The banking and capital markets sector is undergoing immense change as emerging technologies, an increasingly complex regulatory environment, and evolving customer expectations challenge traditional banking business models.
PwC sees five key scenarios for retail banking in 2025 and beyond, including the increasing role of non-traditional players at the front end of banking (CRM) and a wave of consolidation leading to a handful of very large players that can afford the necessary investments in technology to create a truly differentiated customer experience.
What these scenarios have in common is the need for greater clarity on how to ensure a competitive advantage and the role of technology in supporting the banking and financial services business model of the future.
The latest PwC Global CEO Survey found that CEOs in the banking and capital markets sector see acute threats to their profitability from changes in consumer behaviour. More than two-thirds (68%) of banking CEOs identified changing consumer behaviour as a threat, compared to only 56% of respondents overall.
In light of these market changes and the challenges they present, companies are understandably engaging in far-reaching customer transformation initiatives. The aim: to build resilience, accelerate the adoption of emerging technologies such as generative AI (GenAI), enhance customer experiences, and reduce business risks, including those related to sustainability and security.
But not all customer transformation efforts deliver optimal benefits and value. PwC recently undertook the third Market Winners’ Survey to better understand how market winners approach customer transformation, what sets them apart from competitors, and what other companies can learn from their efforts.
The data reveals several key insights for the banking and capital markets sector, including: sustainability, emphasising environmental considerations; generative AI, indicating technological advancements; and security, focusing on the protection of data and assets.
Key insight 1 Sustainability-led product and service development is essential to meet customer demands in banking and finance
Sustainability is a core aspect of successful modern businesses. The Market Winners’ Survey 3.0 reveals that both market winners and laggards prioritise sustainability when building a business case for transformation, ranking it as the second most important element after customer experience.
The economics behind this are clear: PwC's latest research shows that 55% of global GDP – or $58tn – is highly or moderately dependent on nature. The steps companies take to improve their sustainability scores and minimise their harmful impact will be critical to safeguarding future economic value.
The topic gains further importance as regulatory pressures are intensifying across Europe and Switzerland. This shift is marked by a transition from setting ambitious net zero targets to being mandated by regulations to act decisively. The complexity of meeting these regulations is compounded by the significant amount of data required – data that businesses often lack but are now required to report.
This situation has made manual approaches to data gathering and reporting untenable, with sustainability reports taking up to ten times longer to produce than financial statements.
Efficiency emerges as a critical need, driven not only by customer expectations for transparency in sustainability reporting but also by regulatory standards defining the reports’ structure. Furthermore, achieving net zero goals requires a delicate balance between investment strategies and product performance, pushing businesses to innovate without compromising their competitive advantage.
There’s no one-size-fits-all solution for sustainability reporting; it requires a tailored approach involving thorough analysis, a clear understanding of requirements, and the selection of appropriate technology systems. This nuanced approach to sustainability underscores the importance of evolving product and service offerings to align with both regulatory expectations and customer demands for sustainable options.
Interested in understanding the impact of customer-led business transformation on the Banking & Capital Markets sector? Get in touch with PwC’s Customer Transformation und Sustainability team to get started on the journey towards more successful, customer-centric business models today.
Key insight 2 Banking CEOs are doubling down on GenAI to unlock new revenue streams through customer-led transformation
PwC’s 26th Global CEO Survey found that banking executives are more likely than their peers in other industries to invest in the automation of processes and systems, with 86% saying they plan to make such investments this year.
Emerging technologies such as generative AI and critical technologies including cloud services are high on the priority list for the banking and capital markets sector. Eight out of ten CEOs in the sector are investing in such technologies this year, outpacing the global average of 69%. For many banks and financial services providers, sweeping changes in customer preferences are forcing these investments. Critically, companies need to note that market winners see greater potential in using GenAI to improve customer interactions, and that the technology will significantly disrupt their operating models over the next five years.
This requires banks to make smart investments in customer-led business transformation initiatives that accelerate the adoption and deployment of GenAI and other technologies. This, in turn, will drive competitive advantages across their operations, especially within customer-facing processes.
Key insight 3 Security is paramount to mitigate regulatory and customer privacy risks in banking
In the previous Market Winners’ Survey 2.0, cybersecurity was identified as one of the fundamental pillars of successful businesses. This makes sense in a banking context: banks and other financial institutions are prime targets for cyberattacks, and there are legitimate fears in the sector about regulatory risks and privacy concerns. In response to these threats, banks are embarking on customer transformation initiatives to build greater resilience and reduce risk.
In fact, the element of reduced business risk featured prominently in the latest Market Winners’ Survey, where it was the number one positive outcome of market winners’ customer transformation efforts.
Interestingly, the latest data suggests that market winners are de-emphasising cybersecurity concerns. This is not because market winners do not see cybersecurity as a top priority, but rather because they have already made the necessary investments to improve their security posture and have shifted their focus to developing a better understanding of their customers’ needs. With increasing regulatory requirements – in particular, the Securities & Exchange Commission's new cybersecurity disclosure regulation – the higher level of cybersecurity maturity is critical to improving resilience and reducing risk.
The sector must continue to strengthen its defence mechanisms to prevent security risks from negatively impacting the customer experience and undoing much of the progress made in customer-led business transformation.
