Key Themes from McKinsey’s Report
Full Report: https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/our%20insights/global%20banking%20annual%20review/why-precision-not-heft-defines-the-future-of-banking.pdf?shouldIndex=false
- Traditional scale-driven strategies are losing effectiveness
Relying on sheer size and macro tailwinds (e.g., high interest rates) won’t be enough to sustain future growth.
- Precision, not heft, defines competitive advantage
McKinsey argues banks must prioritise precision in strategy, execution, and resource deployment rather than just scale.
- The “precision toolbox” has four core elements
Strategy should be refined across technology, the new consumer, capital efficiency, and targeted M&A rather than broad, one-size-fits-all approaches.
- Technology investments must be surgical
Instead of broad tech spend, banks should focus on specific technologies with demonstrable impact, especially in AI (including agentic AI) that drives productivity and customer engagement.
- Hyper-personalisation beats broad segmentation
Banks must move from broad customer segments to “segment of one” hyper-personalisation, using data and digital channels to build trust and relevance.
- Capital efficiency requires line-by-line discipline
Rather than sweeping reallocations, McKinsey recommends micro-level capital allocation (product, client, risk position) to unlock embedded value.
- M&A should be targeted, not scale-chasing
Deals should close capability gaps — technology, niche propositions, or specific markets — instead of simply expanding size.
- AI disruption both threatens and enables banks
Generative and agentic AI could potentially erode up to $170 billion of bank profit pools by 2027 if banks fail to adapt, by routing customers to better offers faster than banks can respond.
- Precision enables smaller players to compete
With data and AI-enabled precision, even smaller banks — not just the biggest institutions — can capture disproportionate rewards by focusing strategy and execution.
