Technological, customer, regulatory, competitive and geopolitical change is reshaping the banking sector in quite profound ways. These forces are combining to fundamentally alter how banks create value, serve customers, manage risk, organise their workforces and compete.
Naturally, artificial intelligence (AI) is among the key driving forces of these changes. According to Féilim Harvey, banking and capital markets leader, PwC Ireland, the technology has the potential to drive significant change across a range of areas including fraud and financial crime prevention, compliance, customer service, operations and decision-making.
However, as AI capabilities become more widely available, access to the technology itself may cease to be a source of competitive advantage. The differentiator will be how effectively banks translate AI into better business and customer outcomes, supported by the governance, transparency and accountability needed to deploy it responsibly at scale.
“When we talk about AI in the context of banking, it is simplistic to look at it purely in terms of revenue gains or cost savings,” says Harvey. “All banking organisations are working their way through that and in our 2026 Market Volatility Survey, 27 per cent of financial services executives said their organisations had seen a revenue uplift or cost savings as a result of AI.”
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That will fundamentally impact business and revenue models as well as the cost of serving customers, he adds. It will also mean something more fundamental for the competitive landscape in the wider sector.
“Over the past decade neobanks and fintechs have enjoyed a clear competitive advantage in terms of digital and the speed of product roll out,” he says. “But they don’t have the same level of long-standing, deeply embedded customer relationships of the bricks and mortar banks.”
Trust trumps speed
This matters when it comes to products like mortgages where trust trumps speed and convenience of service for customers. And the bricks and mortar banks now have a means to compete on other fronts.
“AI is allowing traditional players to catch up on technology and address technology debt,” he adds. “It is making it easier for heritage organisations to modernise and transition to new technologies. It is a significant accelerant of change. Technology debt is a very significant challenge for the long-established banks. Banks still have some functionality on mainframes and old green screens. It is a massive undertaking to do a core system renewal. It is very big and very hard to do. AI can now look at the original Cobol code and translate it into a more up to date language to enable the transition. That can significantly enhance traditional banks’ competitive position.”
Technology may be changing how banking is delivered, but customer needs and behaviours will ultimately determine which innovations create real value. Customers increasingly expect services to be intuitive, personalised, seamless and immediate, while economic and market uncertainty is increasing the focus on financial resilience, liquidity and security, Harvey points out.
Interestingly, while banks are embracing AI, their customers still value human contact. Another finding of the PwC 2026 Market Volatility Survey was that 91 per cent of financial services executives say technology and AI tools are becoming more important in helping clients navigate uncertainty, yet only 53 per cent of consumers trust AI-powered financial tools during periods of volatility.
More tellingly, some 87 per cent of consumers say they will continue to value human financial guidance even as AI becomes more advanced.
But different customer segments will have different expectations. “The higher earning segments are now made up of digital natives,” he notes. “They have different expectations and needs than their forerunners and the banks need to respond with digital strategies.”
Keeping the money safe
Those strategies need to take behaviours into account as well. “Social media is rising in importance among segments of consumers for financial guidance and banking decisions,” he points out. “Banks must innovate if they are to keep growing. This is a shift from the traditional sweet spot of slow change and keeping people’s money safe. It’s now a case that banks must accelerate change and keep the money safe. The banks that achieve the balance of innovating to meet customer needs and doing it safely are going to win.”
The traditional banks have an advantage in that respect. “It means doubling down on a legacy of hundreds of years of safety. But the way banks deliver services will become more AI enabled as technology becomes more mainstream. AI can become the middleware between two paradigms of white-gloved personalised service and pure digital delivery. The banks will eventually find something in the middle that is highly personalised and customised, agentic, and not as clunky as it can be at the moment.”
He believes the neobanks will be able to use the technology to encroach further on the incumbent players’ territory while those traditional players will be able to use it to compete on more level terms with the digital banks. “They will grow into each other’s areas. It is good to have an injection of competition into the Irish market.”
That will require significant transformation on the part of the banks. “The 64 million dollar question is whether existing transformation models can keep pace with accelerating change. The traditional model is deep analysis followed by a waterfall delivery mode.” But that may no longer be appropriate.
“Change will have to be delivered at a faster pace, and banks will need to take some bets without perfect insights. They will need to be more agile and be able to make changes without perfect information while testing and learning as they go.”
Change is critical
This is not a question of choice. “Change is critical to the survival of banks. They need to have the right methodology to give shareholders confidence that they can do it while delivering the innovation that customers’ need. In future, success will be based on digital resilience, constant change, continuous improvement, embracing new technologies, and delivering change safely.”
While AI and digitalisation can bring competitive advantage, they also open up new cyber risks, and the regulators have been quick to respond. In July, the European Central Bank (ECB) issued what has become known as the “Dear CEO letter” instructing major euro-area banks to tackle advanced cybersecurity threats driven by frontier artificial intelligence.
“There is a significant amount of regulation emerging,” says Harvey. “Regulation exists for a reason. It is there to protect customers and keep the banking system safe. Cyber resilience, data protection and so on are critically important. Where regulation is being developed it is nearly always linked to a risk that needs to be managed. It is sensible for banks to address the risks that have been identified by regulators.”
There is a cost to regulation. “Regulators need to make sure it is proportionate and commensurate with the risks, and it is important to have the right level of regulation. Banks are subject to various pieces of regulation in relation to technology and data including the AI Act, Digital Operational Resilience Act (DORA) and the ‘Dear CEO letter’ reminded them of the expectations set. You can look at cost to comply as a cost of regulation or a cost of risk management. The banks that will win in future are those that address and manage the risks identified by the regulators. Compliance gets a lot easier when that is done.”
Harvey says the Irish banking sector is in very good health while the country is also home to a vibrant international banking sector. “The international banks make a very important contribution to the Irish economy. They have chosen Ireland as a base to sell products and services into Europe and the impact of that on skills development and in other areas has been very important. The presence of a large number of CEOs and senior leadership teams here has placed Ireland in the vanguard of the international banking industry. Plenty of other countries would like to have what we have.
“In this context, PwC is delighted to sponsor the Federation of International Banks in Ireland (FIBI) conference in Dublin on November 17th.”
