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Banks have long invested in technology to improve efficiency, customer experiences, and competitiveness. Artificial intelligence promises to accelerate that progress. But its greatest consequences may extend beyond bank operations.
AI could change where banks earn profits and why customers choose one institution over another. The more important question for leaders is not how to deploy AI, but how to compete as it changes banking economics.
Certain familiar advantages may weaken, even as new opportunities emerge to serve customers better.
When customer inertia is no longer an advantage
Banking relationships have proven durable. Customers rarely compare every deposit rate, loan offer, or fee. Even when competitors offer better terms, switching takes effort.
That inertia has protected established banks despite increasingly attractive digital alternatives.
AI agents could change that equation.
Customers may increasingly use agents to monitor accounts, compare products, find better terms, and eventually act on their behalf, making once time-consuming tasks routine.
The pressure could extend from deposits to mortgages, personal loans, payments, and other standardized products.
Banks that profit from customers overlooking better alternatives may lose that protection. Those that simplify switching could win customers from slower competitors.
Efficiency alone will not secure an advantage
Banks are using AI to automate processes, improve service, accelerate decisions, and cut costs. Early movers could free resources to improve their offerings.
But efficiency gains may not translate into lasting profit increases.
As competitors adopt similar technology, customers may capture much of the benefit through lower prices and better service. An early advantage could become a basic requirement.
The strategic question is not only how much AI can save, but how banks will use those savings.
Reinvesting in distinctive services may create a more durable advantage than focusing exclusively on expenses.
Trust will matter more, but it must be earned
Banks retain strengths that newer competitors cannot easily replicate: regulatory licenses, established infrastructure, and customer relationships.
They also hold valuable information about customers and their needs.
AI could turn those assets into proactive advice and personalized offers.
For business customers, transaction histories, payroll, and cash flow patterns could, for example, help a bank offer financing before a customer requests it.
JPMorgan Chase offers an example. Its Client 360 platform combines more than 150 internal and external data sources to improve cash flow forecasting, pricing, solutions, and credit decisions. Such capabilities could make banking relationships more proactive and useful.
Access to data does not automatically earn loyalty. Customers need to see clear benefits from sharing information.
AI also raises concerns about fraud, cybersecurity, privacy, and automated decisions.
Banks that pair personalized service with transparent advice and dependable protection could strengthen trust. Those that assume trust is theirs to keep may lose it.
Leadership matters more than size alone
AI could also alter the advantages of scale.
Large banks have traditionally spread technology and other fixed costs across extensive operations. Now cloud services, AI development tools, and partnerships give smaller specialists access to capabilities once reserved for large institutions.
Size still matters where fixed costs, network effects, or proprietary data create barriers. But leadership in a particular business matters more than size across many businesses.
A Bain analysis of 30 major banks found that institutions with No. 1 or close No. 2 positions in their businesses earned measurably higher returns on equity than those with weaker competitive positions.
Banks should identify where their relationships, data, and expertise give them an advantage competitors cannot easily match, whether in complex lending, specialized services, or a particular customer segment.
A new strategic agenda for banks
Banks need not abandon their strategies, but they should examine each business through a new lens.
Three priorities stand out:
- Build where AI creates opportunities. Combine technology with existing strengths to offer personalized advice, proactive credit, and tailored products once too costly to provide.
- Defend businesses with enduring advantages. Reinforce positions where regulation, specialized judgment, proprietary information, or infrastructure remain hard to replicate.
- Rethink businesses dependent on friction. Where products are easy to compare or intermediaries control customer relationships, change the offering, partner, or reconsider the bank’s role.
The winners will not necessarily be the banks that adopt AI fastest. They will be those that understand how it changes competition and choose where they can offer customers something distinctive.
The starting point is not what AI can do for the bank. It is what kind of bank can succeed in an AI-enabled future.
Explore more of Bain’s insights on banking and financial services at Bain.com.
