Bank for International Settlements Working Paper: Bank Asset Shares Understate Digital Disruption, Revenue Pool Contest Could Reach 40%
A latest working paper from the Bank for International Settlements (BIS) posits that while digital banks and technology platforms hold less than 2% of banking system assets, they may contest approximately 40% of the revenue pool. As traditional banks retain their balance sheets, payments, loan origination, distribution, advisory services, and fee income could be captured by new entrants, leading to increased earnings volatility.
The Bank for International Settlements (BIS) released Working Paper 1391 on November 4, authored by Christian Schmieder, Head of Operations in the Monetary and Economic Department, Renzo Corrias, Senior Adviser at the Financial Stability Institute, and Oliver Wünsch. The paper's core finding is a distinction easily overlooked: the true battlefield of digital disruption lies not in asset holdings but in revenue generation.
The paper classifies nearly 9,000 banks across more than 150 jurisdictions into three traditional business models and three emerging technology-driven models using a rule-based method applied to 20 years of bank-level data. It outlines four scenarios—slow transformation, technology acceleration, platform expansion, and political uncertainty—to project the ownership of core banking functions ten years out. The authors explicitly state that this framework structures expert judgment rather than producing forecasts.
The key conclusion is that in all four scenarios, traditional banks retain approximately three-quarters of banking system assets, with emerging technology-driven models accounting for only 3% to 27% (around 3.5% under the trend baseline). However, the paper notes that asset shares understate the actual shift. New entrants may capture payments, loan origination, distribution, advice, and fee income, while traditional banks keep the balance sheet. Technology-driven models could contest roughly 40% of the revenue pool.