Banks could save huge amounts on operating costs by artificial intelligence (AI), but this technology will ultimately reduce their profits as AI agents will make recommendations to customers.
According to a recent McKinsey report, while savings on AI could be up to 20%, given the cost of the technology, banking industry profits could fall by 9% as customers transfer money based on recommendations from AI agents.
“The impact of savings, while welcome, will not last long,” McKinsey said. “As with previous innovations, competition will likely erode the benefits for banks, and over time, most of the benefits will be passed on to customers.”
The report said $23 trillion of the total $70 trillion in consumer deposits are in checking accounts with zero interest rates, with most of the remainder in low-interest accounts.
“If only 5–10% [current account] balances have moved to maximum market rates, and this action could be caused by AI agents, which could reduce the banking industry's overall deposit returns by 20% or more,” McKinsey said.
He added that banks could lose $170 billion in global annual profits over the next decade if they fail to adapt. “But the consequences will not be felt equally,” it added. “AI pioneers can see measurable increases in return on capital of up to 4% by using their leadership to rethink models and generate profits.”
McKinsey believes that slow-moving companies are likely to see lower profits over the long term.
Act like big tech
UK banks must act like big tech companies rather than startups if they want to avoid slowness and emulate the success US banks have achieved with AI, according to research from Evident.
The firm, which tracks the adoption of artificial intelligence in financial services, said U.S. banks are leading the way. In his last banking AI adoption indexSix of the ten largest banks are in the United States.
It is clear that these leading banks in AI maturity have pulled away from their peers in 2025, consolidating previous gains and increasingly realizing the return on investment of their AI spending.
The 10 largest banks were found to be accelerating their AI adoption more than twice as fast as the rest of the banks. Investments in AI turn into business value.
Obvious CEO Alexandra Musavizadeh warned that talent is the key to success in using AI for banks.
“Your talent is your destiny,” she added. “That's always been true, but I think it's even more true now because we're at this turning point where there's been a couple of years of experimentation and testing with use cases that are feasible, but it's a very superficial level.”
The Evident Index found that no UK bank is in the top 10 for artificial intelligence.
According to a recent study by Lloyds Banking Group, 59% of companies surveyed reported productivity gains from AI in the last 12 months, up from 32% in the 2024 survey.
In his Financial Institution Sentiment SurveyBanks also reported growth in AI revenue in other areas. The survey found that 21% of respondents believe AI directly contributes to business growth, up from 8% in a survey a year ago.
Meanwhile, a third (33%) of respondents said AI improves customer experience (up from 14%). The same percentage said AI provides them with greater customer insight, up from 18% last year.
As a result of the improvements, half of the financial services companies surveyed said they plan to increase spending on AI over the next 12 months.
