The Migration of Banking Profit Pools
How financial value is moving across lending, payments, transaction banking, wealth, private credit, distribution and capital ownership, and what that means for the economic positions banks should choose to own.
The question is not simply where financial activity will grow. It is which future profit pools remain economically attractive to regulated banks, what capital and customer positions they require, and what the institution should deliberately choose to own.
Banks have always had to decide where to grow. They choose customer segments, lending categories, geographies, products and distribution channels, then allocate capital and management attention according to the opportunities they believe will generate attractive returns. The underlying assumption is usually that the existing architecture of banking remains sufficiently stable for current revenue categories to provide a useful map of future earnings. That assumption deserves closer examination.
The financial system is expanding beyond the institutional boundaries within which banks historically captured economic value. Payments can increasingly be initiated outside the bank interface. Private credit is providing financing that would once have sat naturally on regulated bank balance sheets. Asset managers, insurers, technology platforms and specialist financial providers are participating in activities that overlap with conventional banking profit pools. Wealth, payments, transaction services and distribution are becoming increasingly important sources of fee income, while capital regulation continues to affect the attractiveness of balance-sheet-intensive activities. At the same time, banks are developing new ways of participating in financial activity without necessarily retaining every asset, manufacturing every product or owning every capability themselves.
The result is not a simple migration of revenue away from banks. It is a redistribution of where financial economics are created, who captures them, how much capital they consume and what strategic position an institution must occupy to participate profitably.
This distinction matters because the growth of financial activity does not automatically imply equivalent growth in bank economic value. The global financial system can become larger while a smaller proportion of particular profit pools is captured through traditional banking intermediation. Conversely, banks can participate in growing financial activities through origination, servicing, distribution, advice, transaction flows, risk management or partnerships without necessarily placing the underlying exposure permanently on their own balance sheets.
Evidence of this broader redistribution is already visible. The Financial Stability Board reports that non-bank financial intermediation grew by 9.4 percent in 2024, twice the 4.7 percent growth rate of the banking sector, and accounted for 51 percent of total financial assets across the jurisdictions in its monitoring exercise. Those figures should not be interpreted as evidence that non-banks are replacing banks, particularly because the sectors are increasingly interconnected. They do demonstrate that financial intermediation is becoming more institutionally distributed.
The strategic question for a bank is therefore becoming more demanding than deciding which products should grow. Leadership increasingly needs to determine which future profit pools remain economically attractive to the institution, which should consume scarce balance-sheet capacity, which should be captured through capital-light participation, which strengthen customer primacy, and which should deliberately be left to others.
Bancly describes this process as Profit Pool Migration: the movement of economic value across activities, institutions, customer relationships and ownership structures as the architecture of financial intermediation changes. Profit Pool Migration does not mean that an established source of banking revenue disappears. It means that its growth, margin, capital intensity, distribution architecture or competitive ownership can change sufficiently to alter how attractive the activity is to the bank. That is where revenue strategy becomes Future Banking Economics.
Banking Revenue Is Not the Same as Banking Economic Value
The first distinction is between revenue and economic value. A business can generate substantial revenue and still represent a poor use of institutional resources. Another activity can produce comparatively modest accounting revenue while creating attractive economic value because it requires little capital, strengthens the customer relationship, generates valuable information or creates access to additional profit pools.
Traditional lending provides the clearest illustration. Interest income can be substantial, but the economic value of lending depends on funding cost, expected credit loss, operating expense, liquidity, concentration, regulatory capital and the amount of management capacity required to originate, monitor and recover the exposure. Growth in gross loan income can therefore coexist with deterioration in risk-adjusted economic return.
Fee-based businesses behave differently. Payments, transaction banking, wealth management, asset management, insurance distribution, advisory and servicing may consume less regulatory capital than conventional credit intermediation, although their economics depend on different factors such as scale, customer access, technology, market conditions, conduct risk and distribution power.
The current European earnings mix demonstrates why this distinction matters. Fee and commission income represents close to 30 percent of total revenues for EU and EEA banks, and net fee income increased by 37 percent between June 2020 and June 2025. Payments, asset management and customer resource-related activities together represented more than 59 percent of total fee income. The same evidence also shows that fee diversification is not automatically equivalent to resilient economic diversification because significant portions of fee generation remain concentrated in a relatively small number of activities, while asset-management revenues can be sensitive to market valuations.
Recent ECB analysis reinforces the point. Euro area bank profitability remained strong through 2025 despite declining net interest income because non-interest income and expense dynamics provided support. Yet the ECB also noted that recent revenue growth had relied partly on less conventional and historically volatile sources, which complicates any assumption that simply replacing interest income with other revenue automatically improves earnings quality.
The strategic question is therefore not whether a bank should seek more interest income or more fees. It is whether the underlying activity creates attractive economics after considering risk, capital, customer control, volatility, scalability and the institution’s ability to compete. This requires a broader definition of profit-pool quality. A bank should understand not only how much an activity earns, but how it earns, what institutional resources it consumes, what strategic position it creates and how durable those economics are likely to remain.
Profit Pools Move When the Architecture Around Them Changes
Profit pools do not migrate only because customers suddenly prefer one product to another. They migrate because the architecture supporting economic activity changes.
A payment profit pool changes when shared infrastructure reduces transaction cost, new interfaces control customer initiation and competing providers enter distribution. A lending profit pool changes when alternative pools of capital compete to finance borrowers or when regulatory capital requirements alter the relative economics of holding particular assets. A wealth-management pool changes as household financial assets grow, customer demographics shift and advisory relationships become more valuable. Transaction-banking economics change when corporate operating flows become more deeply integrated with digital platforms, APIs and treasury systems.
The important strategic point is that these changes can occur even when demand for the underlying financial service continues to grow. Credit provides an important example. Corporate financing requirements do not disappear when private credit expands. The economic activity continues, but the institutional architecture through which it is financed becomes more distributed. The Financial Stability Board estimates that private credit assets had reached approximately $1.5 trillion to $2 trillion by the end of 2024, with activity expanding beyond its historical concentration in middle-market borrowers and becoming increasingly connected to banks, insurers and private equity firms.
The significance for banks is not simply that another lender has entered the market. It is that the bank’s role can change. A bank can originate a borrower relationship without retaining the entire exposure. It can provide revolving facilities, transaction services and foreign exchange while another investor provides long-duration credit. It can finance private credit funds, distribute private-market products to wealth clients or retain selected parts of the capital structure while distributing others.
The profit pool has therefore not necessarily left banking. It has been recombined. This distinction becomes increasingly important because future competition may involve different institutions occupying different economic layers of the same financial relationship. The bank can remain critical to origination, customer access and infrastructure while another institution owns the asset. Another bank may choose permanent balance-sheet ownership because its funding economics, risk capability or customer relationship justify doing so. The strategic advantage lies in knowing which role produces superior economics for the institution.
Credit Intermediation Is Becoming More Distributed
Lending deserves particular attention because credit has historically been one of the clearest connections between bank balance-sheet growth and bank earnings. The traditional model combines origination, underwriting, funding, asset ownership, servicing and risk absorption within the same institution. The bank identifies the borrower, prices the credit, provides the funding and retains the resulting asset against regulatory capital.
That model remains fundamental to banking. It is no longer the only economically credible architecture. The private credit ecosystem demonstrates the growing importance of alternative long-duration capital, particularly in activities where borrowers value tailored structures or where regulated banks face capital, liquidity or concentration constraints. What is particularly significant is that bank and non-bank models are increasingly complementary rather than purely substitutive.
The IMF has documented more than twenty partnerships between private credit managers and banks across several countries in recent years. Many involve an originate-to-distribute architecture in which banks use their borrower networks to originate loans that are subsequently funded through private credit vehicles. Banks can retain origination and servicing fees, provide additional banking services to borrowers and finance parts of the private credit ecosystem without permanently holding every underlying asset themselves.
This development illustrates a broader Future Banking Economics principle: customer ownership and asset ownership do not always need to be the same thing. A bank can decide that the customer relationship is strategically valuable while permanent ownership of the asset is not. It can retain transaction flows, deposits, advisory relationships and future origination while distributing some of the credit exposure to institutions with different liability structures and capital economics.
The opposite can also be true. An asset may deserve permanent balance-sheet ownership where the bank possesses superior information, attractive funding, manageable capital intensity and an economically valuable relationship. The strategic question therefore changes from how much the loan book should grow to which credit economics the bank should own.
That requires marginal analysis rather than portfolio averages. Management needs to understand the yield, expected loss, operating expense, liquidity cost, RWA intensity, capital requirement, fee contribution, customer economics and strategic control associated with the next unit of exposure. A loan can be profitable while still being an unattractive use of scarce capital. A distributed asset can generate less accounting interest income while creating superior risk-adjusted economics. A capital-light model can improve return on equity while weakening customer control if distribution allows another institution to capture the relationship. None of these outcomes can be understood through loan growth alone.
Capital-Light Does Not Automatically Mean High Quality
The increasing importance of fee-based and distributed business models has created an understandable preference for capital-light growth. The logic is compelling. If an institution can generate income without committing large amounts of CET1, RWA or liquidity, it can potentially increase return on capital and preserve balance-sheet capacity for activities where ownership creates greater value.
Yet capital-light should not become a synonym for economically attractive. A business that consumes little regulatory capital can still require substantial technology investment, specialist talent, distribution expenditure, operational risk capacity and management attention. It can also be highly cyclical, dependent on market valuations or exposed to intense competition that compresses fees.
Asset management provides a useful illustration. European supervisory data show strong cumulative growth in asset-management fee income since 2020, but the benefits have been highly concentrated geographically and remain sensitive to financial-market conditions.
Payment services provide another example. They generate broad-based fee income and remain an important component of banking revenue, but the economic value of payments cannot be understood purely through fee extraction. As discussed in Article 03, payments also influence customer primacy, deposit formation and information. An institution could generate attractive payment fees while losing control of the interface, or accept lower direct payment margins because the activity protects far more valuable funding and customer economics elsewhere.
Wealth distribution can be capital-light while requiring substantial relationship investment and specialist capability. Insurance distribution can produce commissions without underwriting insurance risk, yet the attractiveness of the business depends on customer trust, distribution quality, product economics and regulatory standards. Advisory can generate attractive fees while remaining volatile and dependent on scarce talent.
The relevant strategic question is therefore not whether a profit pool is capital-light. It is what combination of economic resources the profit pool consumes and what strategic position it creates in return.
Bancly’s Profit Pool Migration framework evaluates prospective activities across four principal dimensions: Economic Attractiveness, Capital Intensity, Customer Control and Right to Win. Economic Attractiveness examines margin, growth, volatility, unit economics and durability. Capital Intensity considers not only CET1 and RWA but also liquidity, balance-sheet capacity and the ability to recycle institutional resources. Customer Control assesses whether participation strengthens transaction primacy, relationship depth, information advantage and future product demand. Right to Win assesses whether the bank possesses the trust, distribution, data, expertise, infrastructure, brand or balance-sheet capability necessary to compete on attractive terms. No single dimension is sufficient.
Customer Primacy and Profit Pool Ownership Need to Be Connected
Article 03 examined Customer Economic Primacy as the position from which an institution influences a significant share of the customer’s financial activity, information and future demand. Profit-pool strategy needs to connect directly to that idea.
Some activities are economically valuable partly because they create revenue. Others are valuable because they preserve access to more important economics elsewhere. Transaction banking illustrates the relationship. Corporate payments and cash management can produce direct fees, but they also create deposits, data and visibility into working-capital requirements. Those relationships can support trade, foreign exchange, liquidity management, lending and advisory. The economic value of the profit pool therefore includes what it enables elsewhere.
Wealth can operate similarly. A private-banking relationship can produce advisory and investment fees while deepening the institution’s position with customers whose businesses, deposits, borrowing, estate planning and family financial needs span multiple profit pools.
A bank should therefore resist evaluating every business line as if it were economically independent. The relevant unit of analysis can be the relationship architecture. A low-margin activity can be strategically valuable if it anchors a high-value relationship. A profitable standalone product can be strategically weak if it does not improve customer control and can easily be replicated by competitors. A business that appears unattractive on isolated product economics can become highly attractive when the associated deposit, fee and information economics are included.
This does not justify subsidising unprofitable businesses indefinitely on the assumption that they create unspecified relationship value. The opposite discipline is required. If management believes one activity exists to protect economics elsewhere, the transmission should be measurable. Payment activity should connect to deposits or customer retention. Transaction banking should connect to CASA, fee density or relationship profitability. Wealth relationships should demonstrate the additional economics they create across the customer. Digital ecosystems should show how participation changes acquisition cost, wallet share or customer lifetime value. Customer primacy is economically meaningful only when it eventually changes the numbers.
Banks Will Need More Than One Ownership Model
The future profit-pool portfolio is unlikely to be governed through a simple choice between entering and exiting businesses. Banks will increasingly need a more differentiated ownership architecture.
Some profit pools should be owned because strategic control, customer primacy, regulatory responsibility, data or balance-sheet economics require direct institutional control. Some should be partnered because the customer proposition matters more than manufacturing every underlying capability. Some should be distributed because the bank can monetise origination, access or servicing without retaining the entire financial exposure. Some may belong in a specialist subsidiary or platform where different talent, economics or regulatory structures are required. Some should be deliberately de-emphasised or exited because the economics no longer justify institutional resources.
The choice should depend on economic logic rather than organisational history. A bank may have manufactured a particular product for decades without possessing a durable future advantage in manufacturing it. Another activity may historically have been peripheral but become strategically important because it increasingly determines customer primacy or funding economics.
This is one of the reasons structural change can be difficult for established institutions. Organisational architecture often reflects yesterday’s profit pools. Business units, technology, incentives and management careers become aligned around activities that were historically important, making it difficult to distinguish institutional identity from economic attractiveness. Future Banking Economics requires the opposite discipline. The bank should begin with the economics and then determine the appropriate ownership structure.
The Future Bank Is a Portfolio of Economic Positions
This leads to a different way of thinking about the institution itself. A conventional bank is often described through a portfolio of businesses and products. Retail banking, corporate banking, SME banking, cards, payments, treasury, wealth and other divisions each maintain strategies, budgets and performance measures.
The future bank may need to be understood more fundamentally as a portfolio of economic positions. One position gives the institution access to low-cost funding. Another provides customer flows. Another generates fee income. Another converts capital into attractive risk-adjusted spread. Another gives the bank informational advantage. Another provides distribution into emerging profit pools. Another protects trust, settlement capability or regulatory legitimacy.
The strategic question is whether these positions reinforce one another strongly enough to produce superior economics at the enterprise level. This matters because an institution can own many profitable products and still possess a weak portfolio of economic positions. It may have limited customer primacy, expensive funding, poor scalability, high capital intensity and insufficient differentiation despite acceptable product-level profitability. Another institution can own fewer products but occupy stronger positions around customer relationships, transaction flows, capital allocation and distribution.
The bank therefore needs to decide what it is economically trying to control. That decision will vary by market and institution. A universal bank with deep transaction relationships, strong deposits and sophisticated capital markets capability has different rights to win from a mid-sized domestic bank. A regional retail institution with trusted household relationships may possess powerful distribution into wealth, protection and payments while having little reason to manufacture every product itself. A corporate bank can build a highly valuable franchise around flows, origination and advisory while becoming increasingly selective about permanent asset ownership.
There is no universal future bank. There are economically coherent and economically incoherent versions of one.
Profit Pool Migration Changes Capital Allocation
The connection between profit-pool strategy and capital allocation is unavoidable. A bank does not possess unlimited balance-sheet capacity. Every asset consumes some combination of funding, liquidity, capital, concentration capacity, risk appetite and management attention. Every technology platform, subsidiary and new business also consumes organisational capacity even where regulatory capital requirements are modest.
This means that the opportunity cost of an existing business can rise even if the business remains profitable. Suppose a lending segment produces a respectable return but consumes significant RWA. If another activity can generate comparable earnings with materially lower capital consumption, management needs to understand whether maintaining the existing balance-sheet allocation remains economically justified.
The reverse can also be true. A capital-light fee pool may look attractive but offer limited scale, intense competition and weak customer control, while a well-underwritten lending relationship produces high RAROC, transaction flows, deposits and broad relationship economics. The decision cannot be made by capital intensity alone. It requires the complete economic architecture.
This is why return on equity, while fundamental, cannot be the only decision rule at individual profit-pool level. Management also needs RAROC, economic profit, RWA productivity, customer profitability and measures of strategic control. The objective is not to minimise capital. It is to allocate capital where ownership produces the strongest risk-adjusted and strategically durable economics.
That principle becomes increasingly important as intermediation moves across institutional boundaries. IMF evidence on bank and private credit partnerships shows that banks are already experimenting with structures that allow them to retain origination and customer economics while distributing some capital-intensive assets.
Such structures are not automatically superior. The FSB has highlighted deepening interconnections between banks and private credit funds, including financing relationships and synthetic risk transfers, and has warned that some of these structures remain insufficiently tested under severe stress. Capital optimisation therefore cannot become risk migration without governance. The objective is better capital economics, not merely lower reported RWA. Article 06 will address that question directly. For the present analysis, the important point is that Profit Pool Migration and capital allocation increasingly need to be governed together.
Where Will Banks Earn in 2035?
The title invites a forecast, but the strategically useful answer is not a list of businesses accompanied by speculative market sizes. No institution can know precisely which profit pools will dominate banking economics in 2035. Interest-rate regimes will change, regulation will evolve, customer behaviour will differ across markets and technological architectures that appear powerful today may develop in unexpected ways.
Foresight becomes useful when it improves preparedness rather than pretending to eliminate uncertainty. What can be observed with greater confidence is the direction in which the architecture is moving.
Financial intermediation is becoming more distributed across banks and non-banks. The FSB’s monitoring shows that non-bank financial assets already represent approximately half of the monitored global financial system and have recently grown faster than bank assets. Credit remains economically important to banks, but some lending pools can increasingly be originated, distributed, financed or shared across institutional boundaries.
Fee income is becoming more strategically important as margin conditions normalise in some markets, with European banks explicitly prioritising net fee and commission income as a source of future profitability. Payments continue to matter, but their economic value increasingly extends beyond direct payment fees into customer primacy, deposits and financial information. Wealth and asset-management economics can provide attractive capital-light revenue, while remaining exposed to market conditions, customer concentration and distribution capability.
Transaction banking can become increasingly valuable because it connects operating flows, deposits, foreign exchange, trade, credit and information. Insurance and specialist financial services can expand relationship economics without requiring the bank to manufacture every underlying risk. Private-market intermediation can create new opportunities for banks in origination, distribution, servicing and financing even where permanent asset ownership migrates elsewhere.
The future earnings architecture is therefore unlikely to consist simply of existing banking products growing at different rates. It is more likely to consist of new combinations of spread, fees, flows, origination, distribution, advice, servicing and capital ownership. The strategic question is which combination the institution is capable of capturing better than alternatives.
The CEO Profit Pool Scorecard
This requires a different management discipline. Conventional business planning asks about market growth, revenue targets, market share and profitability. Those measures remain necessary, but a future profit-pool decision should answer at least six additional questions.
Management needs to know the economic attractiveness of the activity after full risk, operating and capital costs. It needs to understand capital productivity, including the RWA, liquidity and balance-sheet capacity required to produce the return. It needs to evaluate customer primacy, including whether participation strengthens the bank’s position around customer flows, information and future demand.
It needs to establish its Right to Win, rather than assuming that an attractive market automatically represents an attractive opportunity for the institution. It needs to choose the appropriate ownership architecture, determining whether the activity should be owned, partnered, distributed or placed elsewhere. Finally, it needs to understand durability, including which structural forces could change the economics before the bank has recovered the resources committed. These questions create a much more demanding standard for growth.
The Questions at the Top Must Change
The changing distribution of profit pools requires a different CEO and board conversation because traditional growth questions no longer reveal enough about the economics underneath them.
Leadership should continue asking which businesses can grow, but it should also determine whether growth produces sufficient return after capital, liquidity, expected loss and operating cost. Fee income should continue to be pursued where attractive, but management should distinguish genuinely durable diversification from revenue that is cyclical, competitively fragile or dependent on market valuations.
Banks should continue evaluating new markets and customer segments, but the existence of an attractive profit pool should not be confused with an institutional Right to Win. Credit growth should remain fundamental where the economics justify it, while management becomes increasingly precise about which customer relationships require permanent asset ownership and which can be monetised through origination, servicing or distribution.
Capital-light businesses should be encouraged where they create attractive economics, but boards should understand what other resources those businesses consume and whether they create strategically valuable customer positions. Partnerships should be considered where external capabilities improve the economics, while management remains explicit about which parts of the customer relationship and information architecture the bank is willing to surrender.
Most importantly, the institution needs to determine which economic positions it is attempting to own over the decade ahead. A bank cannot lead every profit pool, manufacture every financial product, dominate every customer interface and retain every attractive asset on its balance sheet simultaneously. Strategy requires exclusion.
The question is not only where the bank intends to grow. It is where the bank intends not to commit scarce institutional resources because other opportunities offer better economics or a stronger Right to Win. That is one of the clearest differences between product expansion and economic strategy.
The Migration of Banking Profit Pools
Banking will continue to generate substantial economic value. Households will continue to save, borrow, pay, invest and protect themselves financially. Businesses will continue to require working capital, payments, trade finance, treasury services, credit, risk management and investment. Wealth will need to be managed, risks will need to be transferred and capital will need to move between savers and productive economic activity.
The demand for financial intermediation is not disappearing. The institutional ownership of its economics is becoming more contestable.
Some profit pools will remain naturally suited to bank balance sheets because deposits, capital, information and regulatory trust create genuine advantages. Others will become increasingly distributed across banks, asset managers, insurers, technology platforms and private-market institutions. Some will become attractive precisely because banks can participate without owning the entire asset or manufacturing every capability. Others may continue growing while becoming less attractive to banks because capital intensity, competition or commoditisation reduce the economics available to regulated balance sheets.
This is why future strategy cannot begin with a static list of today’s businesses. It must begin with the economic positions the institution wants to hold.
The bank needs to know which relationships deserve scarce balance-sheet capacity, where fee income genuinely diversifies earnings, which flows create funding and customer primacy, which assets can be distributed without sacrificing strategic control, which capabilities need to remain proprietary and which profit pools no longer justify institutional commitment.
The strongest future bank will not necessarily be the institution participating in the largest number of financial activities. It will be the institution with the most coherent portfolio of economic positions. That portfolio should produce attractive revenue, use capital productively, reinforce customer relationships, preserve strategic optionality and concentrate institutional resources where the bank possesses a genuine Right to Win.
The central question for leadership therefore becomes more demanding than asking where the next billion of revenue will come from. Management must determine which future profit pools deserve the bank’s capital, customer relationships and organisational capacity, what economic role the institution should occupy within each one, and which activities it should deliberately allow others to own. That is the question beneath the future revenue mix, and it is how banks should begin thinking about where they will earn in 2035.
