Banks face $170 billion profit squeeze while AI challengers reset finance

Dubai: Global banks could see profit pools fall by $170 billion by 2030 unless they move faster on AI, data and digital-first operating models, according to a new DIFC report that describes the industry’s biggest structural shift since the 2008 financial crisis.

The second report in DIFC’s 2026 Future of Finance series, titled The Changing Face of Banking, says resilience will matter more than size or legacy as banks respond to digital-native challengers, changing customer behaviour and rising demand from emerging markets.

DIFC said challenger banks built on AI-driven, cloud-first and asset-light models are setting new standards for speed, personalisation and cost efficiency, forcing traditional lenders to confront older systems, slower productivity growth and margin pressure.

In conversation with Gulf News, Arif Amiri, Chief Executive Officer at DIFC Authority, explained that the report is about accelerating the evolution of the entire sector.

Digital-native banks are changing customer expectations by making financial services faster, more personalised and easier to use. Their operating models allow repetitive and time-consuming tasks such as loan approvals, KYC checks, fraud monitoring and cyber-security screening to be handled through AI systems with less manual effort.

That reduces errors, lowers labour and compliance costs, and allows staff to focus on higher-value work, including client advisory, complex risk analysis and product innovation.

The report said AI is rapidly becoming core infrastructure for banking, giving institutions a path to the productivity gains they need. PwC estimates cited in the report show that data-driven AI insights can increase prospect-to-paying customer conversion rates by up to 30%, while enabling up to half of staff to shift into higher-value roles.

Amiri said the banking industry is undergoing its most significant transformation in nearly two decades.

The report points to a major shift in how customers interact with banks, especially in emerging markets where younger, digital-first users expect on-demand services across every part of their lives.

These customers are less focused on individual products and more focused on outcomes. They want to manage, move and grow their money easily, with real-time visibility, instant transactions and access to global financial services from one platform.

Transparency is also becoming more important, with customers expecting tools that help them make better financial decisions instead of simply giving them access to banking products.

Amiri explained that different generations are now interacting with money in very different ways, and those gaps are widening as AI becomes more embedded in daily life. The opportunity for banks is to stay close to those behavioural shifts and respond with services that feel relevant, intuitive and useful.

DIFC said emerging markets will power long-term banking demand, supported by rising incomes, expanding middle classes and stronger trade between developing economies.

The report also identifies entrepreneurs, family offices, ultra-high-net-worth individuals and women as influential client groups whose financial needs remain underserved.

Family offices, particularly in emerging markets, are growing in number and sophistication, but many still need better access to cross-border structuring, private markets and succession planning.

AI-driven insights and more tailored advisory services could help banks unlock new revenue pools by anticipating client needs more accurately and delivering more relevant financial services.

Data architecture will determine how far banks can go with AI. The report argues that banks will gain an advantage from how well they clean, connect and deploy proprietary, real-time information across their organisations.

Modern cloud-based data systems are becoming a priority because AI can only deliver better decisions and stronger productivity if banks have reliable data foundations.

Once those foundations are in place, banks can move routine work to AI systems and create more integrated operating models. DIFC said this could gradually break down older boundaries between front-office and back-office functions, following a pattern already seen among challenger banks.

The transition toward AI-led banking is also changing the talent mix inside financial institutions.

DIFC’s report found that banks are deepening their AI-specialised talent pools, with a survey of 50 major banks showing that the AI workforce grew 12.6 per cent in the six months to March 2025. One in 50 bank employees now works in AI and data-related roles.

The top 10 banks by AI talent have also announced twice as many publicly documented use cases as the other banks tracked in the survey.

Banks are responding through training. More than 70 per cent of banks in the survey provide AI-specific training to employees as they launch generative AI productivity tools, often through phased trials with super-users or sandboxed environments.

Financial services professionals will increasingly need to become fluent in AI, data analytics, cybersecurity and digital regulation if they are to remain competitive in the sector.