The banking industry has reached a pivotal moment in its ongoing disruption. In 2023, global banks produced an impressive $7 trillion in revenue and $1.1 trillion in net income, sustaining healthy capital and liquidity positions. Despite this robust financial performance, a price-to-book ratio of 0.9—the lowest among all industries—highlights the market’s skepticism about the sector’s long-term value creation prospects. The message is unambiguous: to regain investor confidence and fully leverage their financial strength, banks must look beyond traditional models and continue to embrace new approaches shaped by digital ecosystems and customer-centric propositions.
This shift transcends incremental tweaks or, short-term fixes. For several years now, it has demanded a deeper reimagining of how banks integrate into customers’ daily lives, compete through strategic ecosystem participation, and differentiate themselves with data-rich, technology-enabled services. Those institutions willing to adopt these new paradigms of business models stand to recapture growth, enhance profitability, and secure a portion of an estimated $20 trillion in additional value as banking’s valuation multiples return to historical norms.
Among the emerging business models, three stand out for their transformative potential. These models promise to reshape the industry, streamline value chains, and foster a more vibrant, resilient financial services landscape. The future of banking will hinge on how adeptly institutions implement, scale, and refine these models in the coming years.
Digital-only propositions
Over the past decade, the proliferation of digital-only institutions has reshaped the banking landscape. Around 400 licensed neobanks emerged globally, buoyed by an estimated $32 billion in venture capital between 2017 and 2021. Initially celebrated for their innovative interfaces, streamlined operations, and flexible architectures, these digital-only banks relied on novel user experiences and disruptive pricing strategies to gain market share. Now, as the sector matures, these banks must translate their early promise into lasting financial viability.
As we progress into 2025 and beyond, digital-only banks will move from experimentation to operational excellence. Leading players are prioritizing scale as a means of driving profitability. By adopting cloud-native architectures, composable systems, and standardized APIs, they are optimizing their operating costs and improving margins. Some are evolving from purely local players into regional champions, successfully replicating their core capabilities across new markets and geographies.
In parallel, many digital-only banks are diversifying their revenue streams. They are “productizing” internal capabilities—be it technology, operational expertise, or unique data insights—to offer BaaS solutions and even non-financial services. By integrating with ecosystems like e-commerce, travel, or healthcare, these banks embed themselves into the broader fabric of customers’ lives. This strategy creates fresh engagement points, fosters brand loyalty, and ultimately drives sustainable growth.
Still, challenges persist. Investor sentiment has cooled as some neobanks struggle to achieve profitability. To thrive, digital-only players must refine their customer acquisition costs, strengthen their pricing models, and integrate emerging technologies like generative AI and Web3 solutions. With traditional players closing the digital gap, the winners will be those that can balance scale, innovation, and resilience over the long term.
Embedded banking and Banking-as-a-Service (BaaS)
If digital-only propositions revolutionize direct customer engagements, embedded banking and BaaS models go further, weaving financial services into the digital environment. By 2025, embedded finance revenues are expected to surge by 148%, climbing from $92 billion in 2024 to $228 billion in 2028. This dramatic growth reflects the power of integrating lending, payments, insurance, and investments into platforms that consumers and businesses use daily.
Banks that have begun experimenting with embedded offerings must now scale up and diversify their portfolios. Beyond basic payments or deposit accounts, embedded finance solutions increasingly include consumer loans, SME credit, and wealth management services delivered right at the point of need. Regulatory frameworks like PSD3 in Europe and India’s co-lending guidelines are streamlining data sharing and underwriting, enabling faster, lower-cost credit decisions.
Multi-rail payment systems are on the rise as embedded finance providers combine multiple open banking APIs for seamless, cost-effective transactions, especially for bulk and cross-border payments. Businesses are adopting embedded financial services faster thanks to integrated solutions like consolidated international payment APIs and cloud-based accounting platforms.
To stand out, banks must advance from simple integrations to building composable, event-driven architectures capable of handling high-frequency transactions. Advanced analytics and AI-driven tools will be critical to deliver scenario-specific financial products—such as buy-now-pay-later options at checkout or just-in-time liquidity for SMEs. At the same time, the complexity of managing diverse partners across geographies raises governance, cybersecurity, and compliance challenges. Banks that master these complexities will unlock unparalleled reach and relevance, anchoring themselves as integral components of digital ecosystems.
Marketplaces
While digital-only propositions focus on direct channels and embedded banking thrives within partner platforms, marketplaces emerge as a holistic model where banks become orchestrators of wide-ranging financial and non-financial services. Going forward, cross-industry platforms will continue to dismantle traditional barriers, blending diverse offerings—mortgages, insurance, advisory services, and more—into frictionless customer journeys.
Marketplaces demand a strategic approach. Rather than simply listing multiple products, forward-looking banks will look to create curated ecosystems aligned with specific customer scenarios. For instance, a property-focused marketplace might combine mortgage lending, real estate listings, legal consultations, home insurance, and maintenance services. This approach drives deeper engagement, allowing banks to capture value at multiple points in the customer’s journey.
Advanced analytics capabilities are indispensable here. Predictive insights enable banks to serve personalized recommendations, whether ESG-linked investment products or micro-savings apps. Continuous data feedback loops help the marketplace evolve, refining services based on changing customer needs.
Collaboration and integration are crucial. Banks must develop strong partnerships with fintechs, insurers, technology providers, and even retailers. Foundational capabilities such as API-driven architectures, automated partner onboarding, and standardized compliance protocols foster an environment where ecosystem participants can quickly innovate and scale. Specialization also becomes essential; by focusing on certain “arenas,” such as everyday banking or complex financing, banks can differentiate themselves and improve margins.
Architectural modernizations—migrating to cloud-native systems, adopting modular components, and integrating sustainability considerations—prepare banks for an evolving regulatory and market landscape. Successful marketplace strategies unlock not just incremental revenue but also higher customer lifetime value and brand resonance.
Conclusion
The business models emerging in 2025 and beyond redefine banking’s future. Digital-only propositions have moved beyond novelty to pursue profitable scale and cross-sector integration. Embedded banking weaves financial services directly into the platforms people and businesses rely on daily, promising vast growth opportunities for those who master complexity and compliance. Marketplaces enable banks to orchestrate diverse ecosystems, delivering curated experiences that meet complex customer needs and generate new revenue streams.
Success across these models hinges on more than technology. It demands strategic clarity, operational agility, and robust partnerships. Banks must invest in advanced capabilities—data analytics, AI-driven personalization, event-driven architectures—and develop a collaborative mindset to remain ahead in an intensely competitive environment.
As banks continuously refine and scale these models, they will reshape not only their balance sheets and valuations but the nature of financial services itself. The future belongs to institutions prepared to lead this transformation—those that can seamlessly integrate finance into people’s lives, create vibrant ecosystems, and deliver unparalleled value. In doing so, they will redefine what it means to be a bank and secure a lasting competitive advantage in the evolving financial world.
