Running a financial services business has rarely meant juggling so much at once. Regulators keep rewriting the rulebook, fraud is getting harder to catch, customers can move their money with a few taps, and decades-old systems are groaning under the load. And those are just a handful of the balls in the air. This article walks through nine of this year’s biggest challenges in the financial services industry, what each means for the teams managing them, and where technology, including AI, can help.
Key Takeaways
- The threat of fraud keeps financial services leaders up at night. Every miss chips away at customer trust.
- With switching as easy as tapping an app, holding on to primary relationships has become as important to growth as winning new ones.
- The cost of maintaining legacy systems leaves little room to modernize.
- For many firms, a shortage of skilled people is stopping them from putting AI to work.
The Financial Services Industry: The Current Landscape
The financial services industry is on stronger footing than news headlines suggest. Banks are well-capitalized and coming off resilient earnings, and the sector remains one of the largest and most essential in the economy. Opportunities for growth lie ahead, too, in fee income, wealth management, and digital products.
But all is far from perfect. Falling rates squeeze lending margins and nonbank rivals keep circling. Many firms remain, in Deloitte’s words, “stuck in isolated proofs of concept” when it comes to turning new technology into results. Somewhere between the solid fundamentals and the path forward lie the nine challenges presented in this article.
9 Challenges Facing the Financial Services Industry
Two major themes run through many of the challenges. New technology is rewriting how the industry works, while tighter margins and rising competition raise the cost of getting major investment decisions wrong.
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Evolving Regulatory Environment
Financial executives are contending with a wave of regulatory changes governing cryptocurrencies, AI, and other emerging technologies. For example, the GENIUS Act, signed in 2025, authorizes banks to issue and hold payment stablecoins. But the new tokenized-dollar business also introduces regulatory complexity, from full reserve backing for every coin to guaranteed redemption and anti-money-laundering checks built for a different era. AI rules are tightening, too. While the EU delayed enactment of its toughest high-risk obligations until December 2027, US firms still have plenty to track, such as the Treasury Department’s AI risk framework and model-risk guidance, as well as state laws that require firms to explain credit decisions to regulators and customers alike.
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Mitigating Cybersecurity Threats
Fraud is the threat that worries bank leaders most, for good reason: The numbers keep climbing. The FBI’s Internet Crime Complaint Center logged nearly $21 billion in reported losses in 2025, a steep jump from the year before, while Deloitte expects AI-driven fraud losses to hit $40 billion by 2027, more than tripling 2023’s losses. Related, separate research from Bank Director finds that the vast majority of senior-level executives are concerned about AI-based scams targeting their customers, with some indicating that their companies have already been hit by AI or deepfake fraud. Besides the dollar losses, customer trust—which is far cheaper to keep than to win back—is also at stake.
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Increasing Competition and Customer Attrition
Financial services businesses’ competitive threat used to have a storefront. Now it’s an app, and switching takes little effort. In fact, according to JD Power’s 2026 retail banking study, one in five customers moved money away from their primary institution in the first three months of 2026, up from roughly one in six a year earlier. For the teams that own client relationships, the answer doesn’t necessarily mean offering a better rate but, instead, giving customers reasons to stay. It makes sense, then, that customer retention is back at the center of growth conversations.
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Rising Customer Expectations
Customers, especially digital natives, expect their banks to move at the speed of every app they use. They want instant, personalized service and a bank that knows their needs before they ask. However, most banks fall short: Fewer than half of a bank’s customer engagement is driven by what’s actually happening in a customer’s life, while the rest runs on a preplanned campaign calendar set months in advance, according to a 2026 global banker survey by Personetics. The problem compounds when a customer’s mortgage, credit card, and checking account are all in separate systems, so the bank treats one person as three. The takeaway: Meeting rising expectations requires having a single, clean view of the customer, achieved by integrating the financial systems that hold their data.
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Market Volatility and Complexity
Market volatility has become a constant in finance, where rate cuts, tariff swings, and geopolitical tensions push on pricing and credit at once. That turbulence shows up as credit risk, which 60% of bank leaders cite as a top concern, according to Bank Director. The stablecoins legitimized by the GENIUS Act add another moving part, with Deloitte warning that they could drain more than $1 trillion in deposits away from banks and on to new payment rails. The challenge for risk teams is that they now have to measure and monitor more sources of exposure at once, each shifting faster than a periodic review can keep up with. Firms are turning to AI models that continuously reassess exposure.
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Leveraging Advanced Data Analytics
Advanced data analytics are fueling predictive models that price credit, forecast demand, and detect fraud in real time. Firms using advanced analytics and AI-powered ERP software tools can pull raw numbers from all corners of the business to predict outcomes and catch fraud before it spreads. The same models can open new markets and boost revenue by using cash flow and other alternative data to score tens of millions of “credit invisible” Americans. Naturally, analytics is only as sharp as the raw numbers feeding it, and that stems from clean finance, risk, and customer data interconnected in one real-time system.
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Skill Gaps and Workforce Limitations
For all the focus on new tools, the real bottleneck in financial services is often people. Firms are short on two fronts at once—the digital and AI skills that new technology demands, and the experienced hands whose judgment keeps the business running. Sixty percent of financial-services technology leaders surveyed by KPMG said their organizations lack the talent needed to implement their technology plans. And companies industrywide also report trouble filling roles, with AI skills the hardest to find, according to ManpowerGroup. This is where automation often steps in, handing routine work to software and saving the scarce experts for the calls that matter.
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ESG Pressures
Environmental, social, and governance (ESG) planning has become more uncertain amid reconsideration of earlier sustainability commitments. For example, US investor support for environmental and social proposals has fallen sharply—roughly halving over three years—and the EU scaled back its Corporate Sustainability Reporting Directive demands. Still, a solid ESG program can pay off in the forms of lower cost of capital, stronger customer trust, and sharper risk management. The real challenge for financial services firms is having defensible ESG metrics to maintain their credibility and avoid fines.
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Legacy Tech Limitations and Modernization Demands
Built for an era of overnight batch processing, most core bank systems can’t move money in real time, share data through APIs, or scale on demand—the very capabilities that cutting-edge financial products, open banking, and AI all depend on because they run live customer money around the clock and may be layered with decades of undocumented customization. So budget flows to upkeep rather than digital transformation. According to Accenture, as much as 70% of banking IT spending goes to keeping existing systems running, with tech costs outpacing revenue growth for the past 15 years.
Navigating Volatility in the Financial Services Sector With Software
Interest-rate swings, shifting regulations, rising fraud, and fast-moving competitors are realities in financial services that no single tool can tame. Companies that navigate them best often start by deploying a cloud ERP platform that unifies financial, operational, and customer data, providing leaders with a number of benefits, including real-time visibility into cash, margins, and risk exposure, so they can act as conditions shift. On top of that ERP foundation, financial planning and analysis tools model scenarios and forecast cash flow so teams can stress-test rate shifts and funding changes ahead of time. Business intelligence dashboards turn raw data into the role-based KPIs each team tracks, while built-in automation speeds reconciliation and the financial close, incurring fewer errors.
AI runs through the full stack. Embedded and increasingly agentic AI can forecast, call out anomalies, and act on transactions in real time, provided it works with clean, unified data. That’s why fintechs must modernize their technology. Software navigates volatility through an integrated system where data, analytics, automation, and AI reinforce one another.
Navigate Industry Shifts With NetSuite ERP
At the heart of nearly every challenge here is the fact that financial services organizations can’t move fast enough or make data-informed decisions when their numbers are scattered across disconnected, aging systems. NetSuite ERP Software for Financial Services fixes that critical shortcoming by definition, bringing finance, operations, and reporting onto one platform. Automated accounting and a faster financial close cut down on manual month-end work; real-time dashboards give leaders a current view of cash, margins, and risk exposure; and built-in compliance and audit trails help teams keep pace with tightening regulatory and ESG reporting requirements across jurisdictions. Embedded AI and AI agents monitor transactions for potential fraud, forecast cash flow, and automate routine tasks. And as the business grows into new products, subsidiaries, or markets, multicurrency and multisubsidiary support scale with it.
The financial services challenges laid out in this article—regulatory and ESG pressures, market volatility, and thinning loyalty, to name a few—are not going to disappear when the new year begins. Pushing back takes hard, behind-the-scenes work: modernizing core systems, connecting the data trapped inside them, and using AI capabilities to pinpoint where to act first. Firms that put in the effort won’t escape volatility, of course, but they’ll meet it on far better footing than those running on disconnected systems.
Financial Services Challenges FAQs
What is the biggest challenge facing the financial services industry?
For many bank leaders, the biggest challenge is fraud, much of it rooted in AI-based scams. Another is the talent shortage, especially for those with AI know-how.
What role does technology play in addressing challenges in the financial services sector?
Technology is the main tool for addressing challenges across financial services, from fraud and risk to customer expectations and regulatory compliance. Integrated systems, such as ERP, unify scattered data, and AI acts on it to detect threats, forecast cash flow, and automate routine work.
