Top Five Banking Industry Trends to Watch in 2026

If your organization is still struggling to get a strong grasp on the latest trends in the banking industry, you are not alone.

Technology is moving at an unforgiving pace, macro headwinds such as declining growth and steeper yield curves are bringing a great deal of uncertainty, and regulators are layering expectations around artificial intelligence, digital assets, and operational resilience, among many other hurdles.

With this in mind, there’s little doubt that 2026 will essentially turn into a race to adapt to the technological and regulatory challenges. Banks that already have or are planning to shortly incorporate AI agents into their operations and financial institutions that are currently adopting blockchain-based currencies, as well as introducing open banking frameworks into distribution models, are doing the work required to position themselves as market leaders.

Hesitation here means leaving your organization open to obsolescence. Due to the pace of developments in the field, it’s fair to assume that the gap between those who invest in adoption and those who don’t will be enormous.

In this article, we take a closer look at the most important trends that are likely to identify the market leaders from those that lag behind.

Trend #1: AI agents stop being experiments

A recent report published by Deloitte suggests that while financial institutions have incorporated AI and agentic AI across their operations, these efforts are scattered and have yielded “sporadic tactical wins” at best.

In order to achieve clearer, repeatable results, these banks need to invest much more time, effort, and resources into better data collection, funding, and governance rather than working on isolated pilots that don’t really connect to the organization-wide infrastructure.

The issue is also fairly pressing in view of how quickly the AI financial services market is moving. In 2024, it was valued at approximately US$490 million, with analysts predicting it will experience double-digit compounding growth annually.

It is currently reported that about 85% of institutions are leveraging the technology, but the adoption per se is fairly shallow and, for the most part, uneven.

There’s a case to be made in terms of the importance of AI in 2026, specifically because technology is expected to achieve a sort of pragmatic maturity. AI stacks are growing, becoming more accessible and easier to manage, and this is gradually leading to better, more holistic adoption.

We strongly recommend a dedicated budget to undertake considered research into the tech stacks that would benefit your institution and, most certainly, your customers.

Trend #2: ESG‑linked lending becomes standard practice

A lot has changed with regard to the perception of Environmental, Social, and Governance (ESG) practices over the last few years, especially how it is perceived by financial institutions.

Five years ago, sustainability-linked loans were something of a niche product. Today, these loans sit at an approximately US$1.5 trillion cumulative market, which moves it from an area of innovation to a well-positioned, differentiated product.

This changes a great deal in terms of the pricing logic for banks. They now have to take into account whether the borrower can manage to achieve their ESG targets and adjust their margins accordingly to mitigate risk.

While the logic here might be straightforward – if a borrower underdelivers, they pay more; if a borrower overdelivers, they pay less – the issue revolves around ensuring the adequate infrastructure to make this work well.

Financial institutions will now need to have a better grasp of ESG data, the baselines they set, disclosure rules, alignment with taxonomies, and so forth. Failing to get these things right will invariably show up in P&L statements.

It is also important to highlight that there is mounting regulatory pressure emerging from multiple directions. The EU is gradually amending the taxonomies that cover what constitutes “green”. Aspects such as climate-disclosure standards are also starting to converge internationally, so there will gradually be less room for interpretation when it comes to ESG loans.

But all these potential issues aside, this trend creates ample opportunity for banks. Creating the data infrastructure and the means for its processing internally will yield substantial rewards, and not just of a financial nature.

Having strong ESG assessment capabilities early will allow you to position yourself better in a market that’s increasingly looking for sustainability-linked options.

Furthermore, the very systems used to track ESG data can be leveraged in other essential areas of your organization, such as credit risk modelling, sector exposure analysis, supply chain assessment, and so forth.

Trend #3: Digital currencies and tokenized assets

Digital money notoriously struggles with producing mass, real-world, pragmatic usefulness. It’s been around for so long, but has still failed to really break into mainstream finance in a truly meaningful way.

Until recently, it seems. Over 130 governments are currently exploring opportunities to adopt Central Bank Digital Currencies. In retrospect, it’s possible that we’re leaving the curiosity phase of every new technology and entering a more level-headed trial period.

The European Central Bank and the Monetary Authority of Singapore have both expressed intent to continue their tests through 2026. So what does this mean for banks in terms of operations? In short, payments and settlements.

Asset-backed stablecoins and tokenized deposits are well known to be fast to settle, work around the clock, and be between 30 and 50% more affordable, according to different accounts.

Tokenized deposits are particularly worth exploring. Unlike stablecoins that reside outside the banking system, tokenized deposits remain on the bank’s proverbial “books”. JPMorgan and Citi have been testing these with some of their larger clients for some time now.

Trend #4: Compliance automation accelerates

New technology introduces a great deal of complexity to financial services, and it’s doing so very quickly. As a result, compliance costs are becoming a growing concern. For larger financial institutions, compliance costs average about 2.60% of total operating costs and somewhere between 10 and 15% of the workforce.

At a certain point, this complexity will become a problem that can’t be solved by just throwing more people at it.

The Regulatory Technology market (also known as RegTech) is actively expanding to meet these institutional pressures. Grand View Research suggests that it’s poised to grow to over US$70 billion by 2030, having been estimated at US$17 billion in 2023. There are more conservative estimates from other sources, placing it at about US$44 billion by the end of the decade, but it’s absolutely certain that this is now a growing branch of AI-enabled tech that banks and financial institutions should consider.

This explosive growth has arisen for many reasons. For instance, McKinsey suggests that over 90% of anti-money laundering alerts are, in fact, false positives. This creates a broad spectrum of implications for workers’ efficiency.

AI-enhanced transaction monitoring addresses this issue directly. While obviously vendor use cases are likely to be quite optimistic, nevertheless, there have been impressive, tangible results from testing this technology.

• Across large institutions, deployments commonly report a 50–70% drop in false positives while maintaining detection quality.​

• A global payment processor and a major Asian bank each report around 70% fewer false positives after rolling out AI‑driven models.​

• Large U.S. and European banks handling high transaction volumes report double‑digit percentage reductions and thousands of investigator hours saved per month.​

• Several global banks are using graph analytics along with natural language processing to reduce false positives by 20–30%.

The data is still quite fuzzy, but it seems that it’s moving in the right direction.

Trend #5: Rising geopolitical and credit risk

Cross-border lending is likely to become more complicated at an operational level because of geopolitical risks. Different regions are incorporating frameworks – such as the EU CRR III and China’s tightened capital controls – which don’t quite overlap. As a result, this is bound to introduce a great deal of complexity to group capital planning, basic product approval, and capital movement.

The fragmentation also has structural consequences. A 2025 industry report shows that incomplete Banking Union implementation and inconsistent national requirements discourage cross-border consolidation, even when the commercial logic exists, because regulatory ring-fencing turns potential mergers into costly negotiations.

Local supervisors demand local capital and liquidity buffers, which reduces group-level shock absorption even when it appears safer jurisdiction by jurisdiction.​

Credit risk is rising in parallel.

Fitch's 2025 outlook projects European leveraged-loan default rates climbing to 2.5–3.0% (from 2.0–2.5%) and high-yield defaults to 5.0–5.5% (from 3.5–4.0%), driven by post-rate-hike refinancing pressures. Repeat defaulters account for a growing share, particularly in commercial real estate and lower-tier corporates.​

Geopolitics amplify credit risk.

Federal Reserve research shows that when geopolitical risk spikes, global banks cut cross-border lending to the affected countries but maintain or expand credit through local affiliates, leaving balance-sheet risk in place while changing how it looks on the books. Bank of England analysis confirms that political shocks spill into investment and output with a lag, turning today's headlines into tomorrow's non-performing loans.​

Banks are responding by rebuilding country-risk frameworks.

Leading institutions now blend macro indicators, political-risk indices, sanctions, and FATF grey-list status, and detailed trade-exposure data to understand how shocks can proliferate through supply chains and funding channels.

Some incorporate higher-frequency signals – shipping data, customs flows, FX liquidity – catch the early strain before it appears in credit ratings.​

Expert networks have become part of the operational infrastructure. As sanctions regimes grow more complex, banks use structured calls with former regulators, sanctions lawyers, and regional specialists to validate exposures and client structures before onboarding decisions or syndicated loans.

The institutions that integrate geopolitical and credit risk into a unified country and counterparty view will know where to keep lending - and where to step back.​

The bottom line

These five trends aren't separate challenges. They compound. AI moving to production, ESG going mainstream, digital currencies entering settlement rails, compliance automation scaling, geopolitical fracture reshaping credit – banks treating these as isolated initiatives will find their strategies being pulled in different directions.

The institutions that position themselves as leaders are building integrated responses – data architectures that serve AI, ESG, and compliance simultaneously; governance frameworks that handle model risk and geopolitical exposure in parallel; and tech stacks that are flexible enough to incorporate tokenized rails without rebuilding from scratch.

The thing is, the window for positioning is narrowing. 2026 will separate those who adapted early from those who are still planning.