2025 Guide to Next: ISSUE 4

Market volatility, high interest rates, and disruptive technology have driven significant changes in the financial services industry over the past several years. What does the future hold?

Driven by an acceleration in AI adoption, 2025 promises both challenges and opportunities for financial institutions. Many organizations will put AI plans into action this year, a move that could fundamentally begin to reshape the way banks do business.

At the same time, the industry will go “back to normal,” according to David Murphy, Financial Services Practice Lead, International, at Publicis Sapient. “A lot of what we’ve seen over the last two to three years has been the post-COVID exuberance. I think we’ve reached the bottom of that, which means 2025 should bring more normal growth.”

One way this will manifest is through lower interest rates that are reflective of past norms. This will likely put pressure on banks to find new pathways to profitability, including through customer experience and creating efficiencies, in a tight economic environment.

Drawing from market insights and deep industry knowledge, Publicis Sapient’s financial services experts break down the top five trends that will shape the industry in 2025.

THRIVING IN A LOWER-RATE ENVIRONMENT

After a period of high interest rates, the global economy is now entering a new phase. Central banks in several major economies are expected to begin rate cuts in 2025, with some already making moves. In June, the European Central Bank began easing, and the Bank of England started cutting rates soon after. The U.S. Federal Reserve is also expected to follow suit later in the year.

This shift will have significant implications for banks. Lower rates typically mean lower net interest margins, which can put pressure on profitability. As a result, banks will need to find new ways to drive growth and efficiency. This could include investing in technology, improving customer experience, and exploring new business models.

INVESTING IN THE FUTURE OF AI

After AI made significant strides in 2022 and 2023, organizations across all industries raced to develop use cases and incorporate them into their business practices. The financial services industry is no exception, and 2025 will be no different—AI will still be top of mind.

David Donovan, Financial Services Practice Lead, North America, expects to see a “hockey stick effect” in 2025 as more and more financial services organizations adopt it. The International Monetary Fund projects that the industry will spend $97 billion on AI in 2027.

Financial services organizations are especially interested in the potential of using generative AI for risk management and compliance over the next three years. According to Publicis Sapient research, 41 percent of survey respondents ranked this generative AI use case as “extremely important.”

According to Gartner, 80% of banks will have adopted generative AI tools by 2026. This means that 2025 will be a pivotal year for the widespread growth of the technology.

Publicis Sapient’s 2024 Global Banking Benchmark Survey reveals the use cases on which banks are focusing their efforts:

Transactions (credit analysis, underwriting, contracts, etc.): 61%
Employee and internal (developer tools, search, assistants, etc.): 55%
Customer and media (marketing, customer service, etc.): 49%
Not focused on generative AI: 2%

Financial services businesses indicate how important they believe AI will be to risk management and compliance over the next three years:

Extremely important: 32%, 40%, 41%
Important: 25%, 15%, 17%
Not important: 1%, 3%, 1%

“Banks’ number one priority is security, making sure that there aren’t any threats to their organization and ensuring there are guardrails put in place for the use of generative AI across their enterprise.”
— David Donovan, Financial Services Practice Lead, North America, Publicis Sapient

MODERNIZING TECH INFRASTRUCTURE

Legacy mainframes and systems have been the workhorse of the financial services industry for decades. But they are not always efficient, especially as new, agile technologies rapidly develop. Consequently, the modernization of tech infrastructure remains a critical focus for the industry.

Murphy underscores the importance of this transformation, stating, “The modernization agenda is still very much a big topic for a number of banks. If they want to be able to deliver on the promise of simplification—which includes reducing cost and leveraging generative AI—they have to make sure they have the right technical foundations in place at their core banking systems, their data systems.”

According to Publicis Sapient’s Global Banking Benchmark Survey, the majority of banks do not claim to have agile systems up and running. Only 35% have one.

Modernizing legacy systems involves replacing outdated technology with more advanced, agile solutions. Donovan explains, “Mainframes that are built in very old legacy technology, like COBOL, can now be reverse engineered and converted into modern technology like Java microservices.”

Each region approaches tech modernization differently. For instance, organizations in the United Arab Emirates and Saudi Arabia place a heavy emphasis on leveraging AI for modernization and growth. In the U.K. and Australia, the focus is on simplification and cost reduction.

As banks continue to modernize their tech infrastructure, they will need to navigate the complexities of regulatory compliance and regional variations, ensuring that their modernization efforts enhance operational efficiency and security.

BUILDING RESILIENCE IN AN INSECURE WORLD

Recent events, such as the CrowdStrike outage, have highlighted the importance of resilience in the financial services sector. As banks increasingly rely on cloud, data, and generative AI, they must also address the challenges of ensuring operational resilience.

“We need to balance the future—which is quite powerful with cloud, data and generative AI—with the challenges banks will need to solve, which is resiliency.”
— David Murphy, Financial Services Practice Lead, International, Publicis Sapient

5 Trends Shaping the Financial Services Industry in 2025

Introduction

THRIVING IN A LOWER-RATE ENVIRONMENT

INVESTING IN THE FUTURE OF AI

MODERNIZING TECH INFRASTRUCTURE

BUILDING RESILIENCE IN AN INSECURE WORLD

ENABLING PERSONALIZATION WHILE PROTECTING PRIVACY

LOOKING AHEAD TO 2025