For Banks, AI Just Got Serious
Boston Consulting Group’s report, “For Banks, the AI Reckoning is Here,” makes one thing clear: most banks are behind the curve, not because they lack interest in AI, but because they haven’t yet made it a core part of their business strategy.
The AI Revolution in Banking: More Than Just Chatbots
According to the report, only one in four financial institutions is using AI to gain a competitive edge, and only 27% of AI spending is focused on core business innovation. The rest? Still stuck in experimentation mode, testing isolated use cases, deploying chatbots, or running productivity pilots that don’t scale. Meanwhile, the market dynamics are shifting faster than these incremental efforts can keep up with.
In our 2025 German Fintech and Banking Report, our findings for the German market were also similar, as most local AI use cases in banking are currently limited to low-risk side projects.
An excerpt of the 2025 Contextual Solutions German Fintech and German Market Report, revealing the AI Use Cases in the German banking sector
BCG identifies three types of AI (predictive, generative, and agentic) that are not just optimizing banking operations but fundamentally changing the industry. Customers can now switch providers in real time, compare products with complete transparency, and receive financial advice from non-bank digital platforms. This undermines traditional banking advantages, such as customer loyalty, opaque pricing, and control over distribution channels.
The report warns that if banks don’t rethink their value proposition now, they risk losing relevance in a landscape where AI-powered platforms outside the traditional banking system handle decisions.
What’s refreshing is that BCG moves beyond the usual “AI will change everything” narrative. It outlines concrete ways banks can anchor their AI efforts in long-term strategy. For example, it presents three evolving business models: utility providers focused on operational efficiency, open-architecture banks that curate third-party financial products, and financial marketplaces that rely on partnerships and personalization rather than lending margins.
The report claims that simply deploying a large language model (LLM) won’t suffice. The real challenge is orchestration, i.e., integrating different models, ensuring they work with up-to-date data, and building hybrid infrastructures that can handle both legacy systems and new AI capabilities. Banks need to go beyond pilots and invest in foundational architecture, governance, and cross-functional talent to effectively leverage AI.
Despite regulatory uncertainties, the report urges banks to lead AI governance, rather than waiting for regulators to provide a ready-made framework.
From Experiments to Strategy: How Banks Can Leverage AI for Competitive Advantage
The report presents valid points and can be viewed as a compelling call to action. Nevertheless, several gaps should be discussed:
The report gives little attention to the competitive threat from Big Tech, tech, and embedded finance platforms. These players are already positioned as the new financial gatekeepers, with customer relationships, data access, and real-time infrastructure in their hands. For many banks, the question isn’t just how to transform internally, but how keep up and remain relevant in ecosystems they no longer control.
Also, despite the urge to “go big or go home,” some banks will likely create significant value with small use cases. Instead of planning something bigger, which might become outdated by the time it’s ready to launch, banks should try taking small steps in operational improvement, iterate, and move on to the next use case. This approach might be more fitting to stay informed and facilitate internal learning.
All in all, AI conversation in banking should be moved away from labs and into the boardroom. If banks want to be more than just infrastructure providers in a platform economy, they will need to move faster and stop treating AI as a PR project; instead, they should find use cases that matter to their institution and customers.
In BCG’s words: “The next five years will define the next 30.” And those who act now will be the ones shaping that future, rather than reacting to it.
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