Five controversial trends shaping financial services in 2026

The financial services industry enters 2026 amid accelerating technological pressure, shifting regulatory landscapes, and a growing gap between institutions that adapt, and those that cling to familiar playbooks.

Every major consultancy and think tank will issue its version of "2026 trends," filled with predictable statements about AI, digital transformation, and compliance.

This article is not that.

Here, we focus on five trends that are actively debated inside boardrooms, uncomfortable for many executives to confront, and consequential enough to shape competitive advantage for years.

These are not speculative ideas pulled from hype cycles; they are grounded in research, industry activity, and the realities of what financial institutions in Europe, the US, and the Middle East are already wrestling with, quietly or loudly.

1. Generative AI gold rush meets regulatory reality

The AI arms race in finance will only accelerate in 2026, but so will the trust and compliance challenges accompanying it. Banks are rapidly deploying generative AI for everything from customer service bots to automated fraud detection. Industry research states the same.

Forrester predicts that by 2026, over half of under-50 consumers seeking financial advice will turn to Gen AI tools like ChatGPT, forcing banks to experiment with AI-driven advisory services within strict risk limits.

For example, tier-one banks are already moving beyond pilots, and nearly half will have AI agents automating back-office tasks like data reconciliation and even code generation. The promise lies in greater efficiency, hyper-personalised services, and “zero-click” experiences where personal AI agents handle tasks like finding the best mortgage rate.

Yet this AI gold rush faces a hard reality: oversight is lagging behind adoption. Statistics show that more than 70% of banks report using “agentic” AI in some form, but governance frameworks are disturbingly lacking, according to EY’s 2026 regulatory outlook.

In the US and the EU alike, regulators are scrambling to draft AI-specific rules (or apply existing ones), creating a complex patchwork for global banks. Lingering trust concerns over opaque algorithms, bias, and accuracy mean consumers and regulators alike remain cautious. US consumers in particular are wary of fully automated financial decisions, citing accuracy and privacy fears.

Our predictions

Banks cannot afford to sit out the AI revolution, but neither can they afford a reckless dash. In 2026 the winners will be those who embrace AI boldly yet responsibly, embedding GenAI into products with human oversight and clear rules.

They must invest in explainable and auditable AI now, before regulators force their hand. Institutions that cling to manual processes or ignore AI out of fear will be left behind, but those that deploy AI without proper controls court disaster.

2. Embedded finance: Banks face an identity crisis

Analysts project the embedded finance market to soar towards $7 trillion by 2030. And, with non-bank companies offering banking products within their own user experiences, it is reaching a tipping point. Banks face an existential question: Will they remain customer-facing brands or fade into back-end utilities? In practice, this means you might get a loan from your rideshare app or investment services from your retail platform without ever dealing with a bank directly.

One expert aptly noted, “the financial system of the future won’t be built in banks – it’ll be embedded in the apps and services people already use.” In this scenario, the traditional bank recedes from view, essentially becoming “invisible infrastructure” that powers transactions behind the scenes.

We’re already seeing this shift: Big Tech and consumer brands are offering credit cards, wallets, and even deposit accounts through partnerships. By 2026, embedded finance could become the default model across retail, tech, and even healthcare, with non-financial brands seamlessly integrating sophisticated financial products into their offerings.

Traditional banks risk being reduced to regulated pipe-providers, while the customer relationship (and data) lives with the tech platforms. They are increasingly likely to operate “as infrastructure providers rather than customer-facing entities” in this new landscape.

Our predictions

Banks must confront this identity crisis head-on. Trying to cling to a shrinking direct customer base is a losing battle. Instead, incumbents should embrace embedded finance strategically – for instance, by providing Banking-as-a-Service (BaaS) platforms to power fintech and Big

Tech offerings (and thereby share in the revenue), or by developing their own ecosystem partnerships. The controversial prediction here is that banks that fail to adapt could indeed become glorified utility pipes.

To avoid that fate, banks should leverage their strengths (trust, compliance expertise, capital) to insert themselves into embedded finance value chains as key enablers. In short, if you can’t beat the platforms, become the indispensable engine inside them. Banks that reinvent themselves as invisible yet vital service providers can thrive – those that don’t may find themselves famous in name but irrelevant in function.

3. Digital currency shake-up: Stablecoins and CBDCs challenge the status quo

While crypto markets have had their booms and busts, 2026 will mark the year digital currencies hit the mainstream of financial services – not in speculative mania, but in the plumbing of the system. The charge is led on two fronts: central bank digital currencies (CBDCs) and stablecoins.

Over 130 countries are now exploring or piloting CBDCs, and we may see major economies like the UK or EU rolling out digital pound or euro pilots that bring government-backed digital cash to consumers. CBDCs promise near-instant payments and could streamline cross-border transfers, but they also raise a contentious question: Will they disintermediate commercial banks? If citizens can hold digital cash directly with a central bank, traditional banks might see an erosion of deposits.

No wonder many banks and observers are uneasy – “commercial banks will grapple with their role” once CBDCs arrive, potentially relegated to mere distribution and tech support for central banks.

On the private side, stablecoins – digital tokens pegged to fiat currency – are exploding in usage and creeping into mainstream finance. In the first half of 2025 alone, stablecoins processed an astounding $8.9 trillion in transactions, rivalling major payment networks.

Far from just crypto trading chips, stablecoins are now seen as efficient mediums for everything from cross-border corporate payments to settlement of tokenised assets. Major financial players are eyeing them: we could see payment giants using stablecoins for instant B2B transfers, and asset managers adopting them as on-chain cash for settling trades.

Regulators are rushing to catch up here as well – from the US to the UAE, new laws are emerging to require stablecoins to be fully reserve-backed, redeemable, and safely custodied. This regulatory patchwork is still fragmented, meaning adoption will vary by region.

Europe’s MiCA law and similar efforts aim to tame the Wild West of crypto into a governed space. In the Middle East, jurisdictions like the UAE are proactively crafting rules to become hubs for digital assets.

Our predictions

Dgital currencies will irreversibly alter the financial services landscape in 2026 – and incumbents should stop viewing them as fringe. The controversial stance here is that ignoring or dismissing these developments is a mistake many conservative institutions will regret.

Instead, banks need to position themselves on the winning side of this disruption. That means partnering with, or even issuing, stablecoins for payments and settlement to improve efficiency – before upstarts and fintechs corner that market. It also means preparing for CBDCs by working closely with central banks as intermediaries (for example, offering digital currency wallets or integration with core banking).

Yes, there are valid debates about privacy, security and the role of government vs. private money. But with clear regulatory frameworks maturing, digital currencies are moving from speculation to institutional adoption.

I predict that at least one major bank will go all-in and launch its own stablecoin or digital cash product in 2026, shattering the notion that crypto is someone else’s game.

The bottom line for decision-makers is to treat stablecoins and CBDCs not as threats, but as the next evolution of money – one that bold banks can harness to leapfrog slower competitors.

4. Breaking the cloud monopoly: Banks reassess big tech reliance

For the past decade, the mantra in banking tech was “move to the cloud or perish.” By 2026, however, a counter-trend is emerging: some financial institutions are pumping the brakes on public cloud adoption and even repatriating certain systems back on-premises or private clouds.

This goes against the grain of Silicon Valley hype, and few bank executives will say it loudly, but cost and risk realities are setting in. After years of migrating to AWS, Azure, and Google Cloud, CIOs are waking up to sticker shock – soaring cloud bills with hidden fees (like data egress charges) that are hitting the bottom line.

As one tech analysis noted, many enterprises are realising that the “unexpectedly high costs of cloud services are unsustainable in the long term,” leading to a growing movement toward cloud repatriation.

In other words, banks are asking: Is public cloud really the most cost-effective and controlled option for every workload? Increasingly, the answer is no – especially for latency-sensitive trading systems, core banking apps with predictable workloads, or data that faces sovereignty regulations.

It’s not just cost driving this rethink. Regulators have begun scrutinising banks’ dependence on a few “hyperscaler” tech giants, worried that a failure or outage at a dominant cloud provider could cascade into a systemic crisis. In the EU, the Digital Operational Resilience Act (DORA) is forcing banks to audit and mitigate risks from third-party tech providers, explicitly including cloud vendors.

Globally, supervisors are zeroing in on these critical third parties that fall outside traditional banking regulation. Banks in 2026 will face pressure to show they have multi-cloud strategies, exit plans, and on-prem backups to avoid vendor lock-in and concentration risk. Even issues of national digital sovereignty come into play: Europe and the Middle East have shown interest in local cloud infrastructure to keep data within borders and reduce reliance on US-based giants.

Our predictions

Questioning the cloud orthodoxy is not heresy – it’s smart management. In 2026, leading banks will adopt a pragmatic hybrid approach: keep using public cloud for what it does best (scalability for spiky demand, global reach, advanced AI services), but pull back or avoid it where it falls short (high steady-state costs, data control issues, regulatory headaches).

We predict more banks will openly repatriate certain workloads or negotiate tougher terms with cloud providers – a trend many won’t admit until after the fact. The edgy perspective is that the hyperscalers’ stranglehold on finance tech will loosen as banks demand more control and value. Business decision makers should start scrutinising their cloud bills and risk exposures now.

Don’t be the CEO caught off guard when your CIO says that cloud isn’t always cheaper or safer. In 2026, the new mantra will be “cloud-smart, not cloud-all” – and the banks that get this balance right will save money and stay resilient.

5. ESG under fire: Green finance at a crossroads

Not long ago, sustainable finance and ESG (Environmental, Social, Governance) principles were embraced as the future of banking. Now, they’ve become a battleground. By 2026, banks find themselves in a culture war over ESG commitments, especially split between different regions.

In the United States, a politicised backlash against “woke capitalism” has put banks under fire for any perceived activism. Multiple US states (primarily Republican-led) have enacted laws to penalise banks that consider ESG factors in lending or investing, arguing it violates fiduciary duty. The result?

Some banks are quietly caving. Many institutions have scaled back or softened their public ESG commitments to avoid political heat – watering down climate targets, dropping phrases like “racial equity” or “sustainability” from reports, and generally keeping a low profile on social issues. This retreat is happening under the radar, as banks don’t want to alienate other stakeholders, but it’s real: net-zero pledges are being delayed or reworded in certain markets.

Meanwhile, Europe is charging full-speed ahead on green finance mandates. The EU’s regulations (like the CSRD and taxonomy rules) are tightening climate-risk disclosure requirements starting in 2024 and global investors continue to demand transparency and action on climate change. In fact, globally, investor expectations and regulatory demands for ESG are only growing despite the backlash. European and Middle Eastern banks (many of which see sustainability as key to long-term economic resilience) can’t afford to backtrack, or they risk non-compliance and reputational damage.

This is creating a fractured landscape, where. US banks tiptoe around the term “ESG” even as their foreign counterparts double down on climate initiatives. It’s the ultimate damned-if-you-do, damned-if-you-don’t scenario – a pivotal test of values versus short-term politics for the industry.

Our predictions

The uncomfortable truth is that ESG has become politicised, but the underlying risks it addresses are not going away. Climate change will continue to impact portfolios and loan books, and social governance failures will still sink careers and companies. Banks should not abandon their sustainability goals – instead, they should reframe and refocus them.

In 2026, smart financial institutions will strip out the buzzwords and make the business case for ESG in plain terms: risk management, innovation, and long-term competitiveness. They’ll invest in verified sustainability metrics and transparency to counter accusations of greenwashing, showing stakeholders real data on progress. Yes, it takes courage for banks to stick to climate targets when a portion of the market screams “stay out of politics,” but leadership means looking past the quarter’s politics to the decade’s risks.

We believe the bold stance for decision makers is to quietly continue embedding ESG principles (especially where mandated, as in Europe) while educating skeptics that sustainable finance is prudent finance.

By 2026, the edgy prediction is that banks will differentiate themselves along this divide – those that cynically drop ESG may dodge some noise now but will fall behind in innovation and compliance, whereas those that stay the course (even if under a rebranded name like “long-term risk strategy”) will emerge stronger and more trusted. In short, green finance isn’t dead – it’s just finding out who’s truly committed when the going gets tough.

Key takeaways

In conclusion, the financial services industry in 2026 won’t be defined by the obvious trends everyone agrees on, but by how institutions navigate these controversial, make-or-break shifts. From AI and digital currencies to the very role of banks and their stance on cloud and climate, each trend above is rife with debate – and opportunity.

Business leaders in finance should not shy away from these conversations. On the contrary, the firms that engage with these uncomfortable shifts early – taking a nuanced but bold position – will set themselves apart from the pack. While competitors play it safe with generic forecasts, you now have a candid map of the fault lines that others tiptoe around.

Let 2026 be the year your organisation moves decisively on these fronts, leveraging an expert yet edgy vision to stay ahead of the curve. The future belongs to those with the foresight to see which way the wind is really blowing – and the fortitude to adjust their sails accordingly.