From trading floors to retail loans, traditional banks lose ground to tech-savvy challengers: BCG

Time of India

05-06-2025

Traditional banks
are struggling to keep pace with fast-moving, tech-driven financial rivals, even as the overall
financial services
sector continues to grow. This is the central finding of Boston Consulting Group's latest Future of Finance report.
'Financial services revenues are growing – but
banks
are not capturing their fair share,' BCG says. The report observes that value is shifting away from traditional banks to fintechs, private credit funds, non-bank liquidity providers, and digital-native banks. 'Maturing digital assets appear to be on pace to cause significant disruption, with most banks currently on the outside looking in,' it adds.
Digital attacker banks have seen the highest growth among financial players. According to BCG, these banks have recorded revenue compound annual growth rates (CAGR) of 85–100% over the past five years. They are followed closely by private credit players and retail trading platforms. In contrast, traditional banks have posted revenue CAGR of just 10–15%, even though they still hold the largest share of balance-sheet assets.
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The advantage of these challenger firms lies in their use of scalable platforms, lean cost structures, and digital-first models. 'Non-traditional bank competitors are generating new revenue pools,' BCG says. 'The best attackers are positioned for rapid growth, thanks to modern technology stacks and front-to-back digitised operating models.'
The disruption is not limited to
retail finance
. In capital markets too, boutique advisory firms and non-bank market makers are steadily eating into the fee income of large banks. 'Private credit has been gnawing away at bank share, particularly in the US,' the report says.
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Traditional banks are also facing deep-rooted structural challenges. Their fee income is declining. Productivity from non-interest income has dropped across all regions. Meanwhile, cost pressures continue to rise. Despite having invested in technology for years, their efficiency gains are starting to slow. 'Many banks struggle to counter these trends,' BCG says. The report also points out that pricing remains an underused tool for improving performance.
The difference in cost efficiency is stark. According to the report, the cost-to-serve for
neobanks
is often only one-tenth that of traditional banks. 'New competitors are winning on productivity,' BCG says.
Investors, too, are taking note of this growing gap. In regions such as East Asia and the Eurozone, most bank stocks are now trading below their book value. 'Investors are avoiding banks that may be in a vicious cycle of outdated operating model and low profitability,' BCG warns.