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Why Banks Are Slow
It’s a frequent observation about the financial services industry — banks are slow to adapt to technological change. Chasing the latest shiny object could undermine financial stability and therefore, most banks won’t do it. Banks tend to make most of their money from the people who own businesses and have accumulated wealth. The highest value customers tend to be aged 55 and up, people on average slower to adopt digital tools, according to McKinsey & Co.
There are other good reasons why banks fall behind. When banks do adopt technology, unlike companies in other industries, they have done so by adding complexity. When banks added internet and mobile banking, they offered these services for free, bankrolling the costs and mostly keeping their expensive legacy branches. (The big banks have cut back on branches since the global financial crisis of 2007-2009, but many have been building branches the last few years, as Executive Editor Jackie Stewart wrote in her cover story for Bank Director magazine’s second quarter 2026 issue.)
Here’s a good analogy for how banks differ from other industries, from McKinsey & Co.’s “Global Banking Annual Review 2026.” In music, customers paid to replace their records with CDs and then replaced their CDs with subscription streaming services. But “banks paid the costs to add call centers, online banking, mobile apps and now chat and other AI services to the core branch network,” according to McKinsey.
Total factor productivity is the Bureau of Labor Statistics’ measurement of “the efficiency at which combined inputs are used to produce output of goods and services.” By that measure, retail banking saw a nearly 1 percentage point decline in growth between 2010 and 2012. Industries such as real estate, information businesses such as publishing and professional services all gained more than 1 percentage point, according to McKinsey. “Where other industries reinvented themselves, leaping to the next S-curve of innovation and economics, banks built complex operating models,” the report says.
McKinsey argues that the old dynamics in banking are changing — the data suggests the adoption of generative AI, for example, is widespread across age groups. Its own research suggests 45% of working age Americans are using generative AI. Banks may not be able to afford to slow walk technological transformation. “Resilience and precision alone are no longer sufficient,” they write. “Today’s environment demands an equally critical capability: speed.”
• Naomi Snyder, editor-in-chief for Bank Director
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