Traditional banks are ceding the most valuable territory to fintech companies, digital challenger banks, and private credit funds, according to a new report from Boston Consulting Group. While the global banking industry has grown at a 4% compound annual rate over five years, incumbent banks struggle to generate capital-light noninterest income.
The report, titled Fit for Growth, Built for Purpose, reveals that traditional banks have relied on balance-sheet-driven net interest income for roughly 85% of growth. However, noninterest income grew only 1.8% in absolute terms, with the relative amount generated per asset decreasing 18%.
In retail banking, challenger banks and fintech platforms are gaining customer share and investor confidence, with some digital-first banks now matching traditional players’ customer bases. In corporate and investment banking, nonbank liquidity providers and private credit funds are capturing significant revenue streams previously dominated by traditional banks. Stablecoins processed roughly $4 trillion in transaction volume in 2024, signaling broader financial infrastructure realignment.
“Most banks are frustrated with slow value realization from AI and GenAI,” said Saurabh Tripathi, BCG managing director and global leader of the Financial Institutions practice. “The new technology hits the formidable walls of legacy infrastructure and, more importantly, legacy culture.”
The report identifies three patterns the market rewards: scale in domestic market leadership, superior fee income generation, and market-leading productivity. Winning banks pursue front-to-back digitization, customer centricity, focused business models, and M&A strategies.
“Banks need to look boldly at their business portfolio and make hard calls to focus on fewer areas where they can win,” said Andreas Biffar, BCG managing director and report co-author.
