Innovation is reshaping financial services at speed. AI, embedded finance, ESG priorities and fresh business models are driving growth – but rapid change brings risk. The firms that pair agility with strong governance will set the pace, building resilience and competitiveness this year and beyond. In this piece, we explore the trends defining the sector this year.

Published: 20 January 2026
Author: Daren Allen

AI & digital transformation

AI is no longer optional – it’s integral. This year most finance functions will deploy AI for predictive analytics, portfolio optimisation and real-time decision-making. These tools unlock efficiency and insight, but they also raise governance and cyber security challenges. Firms must embed transparent AI frameworks and align with regulatory roadmaps to avoid costly missteps – something that is often a secondary consideration to adoption. Our recent study of AI governance found that more than a third of respondents (37%) had designed an AI framework but had not implemented it yet. Those who get this right will turn compliance into a competitive advantage.

Embedded finance

Payments, lending and insurance are now woven into everyday platforms – from retail apps to mobility services. This trend is reshaping customer expectations and revenue models. For financial institutions, opportunity comes with responsibility: robust third-party risk management and clear liability structures are essential. Without them, innovation could quickly become increased exposure.

ESG integration

Investor appetite for sustainable assets remains strong. Green bonds and sustainability-linked loans surged last year and will continue to dominate. Regulatory enforcement is tightening, so firms must invest in data quality and reporting infrastructure now. ESG isn’t just a compliance exercise – it’s a growth strategy that attracts capital and builds trust.

New business models

API-first banking, ecosystem partnerships and private credit expansion are redefining the sector. These models promise agility and scale, but resilience must keep pace. Innovation without governance is a recipe for increased risk. The winners will be those who combine technology with trust and growth with sustainability.