Innovation, resilience and regulation in financial services
November 2026 | SPECIAL REPORT: FINANCIAL SERVICES
Financier Worldwide Magazine
November 2026 Issue
The global financial services industry entered the second half of 2026 from a position of relative strength, albeit one defined by considerable complexity. Financial institutions (FIs) are simultaneously pursuing growth, modernisation and efficiency while facing heightened regulatory scrutiny, geopolitical instability and rapidly evolving technology risks. The industry is benefitting from strong levels of innovation and investment, but leaders are increasingly aware that competitive advantage depends on balancing opportunity with resilience.
This balance between opportunity and risk is becoming one of the defining characteristics of today’s financial services landscape. As institutions accelerate digital transformation, resilience and governance are increasingly viewed as strategic priorities rather than purely compliance obligations.
“The global financial services industry is operating through a period of rapid transformation, shaped by growth opportunities and heightened risk,” says Sean Tuttle, a partner at StoneTurn. “Institutions are accelerating adoption of AI, cloud platforms, automation and data-driven operating models, while regulators, investors and customers are placing greater emphasis on resilience, governance and trust.
“From a digital forensic and cyber perspective, the sector is increasingly interconnected,” he continues. “FIs now depend on complex ecosystems of cloud providers, fintechs, AI vendors, managed service providers and data partners. That dependency expands the risk of operational disruption, cyber incidents and systemic exposure. As a result, leading organisations are judged not only by how quickly they innovate, but by how securely they operate, how effectively they recover from disruption and how clearly they demonstrate governance during uncertainty.”
These observations align with wider industry assessments which note that the long-term success of FIs will increasingly depend on managing complexity alongside growth opportunities.
Recent data suggests that many parts of the sector remain financially healthy. Industry analysis indicates that global banking net income reached approximately $1.3 trillion in 2025, reflecting continued profitability despite moderating interest rate conditions. However, investors remain uncertain about banks’ long-term growth prospects, particularly as technological disruption accelerates and traditional revenue models come under pressure.
Over the past 12 to 18 months, no single development has had a greater impact on financial services than the rapid mainstream adoption of artificial intelligence (AI). At the same time, FIs have been forced to strengthen cyber resilience programmes, adapt to growing private credit markets, respond to geopolitical shocks and evaluate the implications of digital assets and tokenisation. These trends are reshaping both strategic priorities and operational models across banking, insurance, asset management and payments.
AI becomes a strategic imperative
AI has moved beyond experimentation and become a central component of financial sector transformation. Banks, insurers and asset managers are increasingly deploying AI to improve customer service, automate operations, strengthen risk management and enhance fraud detection.
The pace of AI adoption across financial services has reached unprecedented levels, with the technology impacting customer engagement, operating models and competitive dynamics. As its influence continues to expand, AI is emerging as one of the most transformative forces to affect the banking industry in decades.
Yet the opportunities associated with AI are accompanied by significant governance and risk challenges. Industry practitioners identify AI adoption as one of the most important developments currently influencing financial services operating models and risk management frameworks.
“The most significant developments over the last 12-18 months have been rapid AI adoption, evolving cyber threats, a turbulent regulatory environment and increased focus on third-party risk,” suggests Daniel Fuller, a managing director at StoneTurn. “Generative AI and AI-assisted development are creating new business opportunities, but also new exposure around data leakage, insecure code, exposed credentials and governance gaps. At the same time, ransomware, supply chain compromises, insider threats and nation-state activity continue to evolve, with threat actors using automation and AI to accelerate attacks.
“Regulators globally are responding by emphasising operational resilience, cyber security governance, data protection and oversight of critical vendors,” he continues. “For FIs, cyber security is more than ever a business and governance issue, not only an IT issue. Concentration risk among cloud, technology and service providers is also drawing greater attention because disruptions can affect multiple institutions simultaneously.”
“Institutions are operating in an environment where innovation offers substantial opportunities for growth and efficiency. But success increasingly depends on disciplined governance, operational resilience and strategic adaptability.”
Regulators worldwide are becoming increasingly focused on algorithmic transparency, model accountability, bias management and responsible AI governance. FIs must therefore ensure that innovation does not outpace oversight.
A recent International Monetary Fund (IMF) note on AI and cyber security highlights how AI is transforming the cyber threat landscape and potentially increasing financial stability risks. The IMF warns that AI may accelerate the speed and scale of cyber attacks, particularly through exploitation of vulnerabilities within shared digital infrastructure, cloud platforms and commonly used software environments.
As a result, FIs are increasingly investing in AI-driven defensive capabilities while strengthening governance frameworks designed to manage emerging technology risks. This means not simply adopting AI, but deploying it responsibly, securely and at scale.
Resilience, regulation and emerging risk priorities
The growing importance of operational resilience continues to shape boardroom agendas across the financial sector. Recent disruptions affecting critical market infrastructure and payment systems have reinforced concerns regarding concentration risk, third party technology dependencies and interconnected digital ecosystems.
The Financial Stability Board (FSB) continues to emphasise cyber resilience as a critical element of global financial stability, highlighting the importance of incident reporting, coordinated response mechanisms and recovery planning. The organisation warns that major cyber incidents affecting critical infrastructure could generate broader systemic consequences.
Regulatory expectations continue to rise in parallel. Authorities increasingly expect firms to demonstrate not only strong financial resilience but also operational resilience. This includes the ability to withstand cyber incidents, technology outages, supply chain disruptions and geopolitical shocks without causing harm to customers or markets.
Many organisations are responding by embedding risk management and compliance considerations earlier in their transformation programmes.
“Leading institutions are increasingly treating innovation and compliance as complementary rather than competing objectives,” observes Louis Cona, a managing director at StoneTurn. “The strongest organisations are embedding governance, cyber security, resilience, AI oversight, third party risk management, monitoring and regulatory compliance into transformation initiatives from the outset. This shift toward secure innovation allows institutions to pursue AI, cloud, automation and digital services while maintaining control over risk.
“From a forensic technology perspective, and in addition to the existing regulatory compliant systems, this also means investing in forensic readiness: the ability to preserve evidence, establish facts quickly, support regulatory inquiries and make informed decisions during cyber or operational incidents. Organisations that involve risk, legal, compliance, cyber and business teams early in the technology lifecycle are better positioned to innovate responsibly and respond appropriately to any situation,” he adds.
The concept of forensic readiness is attracting increasing attention as regulators expect firms to demonstrate not only preventative controls but also effective incident response and investigation capabilities.
Geopolitical developments have also become a defining feature of the financial landscape. According to the IMF’s Global Financial Stability Report 2026, the global financial system continues to face risks associated with conflict in the Middle East, persistent inflationary pressures and tightening financial conditions. The IMF notes that elevated sovereign debt levels, leveraged investors and growing market interconnectedness remain important sources of vulnerability.
These challenges are occurring at a time when regulatory frameworks are becoming increasingly fragmented. FIs operating internationally must navigate differing approaches to AI regulation, digital asset oversight, operational resilience requirements, sustainability disclosures and data governance obligations. Managing regulatory divergence is therefore becoming an increasingly important strategic capability.
Financial crime compliance remains another major priority. Growing concerns regarding sanctions evasion, sophisticated fraud schemes, mule account activity and AI-enabled criminal behaviour are encouraging institutions to enhance transaction monitoring, customer due diligence and risk assessment capabilities. Advanced analytics and machine learning are playing a growing role in helping firms identify emerging risks while satisfying increasingly demanding regulatory expectations.
The rise of private credit, digital assets and payments transformation
One of the most significant structural shifts in financial services is the continued expansion of private credit. As companies seek alternative sources of capital and investors pursue attractive yields, private credit markets have grown rapidly across multiple jurisdictions.
The FSB estimates that the global private credit market has expanded to between $1.5 trillion and $2 trillion in assets. The organisation highlights deepening connections between private credit funds, banks, insurers and private equity firms while warning that the sector has not yet been tested by a severe economic downturn. Particular concerns relate to leverage, concentration risk, liquidity mismatches and limited transparency.
While regulators are monitoring these developments closely, private credit is expected to remain an important source of financing and investment activity. The challenge for market participants will be maintaining growth while effectively managing emerging vulnerabilities.
Digital assets and tokenisation are also moving steadily from the margins toward mainstream financial infrastructure. Although enthusiasm surrounding cryptocurrencies has fluctuated, institutional interest in tokenised financial assets continues to increase.
A notable development in 2026 has been progress within the Bank for International Settlements’ Project Agorá initiative. The project demonstrated how tokenised central bank reserves and tokenised commercial bank deposits could support more efficient cross-border wholesale payments. According to the Bank for International Settlements, the initiative successfully showed that atomic settlement across multiple currencies and jurisdictions can be achieved securely while preserving regulatory oversight and settlement integrity.
These developments reflect broader efforts across the financial system to modernise payment infrastructure. Cross-border payments remain expensive, slow and operationally complex in many parts of the world. FIs are increasingly investing in faster payments technology, interoperability standards, ISO 20022 implementation and data-rich payment networks.
JPMorgan’s 2026 analysis of cross-border payment trends highlights the growing importance of AI-enabled payments, interoperability and digital asset innovation. The bank notes that clients increasingly expect international payments to offer the same speed, transparency and availability as domestic payment systems.
The modernisation of payments infrastructure is expected to deliver significant efficiency benefits while supporting broader digital transformation programmes within FIs.
What comes next for financial services?
The future direction of financial services will be driven by the interaction between innovation, resilience and regulation.
“Several factors are likely to shape the next phase of financial services,” notes Mr Fuller. “AI will remain highly transformative, influencing fraud detection, compliance, customer engagement, investment processes, software development and operational decision making. However, governance, explainability, accountability and security becomes as important as the efficiency gains provided by AI systems.”
While AI will remain central to future transformation efforts, resilience and trust are expected to become equally important competitive differentiators. AI adoption will continue to accelerate, but institutions will face growing demands for governance, explainability and accountability. Cyber resilience will remain a board-level priority as technology ecosystems become increasingly interconnected.
“Operational resilience will remain central,” says Mr Cona. “Boards, regulators and customers increasingly expect institutions to maintain continuity during disruption, test recovery capabilities, manage crises effectively and respond to incidents with speed and transparency. Cyber security and digital trust will become strategic differentiators as financial services continue to become digital first. The ability to detect threats, investigate incidents, protect sensitive data and communicate clearly during disruption will directly affect customer confidence and institutional credibility.”
Private credit and non-bank finance are likely to attract closer regulatory attention as their importance within global capital markets increases. Digital assets and tokenisation will continue evolving from experimental concepts toward practical applications with measurable business value. Meanwhile, geopolitical uncertainty, sovereign debt pressures and regulatory fragmentation will ensure that risk management remains central to strategic decision making.
Managing increasingly complex technology ecosystems is likely to remain a critical strategic challenge as institutions continue to digitise operations and engage with a growing network of external providers.
“Third party ecosystem governance will be important, particularly as institutions rely more heavily on cloud services for AI, identity, payments and data providers,” points out Mr Tuttle. “Future success will depend on managing vendors and fourth-party risks without slowing innovation.
“The defining theme is resilient innovation,” he continues. “FIs will continue pursuing growth through technology and data, but the organisations best positioned for the future will be those that treat resilience, governance, cyber readiness and forensic preparedness as foundational enablers of sustainable innovation.”
Overall, the current state of the global financial services industry can best be described as resilient yet transformative. Institutions are operating in an environment where innovation offers substantial opportunities for growth and efficiency. But success increasingly depends on disciplined governance, operational resilience and strategic adaptability. To thrive in this increasingly complex and competitive global marketplace, organisations will need to integrate technological innovation with robust risk management frameworks.
CONTRIBUTORS:
Sean Tuttle is a partner at StoneTurn. He can be contacted on +1 (617) 570 3773 or by email: stuttle@stoneturn.com.
Daniel Fuller is a managing director at StoneTurn. He can be contacted on +1 (617) 570 3702 or by email: dfuller@stoneturn.com.
Louis Cona is a managing director at StoneTurn. He can be contacted on +1 (212) 430 3415 or by email: lcona@stoneturn.com.
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