Global tensions, economic challenges and technology as a game changer – the outlook for the banking market in 2026

We have had a turbulent year. Global tensions, economic challenges and intense cost and earnings pressure have shaped the banking industry in 2025. Looking ahead serves as a compass for realistically assessing the opportunities and challenges for 2026. Of course, we are not gazing into a crystal ball, but rather taking an expert look at how the economy, technology and market conditions influence the business policies of banks.

Looking at the economic challenges and the macroeconomic environment serves as a key indicator for the general development of banking. Whether interest rate developments, inflation, the economy or employment – understanding economic parameters provides guidance for forecasting growth and earnings opportunities in banking.

• Moderate economic growth and subdued economy: Slight to moderate growth of 1-1.5 per cent is forecast for Germany and the eurozone in 2026. Economic output in Germany is therefore likely to increase slightly in 2026, following years of weakness and uncertainty. In addition to economic developments, other indicators for growth include geopolitical risks, trade conflicts and the associated reluctance to invest. Slight to moderate growth in an environment characterised by structural challenges (e.g. trade, industry) will also influence the business policies of banks: cautious lending, selective risk management and an increased focus on risk-adjusted returns will shape the banking sector.
• Inflation and interest rate trends: According to current estimates, inflation for 2026 will be around 1.9 per cent – slightly below the ECB's target. Data from the end of 2025 show that inflation in the eurozone has already fallen to around two per cent, indicating stable price developments. Inflation in the eurozone is therefore likely to remain stable around the ECB's target of around two per cent in 2026, while interest rates are expected to remain at their current level. This creates predictability and stability for banks, tends to support the net interest margin slightly and ensures a more favourable environment for lending. At the same time, the challenge remains to respond structurally to margin pressure and highly competitive deposit markets.
• Labour market and employment: Unemployment in Germany remains relatively high and stable. At the end of 2025, it stood at around 6.3 per cent. For 2026, experts forecast that employment will rise only moderately or stagnate, as demographic factors and weak productivity are slowing demand on the labour market in addition to a lack of economic momentum. Weak industrial growth signals a reluctance to invest and thus lower demand for credit in the manufacturing sector. On the private customer side, too, the weakness implies moderate income and employment growth and thus generally cautious borrowing, especially for larger consumer and real estate loans. For banks, this observation means moderate or declining demand for credit, more conservative risk management and stricter credit checks.
• Geopolitical uncertainties and tensions have a direct impact on banks' business strategies. They influence risk management, business models, technology decisions and regulatory requirements in equal measure. Whether protectionism, sanctions or political uncertainties: banks must explicitly take political risks into account in their business strategies. These can manifest themselves, among other things, in the choice of technology providers to reduce dependence on foreign technology, cloud and payment providers, or in increasing competition between currency and payment systems (e.g. digital central bank currencies). Among other things, banks are being urged to make adjustments to their IT architecture and vendor strategies, take new payment and settlement requirements into account, and question their strategic market position with regard to digital assets and currencies (e.g. stablecoins, digital euro, etc.).

In 2026, the industry will be faced with the challenge of reconciling sovereignty requirements with efficiency.

Technological trends and drivers – When obligation becomes choice

By 2026, technology will no longer be a marginal issue, but a key driver of success and efficiency for the future-proof design of banks' business policies. It determines cost efficiency, competitiveness, risk management and customer access. As a result, the ability to innovate, modernise and achieve process efficiency is increasingly becoming a key success factor. Key technology drivers will need to be taken into account in 2026:

Legacy modernisation – collateral damage becomes fatal

Inflexible, historically grown, rigid legacy systems are among the biggest structural challenges for banks. The term ‘legacy’ is multi-layered and generally refers to outdated or obsolete IT systems, software or technologies that are still in use but no longer meet current requirements. Legacy is not limited to old mainframe systems or COBOL applications. First-generation Java applications or other technologies that were considered modern just a few years ago can also be considered legacy. Outdated core systems, monolithic architectures and proprietary interfaces will increasingly become a risk in 2026, causing high transaction costs that will lead to friction losses in the long term. They act as a brake on efficiency, innovation, resilience and regulatory compliance. The problem is not purely technical, but strategic, organisational and economic. Without tangible remedies, outdated core systems have a negative impact on the flexible adaptation to market developments, which has a direct effect on efficiency, costs, performance and time-to-market.

AI maturity and scaling – moving beyond the playground

By 2026, we will no longer be discussing whether AI will be used, but rather how quickly, how benefit-oriented and how scalable its impact will be.

It will have a significant influence on whether banks can balance productivity and efficiency, optimise processes, identify risks early on, ensure regulatory compliance, retain customers and tap into new growth and revenue opportunities based on innovative business models. This means that AI will take on a central, structural importance for banking in 2026. Its use is no longer an innovation add-on, but a decisive factor for service provision and competitiveness. This observation makes it clear that the ‘playground’ for AI should now finally be left behind. Scalable, regulation-compliant and production-ready AI are becoming differentiating features that contribute measurably to value creation.

Digital sovereignty – resilience and self-efficacy in banking

Banking transactions and data are among the most sensitive types of information. Sovereignty refers to the ability to use, control and further develop technologies and data in a self-determined manner. It determines whether banks control their own data, risks and business models – or are dependent on external actors, foreign jurisdictions and geopolitical interests in critical areas. This is not about isolation or even self-sufficiency – on the contrary: digital sovereignty ensures sovereignty of action, control and decision-making and plays an essential role in the self-efficacy of banks.

It is important to note that digital sovereignty has many dimensions and is not limited to the topic of the cloud. Whether in the selection of technology or architecture, secure and transparent data management, the development of in-house digital skills, or the safeguarding of political and legal sovereignty and operational resilience, the ability of banks to address these components holistically will support their long-term decision-making authority and security. As a result, digital sovereignty will become a central, business-critical issue for banks in 2026. It is no longer an abstract IT model, but a decisive factor for stability, regulatory compliance and trust. Banks will increasingly be measured by how confidently they manage their digital infrastructure, data and AI. Increasing regulatory requirements for resilience, cyber security and security (DORA, BAIT, MaRisk, AI governance, etc.), as well as higher customer expectations for data protection and stability, will significantly increase the need for banks to take action.

Open finance, FIDA & Co. are driving platforms, portals and digital ecosystems

Open finance as an innovative business model in banking will gain particular attention in 2026. Although the concept of open finance or open banking is not new, it is coming into sharper focus with the FIDA regulation. The directive enables the exchange of financial data beyond payment transactions in order to promote the general opening and liberalisation of the financial market. For banks, this implies that, in addition to payment transactions, data on loans, securities accounts and insurance policies will also be made available to third-party providers. With the consent of customers, personal data will also be accessible to non-banks, which should lead to greater transparency and innovation in the financial market. This will result in an increase in the overall intensity of competition for banks.

Access to and provision of data between companies is to take place within contractual systems – known as financial data sharing schemes – which data owners and users implement themselves on the basis of specified requirements. In addition, data owners will be required to provide their customers with so-called financial data permission dashboards. This will enable customers to monitor and manage (e.g. revoke) the data access permissions granted to data users.

The opening of the market is also accompanied by the emergence of new business models for banks: banks can evolve from pure financial institutions to data and service ecosystem providers, offering platforms and portals as ‘trading venues’ by opening up their data and services via APIs and third-party providers.

This means that they are not only selling their own products, but also creating marketplaces, ecosystems and API platforms where financial and non-financial services converge. To successfully implement this business model, banks must ensure architecture, data capability, security and scalability. This involves more than just implementing technically secure, standardised and highly available APIs.

Robust security mechanisms that ensure high data quality, as well as cloud and DevOps capabilities to operate the interfaces stably and use them economically, will play a critical role in success.

Digital assets, tokenised financial products and the like – the competition is reshuffling!

Digital assets are increasingly becoming part of the global financial system, not only as an asset class, but also as technological infrastructure. Tokenisation of real assets, stablecoins as financial infrastructure and more regulated investment products (ETFs) mark the transition from speculative markets to a more mature, functional financial architecture. For banks, this development implies the need not only to offer products for digital assets, but also to digitally and regulatorily realign their entire organisation – from compliance to IT to customer services – in order to remain competitive in an increasingly institutionalised digital asset financial market. As a result, 2026 will be strongly characterised by strong institutional adoption, growing regulatory clarity (e.g. MiCA, US market structure laws) and the increasing integration of digital assets into the traditional financial system. For banks, digital assets should be understood not as a niche product, but as a new financial infrastructure – with a direct impact on revenues, cost structure, customer loyalty and competitiveness.

Costs, division of labour and sustainable cooperation in harmony – co-creation & shoring

Costs, resilience, scalability, speed, regulatory controllability – there are many good reasons why financial institutions are outsourcing more and more IT services. These high demands will not change much in 2026. However, in order to leverage long-term business cost and productivity advantages, banks must work with external service providers to define measurable benefits that go far beyond pure cost savings in order to ensure the added value of the collaboration. At the same time, the challenges associated with increasing interdependence with service providers are growing if systematic and holistic collaboration is not ensured. This requires an effective collaboration model – not only as a means of reducing costs, but also as a tool for increasing the flexibility and adaptability of banks. Partnership-based collaboration will become an integral part of business, technology and operational strategy in the coming years. Co-creation and sourcing provide banks with cost-effective scalability, faster access to specialist knowledge, greater operational resilience, increased speed of innovation and strategic flexibility when integrated into the business and technology architecture in a targeted and long-term manner. A partnership focused on sustainability generates multiplier effects that go far beyond the cost factor. In 2026, banks should not only require technological excellence and a high level of banking expertise when selecting their IT service providers, but should also focus on sustainable cooperation.

Conclusion

2026 will be a challenging year. Global uncertainties, macroeconomic challenges and intensified competition will significantly increase the need for cost and revenue efficiency.