Over the past two decades, banks have navigated a tumultuous journey, marked by dramatic highs and lows. The industry was forced to confront its vulnerabilities from the Golden Era of seemingly unstoppable growth to the cataclysmic impact of the Global Financial Crisis (GFC). The aftermath of the GFC was a humbling experience for many institutions, compelling them to connect more deeply with their broader networks and communities and approach challenges with a renewed sense of humility.

In the turbulent years that followed, banks were compelled to reassess their very essence. The question of what it meant to be a bank in a rapidly changing world became a central concern. At the same time, they had to find ways to counter the growing influence of BigTech and the relentless disruption of fintechs. For years, regulators stood by their side, not only to enforce capital requirements but also to implement a myriad of regulations: KYC, AML, MiFID, PSD, PSD2—the list was seemingly endless.

As banks grappled with these external pressures, they were also forced to rethink their core business models. The era of declining, zero, and even negative interest rates posed a formidable challenge. Banks had to innovate or risk obsolescence in an environment where traditional revenue streams were drying up. This period was undeniably rough, and in many ways, it remains so.

Navigating Rough Seas: The Parallel of Transformation

Rough waters can spell disaster for some, leading to a shipwreck and the loss of all hands on board. However, for others, these challenges serve as an opportunity to chart a new course. The successful navigation of such storms often ends in the discovery of a shining shore lined with white sands or the safe haven of a welcoming harbour. The hard labour of guiding the ship through the storm is not just about survival; it is an opportunity to set a new direction and emerge stronger than before.

Banks weathered the storm. They faced the challenges head-on, bolstered their capital reserves, and sought new fee-based revenue streams to compensate for declining interest income. They worked to rebuild trust with society and embraced their role as financial intermediaries in the sustainable transition. Banks began to transform their engagement strategies by partnering with fintechs or, at the very least, adopting their innovations.

From Defence to Leadership: A Shift in the Banking Industry

Today, we are witnessing a shift in the banking industry. Banks are not just adapting to change but starting to lead it. The combination of dark clouds looming over the startup and fintech sectors, along with the opportunities presented by new technologies like generative AI, is empowering banks to take charge of their own metamorphosis.

For years, banks absorbed pressure from external forces—regulators, competitors, and evolving customer expectations. They learned new skills, integrated new solutions, and internalised a vast array of regulatory requirements. This period can be likened to the stage of a caterpillar’s life where it consumes voraciously, growing and storing energy for the transformation that lies ahead.

Now, the industry appears ready for the next phase of its metamorphosis.

The Chrysalis Stage: Preparing for a new Transformation

In the context of metamorphosis, this stage is known as the "Chrysalis." It is the phase where the caterpillar stops eating and begins its true transformation. Inside the chrysalis, the caterpillar's body breaks down into a biological soup through a process called histolysis. Specialised cells, known as imaginal discs, survive this process and start forming the structures of the adult butterfly.

This is the final stage before the caterpillar emerges as a beautiful butterfly, a vibrant insect with colourful wings that thrive on nectar.

The banking industry is currently in its own "Chrysalis" phase. Sustainable finance is compelling banks to rethink their products and services and their entire risk management models. This presents a tremendous opportunity, but only if executed correctly. The same holds true for emerging technologies like generative AI, which can leverage the vast amounts of data banks have collected over the years. However, these innovations will only succeed if the underlying data is of high quality.

Both transformations—towards sustainable finance and the adoption of advanced technologies—demand expertise that is relatively new to banks. They require a different approach to managing the institution, one that is agile, forward-thinking, and deeply attuned to the changing landscape.

The Beauty of Transformation: What Lies Ahead

Like you, I imagine you can recognise a caterpillar, but it's impossible to predict exactly what kind of butterfly it will become. The parallel with the banking industry is clear: we are witnessing a complete transformation, and while much good will come from it, the exact outcome remains to be seen.

That’s the beauty of working in banking today. Whether in service offerings, customer experience, digital and financial inclusion, sustainable transition, or any other area, banks are making significant strides on multiple fronts. It’s encouraging to see that this progress is increasingly less driven by a “Calimero perspective” and more by a proactive, leadership-driven approach.

Banks are taking the lead, steering the industry toward better waters, and becoming stronger, more trusted partners for the societies they serve. The journey has been challenging, and the seas have been rough, but the potential reward—a more resilient, innovative, and inclusive banking sector—is well worth the effort. =

We will be exploring "A Banking Metamorphosis" during our 2025 conferences. Read our latest white paper, "The Future of Banking Engagement", for insights from over 70 financial services professionals from more than 60 different organisations on "The Paradigm Shift in Banking and Payments—Transforming the Rules of Engagement" - our theme that ran across our conferences in Luxembourg, Amsterdam and Brussels in 2024.