In an era of economic volatility and technological disruption, recent McKinsey insights offer guidance and AI-focused insights for financial industy professionals. The first update from McKinsey addresses the post-2023 banking crisis vulnerabilities, urging midcap institutions (with $10-100 billion in assets) to pivot toward stable retail deposits. The second McKinsey update aims to distill some practical insights from over 50 implementations of autonomous AI systems.
Together, these reports intend to illuminate paths to resilience and efficiency, particularly for banks eyeing digital transformation.
The banking turmoil of early 2023 exposed stark realities for midcap banks. Over $220 billion in deposits fled in just four weeks as customers sought the perceived safety of megabanks. This flight highlighted overreliance on commercial and wholesale funding, which proved brittle amid rising interest rates and regional bank failures.
As McKinsey notes, banks with above-median retail deposits enjoyed net interest margins 44 basis points higher and asset growth twice as fast as peers in 2024. Had commercial-heavy midcaps matched their retail-focused counterparts, they could have unlocked nearly $10 billion in additional net interest income—a 20% boost.
Yet, building this stability demands confronting a generational chasm.
Midcap banks hold just 15% of primary checking accounts, down 9 points since 2015, per McKinsey’s 2024 Consumer Financial Life Survey of 5,000 individuals. Their customer base skews older: 42% baby boomers versus 32% millennials or Gen Z, compared to megabanks’ 50% younger demographic. Only 25% of young consumers name a midcap as their primary provider.
Perceptions exacerbate this: Midcaps score lowest on value (27% “extremely good” rating), especially among digitally savvy youth who prioritize mobile apps and seamless experiences. Cross-selling lags too, limiting noninterest income from products like credit cards and mortgages.
Branches remain a crutch—80% of new accounts acquired in-person versus 8% digitally—incurring costs and alienating Gen Z, whose deposit share is poised to double to 16% by 2035, driving 43% of retail revenue up from 32% today. McKinsey’s strategy counters with five moves: First, sharpen value propositions via personalized digital tools and competitive perks, targeting young families with bundled offerings.
Second, overhaul digital channels for frictionless onboarding, aiming for 30% digital acquisition.
Third, leverage branches as “experience hubs” for high-touch advice, blending physical and virtual.
Fourth, prioritize cross-selling through data-driven nudges, focusing on high-value products.
Fifth, foster intergenerational loyalty by engaging boomers as advocates while courting youth via social media and fintech partnerships.
“Midcap banks with more reliance on retail deposits have outperformed those with more reliance on commercial or wholesale funding,” the report asserts, framing these steps as essential for funding commercial expansion.
With agentic AI, the autonomous systems redefining workflows and offering midcaps a technological edge.
Defined as AI that independently executes tasks, makes decisions, and adapts, agentic AI promises productivity leaps but demands discipline.
One year in, McKinsey’s analysis of 50+ builds reveals hype meeting reality: Some firms rehire staff after agent flops, echoing past tech adoptions.
“A year into the agentic AI revolution, one lesson is clear: It takes hard work to do it well.”
The six lessons prioritize pragmatism.
First, focus on workflows, not isolated agents—remap processes with human-AI hybrids, as an alternative-legal-services firm did by logging edits to refine contract reviews.
Second, deploy agents judiciously; simpler tools suffice for routine tasks, per a financial-services extractor that cut validation needs on complex data.
Third, combat “AI slop” (low-quality outputs) via rigorous evaluations and trust-building, like a global bank’s iterative know-your-customer tweaks. Fourth, embed traceability:
Observability caught data flaws in a document-review workflow, boosting accuracy.
Fifth, reuse components—a centralized platform slashed redundant work by 30-50%.
Sixth, invest in talent: Treat agents like new hires, training them on expert practices to scale safely.
For midcap banks, these converge powerfully.
Agentic AI can supercharge the playbook—automating personalized outreach to snag millennial deposits or analyzing generational behaviors for targeted cross-sells.
A bank deploying reusable agents for credit-risk analysis could mirror the global firm’s success, enhancing decisions while freeing staff for client relationships.
But challenges persist: Workflow redesign risks resistance, and trust hinges on verifiable outputs.