How Banks Can Boost Transaction Banking Profits by 30–50% Through AI & CX Innovation

The McKinsey report “Charting a Path to Increasing Transaction Banking Value by 50 Percent” provides a timely framework for GTB leaders aiming to bolster profitability under pressure from falling rates, regulatory headwinds, fintech competition, and shifting customer expectations. GTB’s revenue base—US$1.3 trillion in 2024—offers both scale and room for performance gaps to be closed.

Key trends influencing the landscape include potential interest-rate cuts that threaten net interest income, frequently rising geopolitical risk that adds complexity to trade and payments, and a perceptible shift in client behavior: customers expect frictionless digital experiences and are willing to switch providers when onboarding, payments or account management fall short.

The six plays McKinsey outlines serve as a strategic roadmap:

• Customer journey experience: Rewiring core client touchpoints—onboarding, transaction interfaces, FX integrations—can lift operating profit by 10–20 %, both through revenue uplift (2–4 %) and cost reductions (10–18 %) when automation and straight-through processing are applied. Early AI interventions have allowed some institutions to shrink onboarding teams by 60 %.
• Front-office excellence: Eradicating silos between RMs and product specialists, improving data-driven lead generation, setting incentives tied to client profitability rather than just volume, can unlock similar 10-20 % profit gains.
• Pricing excellence: Moving from standardized pricing to elasticity-based, client-sensitive fee and pricing strategies can add 5–10 % to profits; this applies across deposits, payments, and trade services.
• Servicing model optimization: Streamlining servicing via digital self-service, consolidating operations via on-shore, near-shore and off-shore models, and automating tasks—driven by AI—can contribute another ~8-10 % to profit. Productivity gains in servicing operations reported at 50 % or more.
• Sector specialization and Fintech partnerships: Tailoring solutions for verticals (e.g. real-estate, FMCG), local ecosystems, and collaborating with fintechs to innovate rapidly, each carry modest margins but crucial strategic differentiation.

Strategic implications for GTB stakeholders include:

• Incumbent banks must evaluate where their GTB franchise stands relative to upper quartile peers—especially in cash management efficiency, deposit profitability and cross-sell metrics—to quantify the potential upside.
• Investments in AI and digital transformation should prioritize impact zones: onboarding, front-office tooling, and customer journey redesign. Early wins here can build momentum and fund further transformation.
• As competition tightens, particularly from fintechs and non-bank platforms, GTB leaders must balance building in-house capabilities vs. partnering to accelerate capabilities while preserving margin structures.
• Risk-taking in pricing discipline and product bundling will be critical; over-discounting or undifferentiated products risk margin erosion, especially in a low-rate environment.

Open questions and areas for further research:

• How will banks manage the regulatory, compliance and operational risks inherent in rapidly scaling AI tools within GTB, particularly for onboarding and customer data.
• What is the timeline over which rate cuts materialize, and how rapidly will they erode net interest income, thus affecting the projected profitability gains? Forecasting rate trajectories is important.
• How will customer expectations continue evolving, especially across geographies and sizes of clients; what is “digital maturity” of smaller corporates vs. larger ones?
• Which partnership models (white-label, joint ventures, revenue share) with fintechs deliver sustainable economic returns vs. diluted control or commoditization risk?
• What is the competitive response to stablecoins and new payment rails—can traditional banks adapt and capture that value, or will they be disintermediated?