Big Banks are Becoming Irrelevant (and they know it)

At the end of August, contender for the Fed Chair. Michelle Bowman, told banks that “change is coming,” and unless you embrace AI and crypto your business will slowly die. With Powell’s retirement, and Bessent’s drive for stablecoin implementation to the save the US debt market, the next Fed Chair will surely embrace those ideas too.

There are two reasons for this transformation:

1. Debt. The amount of debt big banks are carrying make it increasingly harder to turn a profit (and ensure a stable future). and the amount of debt the US is carrying can never be paid off.
2. AI and blockchain are placing power into the hands of the individual, not the institutions.

So the choir is singing a new gospel…

Bloomberg reports:

Bowman Says ‘Change Is Coming’ to How Fed Views AI and Crypto

“Banks and regulators must embrace the benefits of new technologies such as artificial intelligence and crypto or risk diminishing their role in the economy, said US Federal Reserve Governor Michelle Bowman.

“Change is coming,” said Bowman, the central bank’s top bank watchdog, in prepared remarks for the Wyoming Blockchain Symposium. Ideally, regulators will allow new uses to “proliferate in a way that benefits the banking system,” she said. “If this is not our approach, then we risk the banking system becoming less relevant to consumers, businesses and the overall economy.””

For the past two decades, junior bankers have been slammed with more work than they can handle while the firm itself transforms their jobs into something new. Mainly, automating tasks, implementing online banking, and enabling self-directed investing. Now banks are handing over even more complex tasks to Agentic AI to compete with individuals who naturally, want to control their own money. The thing is, the new services banks are adopting to save money are either not what consumers want or are something consumers can find elsewhere.

Does anyone want to wade through the mire of AI chatbots?

CNBC reports:

Here’s JPMorgan Chase’s blueprint to become the world’s first fully AI-powered megabank

“The prospect of collapsing workloads means that fewer junior bankers may be needed even while AI-enabled teams handle more work and pitch more companies, according to senior Wall Street executives at several firms who spoke on the condition of anonymity to provide their candid thoughts.

But to extract the full value from this new, almost magical technology, it’s not just about the tools: Changes to how employees and departments are organized may be needed.

One proposal being discussed at a major investment bank is reducing the ratio of junior bankers to senior managers from the current 6-1 to 4-1. In the new regime, half of those junior bankers would be working from cities with cheaper labor, say Bengaluru, India, and Buenos Aires, Argentina, instead of being clustered in expensive New York.

The AI-powered junior bankers could then work on deals in shifts around the clock, passing the baton from one time zone to the next.

With fewer bankers on the payroll, the cost structure of investment banking would fall, boosting the bottom line, said the executives…

…The bank is closing in on another frontier: It will soon allow generative AI to interact directly with customers, Waldron said. JPMorgan will start with limited cases, like allowing it to extract information for a user, before rolling out more advanced versions, he said.””

Instead, US banks are becoming efficient warehousers and distributorrs of debt. One of the biggest banks here in Canada is saying the quiet part out loud.

Since over 90% of transactions are handled digitally and there’s no profit on facilitating day-to-day banking the entire bank is making a shift to mortgage lending and investment advisory.

Canadian Mortgage Trends reports:

Mortgage approvals in hours, not days: TD leaning on AI to regain edge

“TD is leaning on artificial intelligence to strengthen its mortgage and retail banking business, telling investors it sees both a $40-billion opportunity to win back client mortgages held at rival lenders and major efficiency gains from automating approvals, pre-approvals and client service.

CEO Raymond Chun framed the strategy as a way to deepen relationships with existing clients. “In Canada, we’ve earned the trust of an enormous client base and lead in retail banking in primacy,” he said.

He also underscored efficiency gains as a cornerstone of the plan, telling investors that AI-driven speed and consistency will play a critical role in both client satisfaction and long-term profitability.

“We’re approving mortgages in hours instead of days. We’re pre-approving credit cards with data-driven insights for millions of clients. We’re producing reports in minutes vs. hours or days, and we’re responding to clients in just a few seconds, significantly shortening call and wait times,” he said.

AI-enabled adjudication is already reducing turnaround times, lifting one-day mortgage approvals by 20% in the mobile specialist channel, the bank noted.

TD also highlighted TD Mortgage Direct, a digital funnel that turns online interest into instant callbacks from specialists. That channel has already funded $4.6 billion and converts at four times the old process.

With 93% of routine transactions now handled digitally, TD wants branches to focus less on bill payments and deposits and more on mortgages, renewals and investing. Another 500 branch staff will be redeployed into home-borrowing or investing roles, with referrals to wealth advisers already up 18%.

TD has also reorganized its proprietary mortgage channels, bringing mobile specialists and in-branch bankers closer together on complex deals. That collaboration is already showing results, with branch referrals funding three times as many mortgages and overall productivity up more than 40%, the bank confirmed.”

The writing is on the wall. Banks aren’t transforming because they want to empower customers—they’re transforming because the old model of profit through debt is unsustainable, and new technologies threaten their relevance. AI and blockchain are more than tools for efficiency. They represent a shift in control from institutions to individuals.

In the meantime, the banking institutions will continue to break down in this Fourth Turning. Debt will get easier to obtain directly from US Treasury, or the Federal Reserve itself via stablecoins, or new digital currencies.