Not Just Another New Year Forecast: Seven Signals for Banking Beyond 2026

The banking industry is at a turning point, trying to balance long-standing practices with new technologies and changing customer expectations. Recent conversations in the sector point to a few major trends that will shape the next few years. 

2026 should be the year when banks either keep building on the progress they’ve already made or finally take the first steps toward change. Some institutions have already moved ahead with tools like artificial intelligence (AI), partnerships with fintech firms, and stablecoin models. For others, this is the time to stop planning and start doing.  

By the end of the year, most banks should have clear projects in place and leaders ready to guide them. 

1. Technology Investment Strategy: Beyond the Hype 

Banks are rethinking how they invest in technology. Instead of chasing the latest trend, successful institutions are focusing on tools that deliver measurable results. The key is alignment: technology should serve a clear business purpose. Think of it this way, are you buying a Ferrari when all you need is a reliable delivery truck? The right investment isn’t about flash; it’s about fit. 

Technology’s real value lies in two areas: reducing costs in routine services and enabling new, higher-margin offerings. Partnerships with fintech firms offer strong potential here, especially as the industry moves away from the unsustainable “Rule of 40” mindset that prioritized growth over profitability. The shift toward more rational business models emphasizes practicality and sustainable returns. 

For near-term ROI, banks should prioritize three areas: 

• Online deposit account opening to improve customer acquisition and reduce friction. 
• Real-time fraud prevention systems to protect assets and build trust. 
• Comprehensive AI inventory assessments before implementing new solutions, maintaining efficiency and avoiding duplication. 

These investments deliver measurable benefits quickly while laying the groundwork for future innovation. Longer-term opportunities exist as well, but they require separate, deeper analysis. 

2. Artificial Intelligence: Promise Amid Uncertainty 

AI offers enormous potential for banks – but also plenty of unknowns. While the technology is still in its learning and testing phase, early signs point to major improvements in decision-making speed and quality, which could eventually reduce the need for traditional support roles. 

The most promising uses of AI focus on improving existing processes rather than replacing them entirely. Before adding new tools, financial institutions should start by preparing for AI and taking stock of what they already have. This helps with strategic alignment and avoids costly duplication. AI should be seen as an enabler, not a standalone solution – business goals must remain clear and well-defined. 

3. Talent Strategy: Cultural Transformation 

The banking industry faces a talent challenge that goes beyond hiring. Success now depends on shifting from control-driven cultures to ones that encourage growth, experimentation, and adaptability. This change requires bringing in new skills while allowing existing cultures to evolve. Every institution should maintain transparent succession plans and clear career development paths to support this transition. 

High-growth opportunities start with honest assessments of current capabilities and skill gaps. Increasingly, culture is a deciding factor in employment choices, making talent development a core business priority rather than a side function. The goal is no longer offering short “tours of duty” but creating real career runways that help employees grow and stay engaged. 

Generational differences are also reshaping compensation models. Millennials and Gen Z often favor immediate cash rewards over deferred benefits, requiring banks to adapt rather than resist these changing expectations. At the same time, roles in technology, finance, operations, and audit demand stronger value propositions because professionals in these areas have abundant opportunities outside banking. 

However, the industry also has a compelling story to tell. Stability, strong capitalization, professional training, and structured career development remain powerful advantages. Banks should actively promote these benefits – loudly and visibly – to attract talent from other sectors and reinforce their long-term value proposition. 

4. Risk Management & Fraud Prevention 

Bank fraud continues to rise, and prevention is becoming more complex. Emerging threats such as AI-driven deepfakes and the involvement of nation-states will make defense even harder in the future than it is today. Yet, strong security doesn’t have to come at the expense of customer experience. Advanced AI and customer experience tools can enable smooth online account opening while strengthening Know Your Customer (KYC) processes. 

Centralized data warehouses can speed up service delivery, but they also introduce new risks if aggregators suffer security breaches. When partnering with fintechs, Chief Risk Officers should set non-negotiable standards: 

• Clear compliance responsibility alignment 
• Robust data security practices 
• Well-defined financial terms and exit strategies negotiated upfront 

These steps help balance innovation with security and compliance – so partnerships remain sustainable and resilient. 

5. Balance Sheet Management in Changing Markets 

Current market conditions present both challenges and opportunities for banks. Local factors play a major role in shaping risk profiles – for example, office space exposure varies widely by geography. Duration mismatches can create strategic opportunities for margin gains but also pose significant risks for institutions that remain unhedged. 

Today’s environment is marked by refinancing activity as rates decline, with many institutions swapping fixed-rate instruments for floating-rate positions in anticipation of further decreases. However, bonds earning 1.5–2.0% in a 5% market represent embedded losses that boards often resist acknowledging, despite the opportunity costs and the impact on discount amortization. 

Portfolio management strategies have evolved considerably. Five years ago, swaps were primarily used to achieve neutrality between short and long positions. Now, long-term hedging strategies are expanding to address structural rate changes. In a low-growth environment, the focus should shift from nominal rates to managing the yield curve and identifying spread risk across portfolios 

6. M&A Strategy: Opportunistic vs. Deterministic Approaches 

Merger and acquisition (M&A) strategies in banking generally follow two paths. The opportunistic approach focuses on preparation without fixed annual targets – maintaining acquisition playbooks and staying flexible for emerging opportunities. The deterministic approach, on the other hand, actively pursues acquisitions and new service capabilities with clearly defined strategic goals. 

One principle remains constant: this year’s acquisition becomes next year’s organic growth. Successful M&A requires a growing awareness that institutional investors often view claims of “complementary” mergers as red flags. Instead, the emphasis should be on tangible growth outcomes. Continued expansion remains the key performance indicator, enabling institutions to invest at scale while maintaining strategic execution and retaining top talent. 

7. Capital Management: Offensive vs. Defensive Positioning 

Capital markets reward institutions that shed low-performing assets – even at a loss – to acquire higher-yielding assets aligned with current market conditions. This requires an offensive, deal-oriented approach rather than relying solely on defensive hedging strategies. 

Strategic capital raises are most effective when funding new business operations, though opportunities also exist for share buybacks and subordinated debt retirement, which can reward existing shareholders with a larger share of future profits. 

The question of whether banking has become a pure scale business has no simple answer. While scale delivers advantages in certain products, local scale can also drive strong success. However, the $10 billion asset threshold introduces regulatory challenges that demand additional scale to achieve superior pre-tax earnings under evolving requirements. 

Looking Forward: Balancing Innovation & Stability  

The banking industry’s future success depends on striking the right balance – between technological innovation and practical implementation, cultural transformation and operational stability, and growth ambitions and disciplined risk management. Institutions that master these trade-offs while maintaining a clear strategic focus will emerge as leaders in an increasingly competitive landscape. 

Success metrics will center on sustained growth that enables margin investment, supported by strong execution and talent retention. The industry’s “declaration of independence” means breaking free from outdated models and embracing sustainable innovation and customer-centric strategies that create long-term value. 

Now is the time to act. Assess your technology roadmap, talent strategy, and risk posture. Start building the capabilities that will define leadership in 2026. Institutions that move decisively today will set the standard for tomorrow. 

Ready to take the next step? Contact us to discuss how we can help your institution prepare for 2026 and beyond.