New global retail banking data

The global retail banking industry is entering a new phase in which customer experience, digital adoption, artificial intelligence, data analytics and competition from fintech companies are becoming central to growth. Recent industry data shows that banking remains highly profitable at a global level, but the traditional model of relying primarily on deposits, lending and physical branches is under increasing pressure.

According to McKinsey’s Global Banking Annual Review 2026, global banking net income reached approximately $1.3 trillion in 2025, increasing 7% from the previous year. At the same time, global net interest margins declined slightly from 1.65% in 2024 to 1.63% in 2025 as interest rates began falling in major markets.

For retail banks, this combination creates an important strategic challenge: institutions must continue protecting traditional revenue streams while simultaneously building digital products and personalized services that can compete with fintechs and neobanks.

Retail Banking Is Becoming a Digital-First Business

Customer expectations have changed dramatically. Consumers increasingly expect banking services to work like the other digital services they use every day: instantly, conveniently and with minimal friction.

Mobile applications, instant payments, digital account opening, online lending, automated financial management and personalized recommendations are becoming standard parts of the customer relationship.

The 2026 Retail Banking Trends and Priorities research indicates that advanced technologies have become the top priority for retail banks, increasing from 29% of respondents in 2025 to 49% in 2026. Innovation also increased significantly, reaching 40%.

This shift demonstrates that banks are moving beyond viewing technology as an operational support function. Technology is increasingly becoming a core competitive advantage.

However, the transformation is not purely about eliminating physical banking. Research from Digital Banking Report indicates that while digital experience is a strategic priority for 57% of institutions, around 42% still plan to expand their branch networks in 2026.

This suggests that the future of retail banking is likely to be hybrid rather than completely digital.

Customers may use an application for everyday transactions but still expect physical or human support for mortgages, investments, financial planning and complex financial decisions.

The Global Retail Banking Market Continues to Expand

Market estimates vary depending on how retail banking is defined, but several recent forecasts point toward continued growth.

Mordor Intelligence estimates that the global retail banking market could increase from approximately $3.56 trillion in 2025 to $3.79 trillion in 2026, eventually reaching around $5.20 trillion by 2031. Its forecast also identifies neobanks as one of the fastest-growing banking categories, with an estimated CAGR of 8.20% between 2026 and 2031.

Another 2026 market analysis from Coherent Market Insights estimates the global retail banking market at around $2.30 trillion in 2026, potentially reaching $3.65 trillion by 2033.

The difference between estimates highlights an important point: market-size numbers should be interpreted according to the methodology and definition used by each research provider.

What is more consistent across the research is the direction of travel. Retail banking is expected to continue expanding, while the composition of revenue and customer relationships is changing.

AI Is Becoming a Core Banking Capability

Artificial intelligence is arguably the most significant technology transformation currently taking place in retail banking.

Banks are using AI for customer service, fraud detection, credit assessment, marketing, personalization, employee productivity, risk management and financial forecasting.

The next stage is moving from AI that simply responds to customers toward AI systems capable of predicting customer needs and taking actions within predefined boundaries.

For example, an AI-powered banking assistant could potentially identify that a customer regularly maintains excess cash in a low-yield account and recommend a more suitable savings product. Another system could detect unusual spending behavior and intervene before a potentially fraudulent transaction is completed.

The industry’s AI adoption is accelerating. Recent reporting based on Deloitte research indicates that AI use among bank employees increased from around 30% to 63% in one year. However, only 13% of banks surveyed had reached an optimal level of AI governance, while 10% reported having no AI governance framework.

This creates an important contradiction: banks are adopting AI faster than they are developing governance capabilities around it.

For financial institutions, this gap could become one of the biggest strategic risks of the next several years.

Data Is Becoming the New Competitive Currency

Retail banks have access to enormous volumes of customer information, including transaction histories, spending patterns, savings behavior, loan repayments, digital interactions and product usage.

Historically, much of this information was used primarily for credit decisions, compliance and basic segmentation.

Today, banks are increasingly attempting to turn that data into personalized customer experiences.

Data analytics can help banks answer questions such as:

• What products is a customer likely to need next?
• When is a customer likely to require additional credit?
• Which customers are at risk of leaving?
• Which savings products are most relevant?
• What financial difficulties may a customer be experiencing?
• Which digital channels generate the strongest engagement?
• How can fraud be detected earlier?

The challenge is that personalization requires more than simply collecting data. Banks need high-quality, connected and responsibly governed data.

Digital transformation without strong data architecture can create fragmented customer experiences rather than better ones.

Deposit Competition Is Becoming More Intense

Deposits remain one of the most important foundations of retail banking, but digitalization is changing customer behavior.

Customers can now compare interest rates, savings products and financial services much more easily than in the past.

The Bank for International Settlements recently highlighted how digitalization and social media can make retail deposits more sensitive to interest-rate changes, potentially accelerating the movement of deposits toward higher-yielding products.

This creates a significant challenge for banks.

In the traditional model, customers often remained with the same bank for years because changing providers was inconvenient. Digital banking reduces that friction.

A customer can discover a better savings product online, open an account digitally and move money with relatively little effort.

As a result, customer loyalty can no longer be assumed.

Banks increasingly have to earn deposits through competitive products, strong experiences, trusted brands and personalized engagement.

Neobanks Are Changing Customer Expectations

Neobanks and fintech companies have demonstrated that customers are willing to adopt financial services without traditional branches.

Their advantages often include simple interfaces, rapid onboarding, transparent pricing, real-time notifications and highly focused product experiences.

Recent market research identifies neobanks as one of the fastest-growing segments of retail banking.

Their influence extends beyond their own customer bases.

Traditional banks are increasingly adopting features that were popularized by fintech companies, including instant notifications, digital onboarding, personalized dashboards, automated savings and app-based customer support.

This means that the competitive boundary between banks and fintech companies is becoming increasingly difficult to define.

In many markets, the winning institution may not necessarily be the bank with the largest branch network. It may be the organization that provides the most useful financial experience.

Embedded Finance Is Expanding the Banking Relationship

Retail banking is also moving outside traditional banking applications.

Consumers increasingly encounter financial services while shopping online, using mobile applications, purchasing products or interacting with digital platforms.

This is contributing to the growth of embedded finance.

Instead of asking customers to visit a bank to obtain financing, businesses can offer financing directly during checkout.

Instead of requiring customers to separately open a savings product, digital platforms can integrate financial management features into their existing experience.

This creates new competition for banks because the customer may interact with the financial product without interacting directly with the bank’s brand.

For banks, partnerships with fintechs, retailers and technology platforms could therefore become increasingly important.

India’s Retail Banking Market Shows the Power of Digital Payments

India provides one of the clearest examples of how digital infrastructure can reshape retail financial services.

The rapid growth of the Unified Payments Interface has changed how consumers and businesses make everyday payments.

Recent reporting notes that UPI is processing more than 20 billion transactions per month, while its user base has reached approximately 500 million people.

This ecosystem creates a large amount of transaction data that can potentially support new financial products.

The next opportunity could be using transaction behavior to improve access to credit.

Traditional credit assessment often relies heavily on established credit histories and conventional financial information. However, transaction data and alternative financial information can potentially help institutions understand cash flows and repayment capacity.

India’s Account Aggregator framework and emerging digital lending infrastructure could further support this transition.

The opportunity is particularly significant because a large population remains underserved by conventional credit products.

Retail Lending Is Becoming More Data-Driven

Credit is another area undergoing rapid transformation.

Banks are increasingly using data analytics and machine learning to assess borrowers, detect fraud and predict repayment behavior.

The objective is not simply to approve more loans. It is to make better decisions faster while maintaining responsible lending standards.

Recent developments in India illustrate the strength of retail credit demand. Axis Bank, for example, reported that its retail lending performance was supported by strong demand for gold loans, with gold-loan growth reaching 94% year-on-year.

The broader Indian banking sector’s credit growth was reported at 18.3% year-on-year as of June 2026.

These figures demonstrate that retail credit remains an important growth engine even as banks modernize their digital infrastructure.

Customer Experience Is Becoming a Financial Product

One of the most important changes in retail banking is that customer experience itself is becoming a competitive differentiator.

A bank may offer a competitive interest rate, but if its application process takes days, requires multiple documents and involves repetitive manual steps, customers may choose a competitor.

Likewise, a bank may have excellent financial products but lose customers if its mobile application is difficult to navigate.

Consumers increasingly judge financial institutions based on:

Speed + simplicity + personalization + trust + security.

This is why digital experience is becoming one of the industry’s most important strategic priorities.

Banks are no longer competing only on interest rates and fees. They are competing on the quality of the entire customer journey.

Branches Are Not Disappearing Completely

Despite rapid digitalization, the physical branch still has a role.

Customers may prefer digital channels for routine activities such as checking balances, transferring money or paying bills. However, human interaction can remain important for complex products.

Mortgages, retirement planning, wealth management, business lending and financial advice can require trust and personal guidance.

The continued investment in branches reported in 2026 research reinforces this point. Digital and physical banking should not necessarily be treated as opposing models. Instead, successful banks may combine both.

The branch of the future could become less focused on transactions and more focused on advisory services, relationship management and financial education.

Fraud and Cybersecurity Are Growing Challenges

Greater digital adoption also creates greater digital risk.

As customers move more financial activity online, cybercriminals have more opportunities to target accounts, payment systems and identities.

Banks therefore need to invest heavily in fraud detection, authentication, identity verification and cybersecurity.

AI can play an important role in identifying suspicious patterns, but AI itself can also introduce new risks.

The use of automated decision systems requires strong controls around explainability, bias, privacy, security and accountability.

This makes governance an essential part of digital banking transformation rather than an afterthought.

The Rise of AI Agents Could Change Banking Again

The next major transformation may involve AI agents that can perform tasks rather than simply provide information.

Imagine a banking assistant that does more than answer, “What is my account balance?”

It could potentially monitor spending, identify recurring expenses, compare financial products, prepare a budget and alert the customer when action is required.

In the future, customers may increasingly interact with banks through intelligent digital agents rather than navigating multiple menus and applications.

This could make banking more convenient, but it also creates difficult questions around authorization and responsibility.

If an AI system recommends or executes a financial action, who is responsible when something goes wrong?

Banks will need clear policies around human oversight, customer consent, auditability and risk management.

Financial Inclusion Remains a Major Opportunity

Despite significant technological progress, access to financial services remains uneven across countries and populations.

The World Bank’s Global Findex continues to track global developments in account ownership, digital payments, saving and borrowing, making it an important source for understanding financial inclusion.

Digital financial services can help reduce barriers to banking by lowering transaction costs and making services available through mobile devices.

However, digital access alone does not guarantee meaningful financial inclusion.

Customers also need affordable products, financial literacy, reliable connectivity, appropriate consumer protection and responsible lending.

The future of retail banking therefore involves not only serving existing customers better but also finding sustainable ways to bring underserved populations into the formal financial system.

What the New Data Means for Retail Banks

The latest data points toward several strategic priorities for banks.

First, digital transformation is no longer optional. Technology has moved from an innovation project to a core business priority. The rise in banks identifying advanced technologies as their top priority demonstrates this shift.

Second, customer data must become actionable. Banks need to move beyond collecting information toward using data responsibly to improve decisions and customer experiences.

Third, AI governance must develop alongside AI adoption. The rapid expansion of AI without equally mature governance frameworks could create operational, regulatory and reputational risks.

Fourth, deposits cannot be taken for granted. Digital comparison tools and fintech competition are making customers more responsive to pricing and product differences.

Fifth, branches and digital channels should work together. The continuing investment in physical locations alongside strong digital priorities suggests that hybrid banking remains important.

Finally, banks need to think beyond traditional banking products. Partnerships, embedded finance, personalized services and digital ecosystems could become increasingly important sources of growth.

The Future of Global Retail Banking

The global retail banking industry is not simply moving from traditional banking to digital banking. It is moving toward intelligent, connected and personalized financial services.

The next generation of banking will increasingly combine mobile platforms, artificial intelligence, advanced analytics, open banking, digital payments, automation and human expertise.

The strongest institutions will likely be those that can combine the trust and financial strength of traditional banking with the speed and convenience of technology companies.

At the same time, profitability will remain essential. McKinsey’s latest global banking analysis shows that banks remain highly profitable, with global industry net income reaching approximately $1.3 trillion in 2025.

But profitability alone will not guarantee future competitiveness.

The more important question is whether banks can build relationships that customers value enough to retain their deposits, borrow through their platforms, use their payment services and purchase additional financial products.

In an increasingly digital financial ecosystem, the bank that understands its customer best may ultimately have the strongest competitive advantage.

Conclusion

New global retail banking data reveals an industry undergoing simultaneous growth and disruption. Banking remains one of the world’s most profitable industries, yet traditional sources of competitive advantage are being challenged by digital-first competitors, fintech platforms, changing deposit behavior and rapidly evolving customer expectations.

AI is becoming central to the transformation, while data is emerging as a critical strategic asset. Digital payments are creating new opportunities for financial inclusion and alternative credit assessment, while branches continue to play a role in complex and relationship-driven banking.

The future will not belong exclusively to traditional banks, neobanks or fintech companies. Instead, it will likely favor institutions that can combine trust, technology, data, personalization, security and human expertise.

As the global retail banking market continues to evolve, the central competitive question is changing from “Who has the biggest banking network?” to “Who can deliver the most valuable financial relationship to the customer?”

That shift could define the next decade of global banking.