Written by 10:00 Financial Centre, Financial Centre, Member, Member

Future of the European Banking Ecosystem 2035

At a pivotal era of digital and regulatory evolution, the European banking sector anticipates significant shifts. Insightful collaboration between industry leaders and academics has led to four scenarios forecasting the industry’s transformation, highlighting digital banking, decentralized finance, and ESG regulations as key factors. This analysis offers a strategic blueprint for navigating the future.

The challenges that threaten traditional banking business models are ubiquitous. Among a myriad of market developments, FinTechs are entering the market using blockchain and other innovative technologies. And regulators are introducing costly requirements to protect consumers and the economy. Meanwhile, BigTechs are developing more and more banking-related products. Considering these trends and changes, it is crucial to continuously reevaluate and adapt current business strategies. As these developments remain highly uncertain, scenario-based thinking is an excellent tool to help with orientation.

Therefore, our Deloitte Banking Experts and the Center for the Long View take a glimpse into the future. Our proprietary scenario analysis methodology starts with identifying impactful drivers using our European Banking Trend Radar as well as extensive AI analysis, supported by expert interviews and workshops. In a next step, the drivers are divided into those that will most likely occur in the future and uncertain ones whose occurrence remains unclear.

Certain drivers

Even though the overall future remains uncertain, there are some drivers that influence all our scenarios:

  • Rising customer expectations about real-time banking and transparency
  • Demographic change leading to a divergence of customer needs between younger and older generations
  • New crypto-asset products
  • The rise of decentralized finance systems, and the ability of regulators to control them
  • Adoption of automation and AI in financial services
  • Metaverse and Web 3.0 applications
  • New interdisciplinary requirements for talent
  • New leadership archetypes to attract talent
  • Standardization of ESG-regulation and increased stakeholder pressure regarding ESG compliance

Uncertain drivers

From the multitude of uncertain driving forces, our experts have determined two main dimensions that will predominately shape the future of the European banking ecosystem.

The first dimension is the scope of the ecosystem. On the one hand, banks could face a narrow ecosystem in which innovative products are scarce, and customer choice is limited and standardized. On the other hand, the ecosystem could be comprised of a multitude of integrated services offered by startups. For this purpose, they rely on open interfaces and embedded finance as well as on novel technologies such as distributed ledger technology.

The level of regulatory intervention characterizes the second dimension. A regulatory “long-leash” allows banks with considerable leeway for new ideas and experiments. However, it is also conceivable that significant interventions could be at the center of the European regulatory framework, ensuring stability but suppressing innovation.

Our four future scenarios for the European Banking Ecosystem 2035

Based on these two dimensions, we have developed four distinct future scenarios, each of them marking the endpoints of the dimensions:

Scenario 1: Mild Wild West

[Long-leash & a multitude of integrated services]

In this scenario, European banking is set in a highly dynamic environment with a multitude of players who often flourish but also disappear quickly. Updated regulatory frameworks lead to increasing efficiency and innovation, and eventually foster competition. New challengers appear on the horizon and are often taken over by established players as quickly as they emerge. These dynamics result in a myriad of innovative services aimed at meeting every customer demand.

Scenario 2: Sandboxed Innovation

[Significant intervention & a multitude of integrated services]

In this scenario, the European banking ecosystem is characterized by inter- and intrasector collaboration taking place in a safeguarded sandbox environment for innovation. Regulatory bodies are primarily concerned about stability. Yet, as a secondary goal, they intend to maintain competition and innovation. Startups enter the market under strict regulatory constraints designed to protect traditional banks as providers of critical infra-structure. In contrast, big tech players are banned from offering financial services on their own.

Scenario 3: Caught in the Matrix

[Significant intervention & a narrow ecosystem]

In this scenario, strict regulatory frameworks enforce stability and safety of the European financial system. However, competition and breakthrough innovations have to be sacrificed for that purpose. Consequently, high regulatory entry barriers lead to oligopolistic market structures in which large traditional banks dominate. Customers are searching in vain for fully digitized and personalized banking services. Instead, the focus is on established values, such as data protection and transparency, and rather conservative and cost-focused business models.

Scenario 4: Big Players’ Paradise

[Long-leash & a narrow ecosystem]

In this scenario, banking in Europe is shaped by the dominance of international big players. Low regulatory standards and the softening of licensing requirements have prompted well-financed big tech companies to leverage their large customer base and enter the financial services market. Along with incumbent banks, these players constitute a powerful oligopoly, hindering the emergence of new innovative startups. This market structure comes at the disadvantage of customers: They have to face high prices, low transparency, and dubious data protection standards.


Each of these four future scenarios will pose critical challenges for the European banking ecosystem. Traditional banking players will face innovative challengers, such as FinTechs or neobanks, and platform orchestrators, such as big tech companies or decentralized financial service providers. Regulators will update their frameworks and customer expectations will change. Our scenario analysis enables banks to proactively prepare for the upcoming developments.

Source: Deloitte
Image:  Onchira via stock.adobe.com

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