IBM has released its annual outlook for the banking and financial services sector, predicting that generative artificial intelligence (AI) will play a pivotal role in shaping the industry in the year ahead. The report, titled IBM Institute for Business Value 2025 Outlook for Banking and Financial Markets, highlights key trends and challenges expected to define the sector’s trajectory.
The global financial services industry is witnessing a significant shift as generative AI adoption is expected to rise dramatically. While only 8% of banks were systematically developing generative AI in 2024, the report indicates that 78% were taking a tactical approach. As financial institutions move from pilot projects to full-scale implementation, a strategic focus on AI applications is becoming central to their future plans, including the use of agentic AI in banking services.
“Banks are shifting from broad experimentation with generative AI to a more strategic enterprise-level approach, with targeted applications that are enhancing customer experience, boosting operational efficiency, reducing risks, and modernising IT infrastructure,” said Shanker Ramamurthy, IBM Consulting’s Global Managing Director for Banking & Financial Markets. “Generative AI will be central to financial institutions’ transformation efforts in 2025, helping them stay competitive in an increasingly digital world.”
The report also notes a shift in the banking landscape. As institutions reconsider their business models, a clear divide is emerging between banks that successfully execute their digital transformation strategies and those that lag behind. According to the research, 60% of banking CEOs acknowledge that embracing automation and accepting some level of risk are necessary to stay ahead of the competition.
A major trend highlighted in the report is the rise of branchless, fully digital banking. Over 16% of banking customers worldwide are now comfortable using a fully digital bank as their primary banking relationship. Competition is also shifting, with traditional mass-market digital offerings being overtaken by higher-value services such as embedded finance and advisory services targeted at affluent investors and small and medium-sized enterprises (SMEs).
The financial services industry is also expected to experience steady convergence, leading to contrasting financial performances across different banks. Those that successfully re-imagine their processes and models will emerge as winners, while others may struggle to keep up.
For financial institutions, 2025 will be a year of significant investment in technology, talent, and transformation. The integration of generative AI is poised to be a game-changer, especially in how banks approach customer engagement and risk management. IBM’s report outlines how the sector is moving from experimentation to full implementation of AI strategies, with a particular focus on enhancing customer experience and modernising operations.
IBM’s insights come from a comprehensive analysis of C-suite leaders’ perspectives, customer behaviour, and economic data across eight major markets, including the United States, United Kingdom, Canada, the European Union, China, India, Japan, and the United Kingdom.
To learn more about the future of banking and financial markets, the full report can be accessed here.
