The retail bank at a pivotal time: with digital-first generations and competition from fintechs, traditional banks must modernize or risk obsolescence.
Digital: the urgency of a transformation
The retail bank has been evolving for more than two decades, but the issues have never been so high. In T1 2025, JPMorgan Chase displayed a net profit of 14.6 billion dollars, up 9% in annual shift, carried by solid income from trading and investment banking commissions. At the same time, British neobancs make significant progress: Revolut made a net profit of $ 1 billion in 2024. Monzo also displayed its first full year of profitability, with a before tax profit of 15.4 million pounds and a turnover doubled at 880 million pounds.
Despite these advances, 62% of retail banks admit that their transformation pace is delayed on their competitors (1). This is not a slight delay, but a strategic disadvantage on a market where 44% of new current accounts are already open to digital banks and fintechs.
Generative AI: catalyst and constraint
Among all the changes in progress, generative artificial intelligence stands out as the most powerful and potentially disruptive force. Managers are focusing on AI not only to improve customer commitment, but also to modernize operations and accelerate the transformation of the core business.
The impact of the generative AI in the bank is tangible. It can customize large-scale customer journeys, accelerate software development cycles, write code and automate data management, provide hyper-details products, and supply IA agents with almost human customer service capacities.
In summary, the generative AI not only makes possible what was once prohibitive in cost and time, but also evolving.
The customer profile has changed
Retail banks must stop focusing on yesterday’s client. Generation Z, which will represent a third of the active population by 2030, already favors a mobile-friend bank, always accessible. It values immediacy, personalization and authenticity.
To this generational change is added the decreasing relevance of traditional customer segmentation. Consumers today challenge any linear categorization. The same person can be a business manager, parent and first -time – yet banks often treat them as three separate customers due to products centered on products.
The weight of Legacy, brake on transformation
Inherited systems continue to be the main obstacle to a significant transformation. Indeed, 70% of banking leaders say that their Legacy infrastructure hinders their ability to offer digital experiences expected by customers. Many central systems are based on cobol and approach their end of life, yet banks hesitate to modernize due to perceived risk and complexity.
The irony is obvious: the risk of maintaining obsolete systems now exceeds the risk of change. With the generative AI, banks finally have tools to face the major challenge: the modernization of the core business.
The modernization of the core business, the keystone of transformation
Modernizing the core business is not limited to infrastructure. This is the key to freeing all the value of AI, data and digital transformation. A modern and native Cloud central architecture allows real-time access to FIRST-Party and Third-Party data, agile delivery via microservices, better governance and regulatory transparency, and faster marketing with new applications and services.
Retail banks that modernize their core business can stop building expensive middleware just to access data. They gain in return a unified vision of the customer and agility to respond to market developments in real time.
The virtuous circle of AI and the core business
What is really powerful is the feedback loop between generative AI and a modernized core business. The generative AI helps to accelerate the transformation of the heart by generating code, automating tests and rationalizing documentation. Once modernized, this heart then improves the capabilities of generative AI with clean and structured data. This virtuous circle creates an exponential value, making digital transformation faster, cheaper and more durable.
Retail banks already allocate 35% of their digital transformation budgets of the customer experience at generative AI, and many integrate AI in the entire software development cycle using tools to reduce human error, increase test coverage and deliver better code more quickly.
From the centered-product to the centered person
Finally, this report encourages retail banks to move from a state of mind focused on products to a state of mind focused on people. This means designing experiences around life moments, not product categories. This means knowing that the mortgage customer is also a business manager and a parent, and propose solutions that reflect this reality.
With modern central systems and generative AI, banks can personalize their approach, adapt their financial advice and meet customers where they are. This holistic vision is essential not only for growth, but also for loyalty.
The postponement is completed. Banks can no longer afford to delay the transformation of their core business. The generative AI has reduced costs, reduced the complexity and accelerated the rate of change. The only question that remains is whether the banks are ready to take the lead or may late. The future of the retail bank does not happen – it is already there. The moment to act is now.
(1) Publicis Study Sappient
