Dive Brief:
- AI is expected to drive up to 20% in net cost reductions for banks as the technology is implemented across the industry, according to McKinsey & Company’s Global Banking Annual Review 2025 published last week. But AI-driven cost savings aren’t expected to last, as competition will erode gains for banks and savings will pass to customers rather than the industry.
- The banking industry’s net income reached $1.2 trillion in 2024, the highest total among every other industry, the report found. However, valuation of the banking sector trails other industries by roughly 70% as favorable conditions are expected to change for the industry, the report found.
- Despite potential productivity gains from technology adoption, the sector will grapple with “disruption stemming from advancements in AI, intensifying competition from nonbank providers such as fintechs, and evolving customer expectations,” the report said.
Dive Insight:
AI promises to be a powerful force for banks’ productivity gains, but to capture value, banks will have to transform the way they operate and prepare for technology-driven change.
The extent of AI’s impact on the banking industry revolves around banks’ ability to become fully agentic and lower operating costs, as well as customers’ adoption of AI to manage finances, according to the McKinsey report.
Agentic AI is poised to have the most significant impact on banks’ operations, the report said. Leading financial firms are investing heavily in AI agents, with banks such as BNY, Capital One and JPMorgan Chase building architecture for agentic AI workflows.
The banking industry will likely see the emergence of a collaborative model in the near future, with one human employee supervising 20 to 30 AI agents autonomously managing complex end-to-end workflows, the report found. BNY deploys 117 agentic AI tools for managing different aspects of the banks’ operations, Leigh-Ann Russell, CIO and global head of engineering at BNY, shared at last week’s Gartner IT Symposium/Xpo in Orlando, Florida.
Despite its promises, AI will prove to be a double-edged sword for the banking industry, according to the report. Staying anchored in tangible outcomes will be a significant focus for players like JPMorgan Chase.
While there are “productivity tailwinds” from AI, the company plans to balance its approach by not rushing into a hiring spree for building out AI, CFO Jeremy Barnum said during a Q3 2025 earnings call on Oct. 14.
Additionally, requiring proof of AI cost savings is a “very hard thing to do,” he said.
“Hard to prove and might, at the margin, result in people scrambling around to use AI in ways that are actually not efficient and that distract you from doing underlying process reengineering that you need to do,” he said.
