Banking & finance industry trends

Summary: Fully autonomous banking systems managed by algorithms could redefine banking operations.

Current Situation: Decentralized Autonomous Organizations (DAOs) are paving the way for banking systems that operate with minimal human intervention. Built on blockchain and smart contract technology, these systems automate financial processes like lending, investing, and compliance. While still in experimental stages, DABs are being explored for niche financial products in decentralized finance (DeFi) ecosystems, with limited adoption due to technical and regulatory hurdles.

Expected Development: In the next 10+ years, DABs could evolve into fully functional banking entities, offering loans, managing assets, and executing transactions autonomously. Their transparency and efficiency could challenge traditional banks, especially in underserved markets where trust in traditional systems is low.

Challenges: Regulatory acceptance, technical scalability, and ethical concerns about autonomous decision-making remain significant barriers. Ensuring security and trust in algorithm-driven systems is also critical.

Time to Impact: 10+ years

Potential Impact: High

STEEP Segment: Technological

This year’s trend development

Summary: Fractional ownership of assets like real estate and art through blockchain will democratize investment. 

Current Situation: Tokenization allows physical assets to be divided into digital shares on a blockchain, enabling broader access to investments. Early pilots by banks and fintech companies are enabling clients to invest in high-value assets with minimal capital. These pilots remain small-scale and are primarily aimed at affluent clients.

Expected Trend Development: Over the next 6-8 years, tokenization will expand into mainstream banking services, offering new asset classes for wealth management. Private banks could manage tokenized portfolios for HNWIs, making traditionally illiquid assets more accessible and liquid.

Challenges: Establishing valuation standards, ensuring legal ownership rights, and navigating global regulatory landscapes will be critical for adoption.

Time to Impact: 6-8 years

Potential Impact: Medium

STEEP Segment: Economic

This year’s trend development

Summary: Financing projects that actively restore ecosystems will create new banking opportunities.

Current Situation: Regenerative finance goes beyond sustainability by funding projects that repair environmental damage, such as reforestation, soil regeneration, and biodiversity initiatives. While green bonds and loans are common, regenerative finance is emerging as a niche offering piloted by a few innovative banks.

Expected Development: In the next 6-8 years, this niche could expand significantly as governments and corporations aim to meet net-zero and biodiversity targets. Banks may develop specialized products to attract eco-conscious clients, including HNWIs and corporates.

Challenges: Measuring the impact of regenerative projects and aligning financial returns with ecological outcomes will require new frameworks. A lack of investor awareness and skepticism about returns also poses hurdles.

Time to Impact: 6-8 years

Potential Impact: Medium

STEEP Segment: Ecological

This year’s trend development

Summary: Tokenization of debt instruments on blockchain platforms will enhance liquidity and accessibility in bond markets.

Current Situation: Tokenized debt is an emerging financial innovation where bonds are represented as digital tokens on blockchain networks. This allows for fractional ownership, faster settlement times, and cross-border trading. Early-stage pilots are being conducted by institutions experimenting with issuing tokenized bonds for corporate clients and governments. Adoption remains limited to small-scale projects due to regulatory uncertainty and technological integration challenges.

Expected Development: Over the next 4-6 years, tokenized debt markets will expand as blockchain technology matures and regulators establish clearer frameworks. These instruments will unlock new pools of liquidity, particularly for smaller investors and global participants, while significantly reducing transaction costs and settlement delays.

Challenges: Regulatory compliance and interoperability between traditional financial systems and blockchain platforms are key hurdles. Investor protection mechanisms need to be integrated to prevent fraud.

Time to Impact: 4-6 years

Potential Impact: High

STEEP Segment: Technological

This year’s trend development

Summary: Digital twins of financial markets will enable accurate simulations of deal outcomes and market behaviors.

Current Situation: Digital twin technology creates virtual replicas of physical systems, and its application in financial markets is in the early stages. Banks are experimenting with models to simulate how assets, portfolios, and transactions perform under various scenarios. These tools are primarily used for stress-testing portfolios and predicting market responses to external events. 

Expected Development: Within 4-6 years, digital twins will be widely adopted for pre-testing deal strategies, helping investment banks optimize outcomes for clients. These models will be integral for high-stakes decisions, particularly in volatile or unfamiliar markets. 

Challenges: Building accurate and comprehensive simulations requires vast amounts of data, robust analytics capabilities, and computational resources. Ensuring these models remain up-to-date with real-world changes is another challenge.

Time to Impact: 4-6 years

Potential Impact: Very High

STEEP Segment: Technological

This year’s trend development

Summary: AI simulating multiple M&A outcomes will optimize decision-making for complex deal structures.

Current Situation: AI tools are being tested to predict post-merger synergies and value creation under different scenarios. These tools analyze historical data, market conditions, and company metrics to provide insights. Adoption is still limited, with manual processes dominating due to trust and accuracy concerns.

Expected Development: Within 2-4 years, AI-driven tools will become essential in M&A advisory, offering real-time scenario modeling and actionable insights. This will streamline decision-making, improve deal success rates, and reduce risks for clients.

Challenges: Ensuring AI accuracy, mitigating biases in data, and overcoming resistance to replacing traditional expertise with automation.

Time to Impact: 2-4 years

Potential Impact: Very High

STEEP Segment: Technological

This year’s trend development

Summary: Innovative insurance products for cryptocurrencies and tokenized digital assets.

Current Situation: With the rise of digital assets, insurers are beginning to offer policies addressing risks like wallet theft, smart contract vulnerabilities, and custodial failures. These products remain niche and largely unavailable due to regulatory uncertainty and difficulties in pricing highly volatile assets. Financial institutions dabbling in crypto are exploring bespoke risk solutions through partnerships with insurtechs specializing in digital asset coverage.

Expected Development: Over the next 4-6 years, as regulations mature, insurers will offer standardized policies for digital assets, covering broader risks in decentralized finance (DeFi) and tokenized securities. New products will include fraud protection, operational risk mitigation, and compliance coverage for institutions holding crypto portfolios.

Challenges: Establishing reliable pricing models, overcoming regulatory fragmentation, and managing rapid technological changes in blockchain ecosystems.

Time to Impact: 4-6 years

Potential Impact: High

STEEP Segment: Economic

This year’s trend development

Summary: Insurance seamlessly integrated into banking products through APIs and digital platforms.

Current Situation: Embedded insurance is gaining traction as banks collaborate with insurtechs to include insurance options in financial products like loans, credit cards, and digital wallets. These offerings simplify the customer journey by bundling relevant coverage directly into banking transactions. For example, loan protection insurance is automatically included during loan applications, eliminating the need for separate policy purchases. While adoption is growing, most implementations remain basic, focusing on low-complexity products.

Expected Development: Over the next 4-6 years, embedded insurance will expand to cover diverse needs, such as business continuity coverage for SMEs and personalized on-demand insurance for gig workers. APIs will allow insurers to provide hyper-personalized, data-driven coverage seamlessly integrated into digital banking ecosystems, creating a more holistic financial services experience.

Challenges: Ensuring regulatory compliance across multiple jurisdictions and integrating complex insurance offerings into banking platforms remain key obstacles. Consumer trust in bundled products must also be nurtured.

Time to Impact: 4-6 years

Potential Impact: High

STEEP Segment: Technological

This year's trend development

Summary: Insurance products for risks associated with carbon credit markets, such as fraud and non-delivery.

Current Situation: As carbon markets expand, insurers are beginning to address risks like project underperformance, price volatility, and fraudulent credits. Pilot policies for protecting carbon offset buyers and sellers are emerging, but the market remains nascent. Few standardized offerings exist, and regulations vary widely across regions. Early adopters include institutional investors and multinational corporations seeking to manage risks in their sustainability commitments.

Expected Development: In the next 4-6 years, insurers will develop standardized policies to cover risks in carbon credit trading and offset projects. These will include coverage for non-delivery of credits, fraud protection, and reputational risks tied to ESG initiatives. Integration with emerging regulatory frameworks will ensure wider adoption.

Challenges: Lack of uniform global standards for carbon markets, difficulties in assessing project risks, and pricing coverage in a highly volatile and speculative environment.

Time to Impact: 4-6 years

Potential Impact: High

STEEP Segment: Ecological

This year's trend development

Summary: The transfer of wealth from baby boomers to millennials and Gen Z is reshaping investment strategies and tools.

Current Situation: A significant generational wealth transfer is underway, with younger investors prioritizing sustainability, digital-first platforms, and personalized investment strategies. Traditional wealth managers are struggling to adapt, while fintech platforms are gaining traction by offering tailored, tech-driven solutions.

Expected Development: Over the next 4-6 years, wealth managers will increasingly adopt technology-driven tools to meet the expectations of younger, tech-savvy investors. Sustainable and impact-focused investment options will become standard, alongside enhanced digital engagement tools.

Challenges: Adapting traditional management frameworks to new generational priorities and building trust with younger investors who favor direct, transparent platforms.

Time to Impact: 4-6 years

Potential Impact: Very High

STEEP Segment: Social

This year’s trend development

Summary: Robo-advisors are expanding into real estate, offering data-driven strategies for property investment.

Current Situation: Robo-advisors are primarily used for stock and bond investments but are starting to integrate real estate into their platforms. By analyzing property trends, taxes, and market data, they offer tailored recommendations for both individual and institutional investors. Adoption is still in its early stages.

Expected Development: Within 2-4 years, robo-advisors will become widely used for real estate portfolios, integrating with geospatial analytics and smart contracts to provide end-to-end property investment solutions. This will attract both seasoned and novice investors.

Challenges: Building trust in automated systems for high-value assets and managing complex property-specific variables such as zoning laws and maintenance costs.

Time to Impact: 2-4 years

Potential Impact: High

STEEP Segment: Technological

This year's trend development

Summary: Blockchain enables fractional ownership and liquidity in traditionally illiquid pension fund assets.

Current Situation: Tokenization is being piloted for pension funds, allowing fractional shares of fund assets to be traded on blockchain platforms. This improves liquidity and democratizes access to pension fund investments. Current adoption is limited to experimental projects in progressive financial markets.

Expected Development: In the next 4-6 years, tokenized pension funds will gain broader adoption, allowing individual investors and smaller entities to participate in pension markets. This will drive transparency and create new liquidity opportunities.

Challenges: Navigating regulatory frameworks, ensuring secure and compliant platforms, and managing the transition from traditional pension structures.

Time to Impact: 4-6 years

Potential Impact: Very High

STEEP Segment: Technological

This year's trend development