The Bank for International Settlements (BIS) published a working paper examining how digitalization could transfer banking income and customer relationships to new providers while leaving traditional banks holding the associated exposures. Across four illustrative scenarios spanning 10 years, banks remain dominant in assets, but earnings become more volatile and faster deposit withdrawals shorten the interval between funding stress and capital pressure. The framework structures expert judgment rather than producing forecasts. Emerging models, including digital banks, platforms and decentralized finance, reach 3%-27% of banking system assets across the scenarios. Traditional banks retain roughly three quarters even under platform expansion, the scenario with the greatest shift toward new providers. Asset shares nevertheless understate the competitive challenge: technology providers could contest roughly 40% of the revenue pool through payments, loan origination, distribution and advice. Platforms can capture customer relationships and fees while partner banks retain funding and credit risk. These projections concern banking assets and exclude the wider migration to nonbank financial intermediaries. Four supervisory priorities apply across the scenarios: reassessing deposit outflow assumptions, strengthening operational resilience and safeguards against third party failures, treating weak earnings as a solvency vulnerability, and improving data on emerging models. Weak profitability directly constrains capital generation, while digital withdrawals and shared technology dependencies can accelerate stress across established banks as well as entrants. Under technology acceleration and platform expansion, additional measures could include tracing origination through to the institution holding the exposure and preparing resolution arrangements for providers whose failure could interrupt banking services despite their limited balance sheets.
BIS paper finds digital providers could contest roughly 40% of banking revenues
A Bank for International Settlements working paper uses illustrative scenarios, not forecasts, to examine how digital providers could challenge roughly 40% of banking revenues while traditional banks retain most assets. Customer relationships and fees may migrate to platforms even as banks keep the exposures, increasing earnings volatility and accelerating the transmission of deposit withdrawals into capital pressure. Common supervisory priorities include revised outflow assumptions, stronger operational and third party safeguards, closer scrutiny of weak profitability, and better data on emerging models.