin exchange-traded funds, which opened the asset to vast pools of capital. The combined value of all cryptocurrencies peaked at $4.2 trillion in September 2025, then fell to $2.6 trillion by April 2026.
Stablecoins have carved out clearer roles in cross-border transfers, dollar-linked savings and crypto trading. Two dollar-pegged coins dominate: Tether accounts for 64% of circulation and Circle’s USD Coin for 25%. Their scale supports liquidity, but it also concentrates risk in the quality and availability of the reserves behind them.
Blockchain finds a day job
Blockchain is also starting to generate value independently of crypto. It can cut the 2–6% that intermediaries often take from each payment, a cost that bites hardest across borders, to fractions of a percent. It also lets institutions reuse verified know-your-customer (KYC) data on a permissioned shared ledger, so a customer is checked once. Smart contracts can flag expired identity documents or restrict transactions, while encrypted proofs confirm attributes without exposing the personal data behind them. Such focused uses are moving blockchain from pilots toward infrastructure with a measurable return.
Discover further insights
To learn more, download The future of financial services: insights for investors & M&A dealmakers, published in association with Sterling Technology – the provider of premium virtual data room solutions for secure sharing of content and collaboration for the investment banking, private equity, corporate development, capital markets and legal communities engaged in financials M&A dealmaking and capital raising.
