Financial institutions have embarked on a significant journey into emerging technologies, often with considerable investment but less clarity on the precise timing and nature of their returns. For investors, mergers and acquisitions dealmakers, and corporate strategists, the critical challenge lies in discerning which technological projects are poised to generate revenue or substantially reduce operating costs. Concurrently, it is essential to identify spending that is indispensable for risk containment and which technologies, despite a more distant prospect of returns, warrant early investment to maintain a competitive edge.
September 10, 2026
The landscape of financial technology is a dynamic one, marked by rapid innovation and substantial capital deployment. As institutions grapple with the imperative to demonstrate value from these investments, a close examination of Artificial Intelligence (AI), cybersecurity, quantum computing, and augmented reality (AR) reveals distinct challenges and opportunities. After considerable investment in AI, firms are seeking Return on Investment (ROI) sooner rather than later. The demands of cybersecurity necessitate continuous investment as threats become increasingly sophisticated and harder to contain. Quantum computing, while holding immense long-term promise, also presents a more immediate security concern due to its potential to disrupt current encryption methods. Meanwhile, Augmented Reality (AR) is carving out practical applications in the insurance sector, a notable shift after initial disappointment among many early enthusiasts in the banking industry.
AI Must Earn Its Keep: The Pursuit of Measurable Value
The sheer volume of capital committed to Artificial Intelligence (AI) makes the question of its return on investment increasingly difficult to defer. GlobalData projects the global AI market to experience a significant expansion, growing from an estimated $131 billion in 2024 to a staggering $642 billion by 2029, reflecting a robust compound annual growth rate of 37.4%. Within the financial services sector alone, spending is forecast to surge from just over $18 billion to at least $87 billion over the same period. These impressive figures underscore a formidable market for technology suppliers. However, for the buyers – the financial institutions – the crucial task remains to clearly establish what tangible benefits they will receive for their substantial financial outlay.
Banks and insurers have already moved beyond pilot programs, testing AI applications such as chatbots for customer service, sophisticated document summarization tools, advanced fraud detection systems, and automated credit scoring. The advent of agentic AI, however, promises a more direct and clearer pathway to realizing returns. Agentic AI systems are designed to understand a given goal, autonomously plan the necessary steps, and execute a workflow with minimal human intervention. This capability is expected to find early and impactful applications in areas such as customer onboarding processes, compliance checks, and real-time risk scoring. The primary driver for adoption in these areas will be the significant reduction in labor costs associated with complex and repetitive tasks that currently demand extensive human oversight.
The commercial possibilities stemming from agentic AI are multifaceted. These include a direct reduction in process costs through automation, the development of premium financial products and services that leverage AI-driven insights, and pricing models that are more closely tied to specific outcomes. Each of these offers a more concrete basis for assessing the business value of AI deployments than simply counting the number of pilot projects initiated. The truly pertinent question for financial leaders is which specific deployments can be directly linked to a positive impact on the profit-and-loss account, and through what mechanisms. The sustained interest in startups that are building their foundations on agentic AI is likely to persist, even as major banks increasingly focus on developing more of these advanced systems in-house. This strategic decision to build certain capabilities does not, however, preclude the possibility of acquiring others that offer complementary strengths.
The Cost of Keeping Criminals Out: Cybersecurity’s Unyielding Imperative
Unlike technologies driven by the pursuit of new revenue streams, cybersecurity spending is primarily justified by the losses it helps to prevent. Industry analysts at Celent estimate that global banks collectively invested up to $32 billion in cybersecurity measures in 2025. This significant expenditure is set against the backdrop of estimated annual economic losses from cyber breaches and attacks reaching approximately $500 billion worldwide. Financial institutions that underinvest in robust cybersecurity defenses face a multi-pronged threat: direct financial losses from compromised assets, severe disruption to their core operations, and enduring reputational damage that can often outlast the immediate aftermath of a breach itself.
The inherent difficulty in the cybersecurity arms race lies in the fact that cybercriminals often have access to much of the same cutting-edge technology as their targets. The proliferation of generative and agentic AI tools empowers attackers to craft highly personalized and sophisticated phishing messages at unprecedented speed and scale. Similarly, advancements in deepfake technology have made manipulated audio and visual content significantly more convincing, blurring the lines between authentic and fabricated communications. A further challenge arises from the attackers’ agility; they are often unburdened by the regulatory and ethical considerations that constrain legitimate financial providers. While regulated institutions must prioritize compliance, consumer trust, and ethical deployment, their adversaries are spared such deliberations, allowing them to adopt new systems and tactics with greater speed.
However, AI is also proving to be a potent force in strengthening defensive capabilities. By intelligently combining vast amounts of transaction data, detailed user behavior analytics, and external threat intelligence, AI-powered systems can identify anomalies in real-time, assign dynamic risk scores to transactions, and intelligently direct human analysts towards the most urgent and critical alerts. A recent survey conducted by the Bank of England revealed that a substantial 75% of responding UK financial firms were already leveraging AI in their cybersecurity strategies. Early results from some AI-driven fraud detection systems have been remarkable, with certain deployments successfully intercepting up to 92% of fraudulent activities before a transaction could be fully approved. These compelling outcomes provide a clear and irrefutable investment case: financial institutions are in urgent need of tools that not only enhance detection rates but also optimize the utilization of finite investigative resources.
Quantum Computing: A Long Game with Pressing Security Implications
Quantum computing, while still in its nascent stages of commercial viability, presents a unique dual proposition for the financial services industry. Its potential applications directly address core economic functions within banking, including enhanced arbitrage detection, more sophisticated derivatives pricing, improved credit scoring models, and more accurate calculations of economic capital. These prospective benefits are a primary driver behind expectations that financial institutions will emerge as some of the earliest adopters of quantum technology once it achieves commercial scalability.
Industry projections from Quantinuum suggest a dramatic increase in investment in quantum computing by banks and financial institutions, with estimates indicating a rise from $80 million in 2022 to a projected $19 billion by 2032. The primary constraint currently hindering widespread adoption remains the state of quantum hardware. The development of robust error correction mechanisms and fault-tolerant quantum systems is still ongoing. Commercial-scale deployment is generally anticipated to occur within the 2030-2035 timeframe. Consequently, investors assessing this opportunity must adopt a long-term perspective, aligning their expectations with the technology’s developmental trajectory rather than assuming that an attractive use case automatically translates into imminent revenue generation.
The more immediate and pressing concern surrounding quantum computing stems from its profound security implications. A sufficiently powerful quantum computer possesses the capability to break widely used public-key encryption algorithms, which form the bedrock of much of today’s digital security. While the precise timing remains uncertain, some experts predict such a machine could emerge as early as 2029. This means financial institutions may be compelled to implement defensive measures and prepare for this threat well in advance of realizing the broader commercial benefits that quantum computing promises.
Quantum key distribution (QKD) offers an early and practical application in the realm of secure communications. Commercial deployments of QKD began in late 2024, with several banks actively exploring its utility for safeguarding data as it moves between disparate data centers. Therefore, for investors and strategists in the financial sector, quantum computing presents two distinct strategic considerations: the extended timeline for the maturation of its computational applications and the more immediate and critical need to fortify financial information against potential quantum decryption threats.
Insurers Give Augmented Reality a Purpose: Finding Practical Applications
Augmented Reality (AR) has encountered a more challenging reception in the banking sector compared to its potential in other industries. While the global AR market is forecast to experience substantial growth, expanding from nearly $30 billion in 2024 to over $87 billion by 2029, many banks and wealth management firms have scaled back or discontinued their early AR initiatives. In contrast, insurers are demonstrating a more pragmatic approach, identifying and implementing AR solutions that directly address specific operational needs and deliver tangible value.
Claims teams within insurance companies are leveraging AR to provide remote support for site inspections, enabling adjusters to guide policyholders through damage assessments from afar. Underwriters are utilizing AR to visualize potential risks before damage even occurs, offering a more intuitive understanding of environmental or structural vulnerabilities. The application of AR in assessing environmental risks, for instance, is particularly compelling. By visually demonstrating to a customer the potential consequences of a specific event, AR can significantly enhance the clarity and understanding of an underwriting decision. The commercial appeal of AR in this context lies in its ability to be integrated into existing processes, performing a clearly defined and valuable job.
While its adoption in banking has been slower, potential openings for AR in other areas of finance may yet emerge. Should smart glasses achieve widespread consumer acceptance, payments providers could explore AR interfaces to streamline point-of-purchase transactions, reducing friction for customers. Banks might also develop interactive AR tools that provide regulators and customers with greater transparency and the ability to examine claims related to environmental investments more closely. Currently, such advanced AR tools are scarce, presenting an opportunity for vendors who can demonstrate a clear regulatory or commercial use case. For prospective investors and acquirers in the AR space, evidence of such practical applications will likely hold more weight than broad market growth forecasts.
Discover Further Insights
To delve deeper into the strategic implications of these technological advancements for the financial services industry, readers are encouraged to download The future of financial services: insights for investors & M&A dealmakers. This comprehensive report, published in association with Sterling Technology, offers valuable perspectives for stakeholders engaged in investment banking, private equity, corporate development, capital markets, and legal advisory. Sterling Technology is a leading provider of premium virtual data room solutions, facilitating secure content sharing and collaboration for professionals involved in financial services and insurance M&A dealmaking and capital raising activities. The report provides a detailed analysis of the evolving technology landscape and its impact on strategic decision-making within these critical sectors.
