Banking Market Report 2025 (Global Edition)

Market Dynamics of  Banking Market

Key Drivers of  Banking Market

Digital Transformation and Fintech Integration

The banking industry is undergoing a fundamental shift driven by the adoption of digital technologies. Banks are leveraging mobile banking apps, artificial intelligence (AI), cloud computing, and blockchain to enhance customer engagement, streamline back-office operations, and reduce costs. Fintech companies are introducing agile, customer-focused solutions, prompting banks to collaborate, invest, or acquire such startups to remain competitive. These integrations also help banks personalize services, automate processes, and reach unbanked populations in remote areas.

Growing Demand for Financial Inclusion

Globally, over 1.4 billion adults remain unbanked (World Bank data). To address this, governments in countries like India, Kenya, and Nigeria are launching initiatives to provide basic banking services through mobile banking, agent networks, and biometric verification. Banks are also extending microcredit, insurance, and digital wallets to underserved segments. Financial inclusion not only promotes socio-economic development but also opens up new customer bases and revenue opportunities for banks.

Rising Middle-Class Population and Urbanization

As urbanization accelerates, especially in Asia-Pacific, Latin America, and Africa, more individuals are entering the formal financial ecosystem. The growing middle class is seeking access to loans (home, auto, education), investment products (mutual funds, equities), and digital banking services. This demographic also demands better digital engagement, leading banks to innovate in their offerings and customer experience strategies.

Shift to Cashless and Contactless Payments

The global adoption of digital payment systems such as UPI (India), mobile wallets (e.g., Apple Pay, Google Pay), NFC-enabled cards, and QR code scanning is reshaping retail and commercial banking. COVID-19 further accelerated this shift, as hygiene and convenience became top priorities. Banks are modernizing their payment infrastructures, partnering with tech providers, and embedding these services into mobile apps to remain relevant and competitive.

Regulatory Support and Policy Initiatives

Governments and regulatory bodies are fostering innovation through frameworks that promote transparency, interoperability, and consumer protection. Open banking regulations (e.g., PSD2 in Europe) allow customers to share their financial data securely with third-party providers, driving innovation in product offerings. Digital ID systems, real-time payments (like RTP, FAST, and PIX), and sandboxes for fintech experimentation are also making banking more accessible and responsive.

Key Restraints of  Banking Market

Cybersecurity and Data Privacy Risks

As banks digitize, they become prime targets for cybercrime. Attacks like phishing, ransomware, and data breaches can compromise sensitive customer information and disrupt operations. Compliance with stringent regulations (GDPR in the EU, CCPA in California, etc.) requires significant investment in cybersecurity infrastructure, employee training, and response planning. Any lapse in security can erode trust, lead to legal penalties, and damage brand reputation.

Regulatory Complexity and Compliance Burden

Banks operate under a highly regulated environment that is continuously evolving. Adhering to anti-money laundering (AML), know-your-customer (KYC), Basel III capital adequacy standards, and other global/local requirements increases operational complexity. Compliance often requires specialized teams, regular audits, and technology upgrades, which elevate costs and can slow down innovation and cross-border expansion.

High Competition from Non-Banking Players

Tech giants (e.g., Apple, Google, Amazon, Meta) and fintech startups are offering financial products such as digital wallets, loans, and buy-now-pay-later (BNPL) services. These non-banking entities often deliver seamless, intuitive experiences, setting new benchmarks for customer expectations. Traditional banks, constrained by regulations and legacy systems, struggle to match the agility and UX of these disruptors.

Low Interest Rate Environment

In developed markets, central banks have maintained ultra-low or even negative interest rates to stimulate economic activity. While this benefits borrowers, it compresses net interest margins—the primary source of income for many banks. Low yields on deposits and loans reduce profitability, forcing banks to diversify income sources or cut costs aggressively.

Legacy Infrastructure and Cultural Resistance

Many traditional banks still rely on decades-old core banking systems that are rigid, slow, and expensive to maintain. These legacy systems hinder integration with modern APIs, mobile apps, and cloud platforms. Additionally, internal resistance to change, lack of digital talent, and bureaucratic decision-making processes delay digital transformation, leaving banks vulnerable to more agile competitors.

Key Trends of  Banking Market

Rise of Digital-Only and Neo Banks

Neo banks are financial institutions that operate entirely online, without physical branches. These banks offer simplified account opening, real-time notifications, budgeting tools, and personalized financial insights via mobile apps. They appeal to tech-savvy millennials and Gen Z consumers looking for convenience and low fees. Notable examples include N26, Revolut, Chime, and RazorpayX. Traditional banks are responding by launching their own digital-only subsidiaries or upgrading digital channels.

Adoption of AI and Data Analytics

Artificial intelligence is transforming banking operations and customer service. AI-driven tools are used for fraud detection, credit scoring, customer onboarding, wealth advisory (robo-advisors), and hyper-personalized marketing. Chatbots and virtual assistants like Erica (Bank of America) or EVA (HDFC Bank) are improving customer support while reducing human workload. Predictive analytics helps banks anticipate customer needs, detect risky behavior, and optimize loan portfolios.

Blockchain and Decentralized Finance (DeFi)

Banks are experimenting with blockchain for cross-border payments, trade finance, and identity verification due to its transparency and tamper-resistance. Projects like JPM Coin and RippleNet aim to replace traditional SWIFT transfers with faster blockchain-based solutions. Meanwhile, DeFi platforms are offering decentralized versions of lending, borrowing, and savings—raising questions about the role of banks in a decentralized future.

Sustainable and ESG Banking

Environmental, Social, and Governance (ESG) considerations are becoming central to investment decisions and banking strategy. Banks are issuing green bonds, offering loans for renewable energy and eco-friendly infrastructure, and integrating ESG risk assessment into lending practices. Customers and institutional investors are increasingly favoring banks with strong ESG commitments, transparency, and sustainability disclosures.

Embedded Finance and Banking-as-a-Service (BaaS)

With Embedded Finance, non-banking companies (e.g., e-commerce platforms, ride-hailing apps) are offering financial services directly to customers through APIs provided by banks or BaaS providers. For instance, Shopify can offer merchant loans, and Uber can provide driver wallets, all powered by a licensed bank in the background. This trend creates new revenue models for banks while shifting customer engagement to third-party platforms.

Our study will explain complete manufacturing process along with major raw materials required to manufacture end-product. This report helps to make effective decisions determining product positioning and will assist you to understand opportunities and threats around the globe.

The Global Banking Market is witnessing significant growth in the near future.

In 2023, the Retail Banking segment accounted for noticeable share of global Banking Market and is projected to experience significant growth in the near future.

The Traditional Banking segment is expected to expand at the significant CAGR retaining position throughout the forecast period.

Some of the key companies Mitsubishi UFJ Financial Group , Citigroup Inc. and others are focusing on its strategy building model to strengthen its product portfolio and expand its business in the global market.

Frequently Asked Questions