Scenarios for future banking: implications for profitability, liquidity and solvency
A Bank for International Settlements study asks who will perform banking's core functions a decade from now, and what that shift means for profitability, liquidity and solvency. It classifies some 9,000 banks in more than 150 jurisdictions into three traditional business models using 20 years of bank-level data, then builds four scenarios — slow transformation, technology acceleration, platform expansion and political uncertainty — combining different paths for technology, regulation, consumer preferences and macro-financial conditions. The framework deliberately structures expert judgment rather than producing forecasts. Traditional banks retain around three quarters of banking-system assets in every scenario, but asset shares understate the change: new providers may capture payments, lending origination, distribution, advice and fee income while banks keep the balance sheet, and technology-driven models could contest roughly 40% of the revenue pool. Earnings become more volatile as fees replace interest income, digital channels let deposits leave faster, and operational and third-party dependencies grow, adding pressure on mid-sized banks. Four supervisory priorities apply across all scenarios: reassessing deposit outflow assumptions, strengthening operational and third-party resilience, treating weak earnings as a solvency risk, and improving data on emerging models.
Highlights
new providers, including digital-only banks, technology platforms and decentralised finance, still hold less than 2% of banking-system assets, but they are already changing competition, customer expectations and the speed at which stress spreads.
Traditional banks retain around three quarters of banking-system assets in all scenarios.
Earnings become more volatile as fees replace interest income, while digital channels allow deposits to leave more quickly, shortening the path from funding stress to capital pressure.
Contrarian Viewpoints
- The wide 3–27% range for emerging models' asset share shows how judgment-driven the exercise is: the framework maps possibilities rather than ranking which scenario is most likely, so it offers limited guidance on timing.
- Retaining three quarters of assets may reflect regulatory protection and balance-sheet privilege as much as competitiveness, and could coexist with a much larger loss of the profitable revenue pool.
- Faster deposit flight is a real risk, but it may be concentrated in specific funding models rather than uniform across banks, and stronger digital relationships could also improve monitoring and early intervention.
Investment Implications
- Favor large, diversified banks with sticky deposit franchises and demonstrated operational resilience, and stay cautious on mid-sized banks most exposed to fee-income volatility and third-party dependencies.
- Watch payments and platform providers contesting the fee and distribution revenue pool, while treating emerging-model asset share alone as a poor proxy for profit-pool disruption.