Artificial intelligence (AI) faces pressure to justify its growing bill. Cybersecurity demands investment as threats become harder to contain. Quantum computing offers substantial long-term promise but a more immediate security concern. Augmented reality (AR), meanwhile, is finding a practical role in insurance after disappointing many of its early enthusiasts in banking.
AI must earn its keep
The sums committed to AI make the question of returns increasingly difficult to defer. GlobalData expects the global market to grow from $131bn in 2024 to $642bn by 2029, a compound annual growth rate of 37.4%. Spending within financial services is forecast to rise from just over $18bn to at least $87bn over the same period. Those figures describe a formidable market for suppliers. Buyers still need to establish what they will get for their money.
Banks and insurers have already tested chatbots, document summarisation, fraud detection, credit scoring and background automation. Agentic AI could offer a clearer route to returns. Given a goal, an agent can plan the steps required and complete a workflow with limited human involvement. Onboarding, compliance checks and real-time risk scoring are likely early applications, with scope to reduce the labor costs involved in complex, repetitive processes.
The commercial possibilities include lower process costs, premium products and pricing tied to outcomes. Each offers a more tangible basis for assessing a business than the number of pilots it has launched. The useful question is which deployments can be linked to a line in the profit-and-loss account, and how. Interest in start-ups built around agentic AI is likely to persist even as major banks develop more systems in-house. The decision to build some capabilities need not rule out buying others.
The cost of keeping criminals out
Cybersecurity spending has a different justification: the losses it helps prevent. Celent estimates that banks worldwide spent up to $32bn on cybersecurity in 2025. Annual economic losses from cyber breaches and attacks are estimated to cost about $500bn worldwide. Firms that underinvest risk direct financial losses, disruption to their operations and reputational damage that can outlast the breach itself.
The difficulty is that criminals have access to much of the same technology as their targets. Generative and agentic AI allow them to produce personalised messages at speed and scale; deepfake tools make manipulated voices and images more convincing. Attackers can also adopt new systems quickly. Regulated providers must first consider compliance, consumer trust and ethics. Their opponents are spared such deliberations.
AI is strengthening the defence, too. By combining transaction data, user behaviour and external information, it can identify anomalies in real time, assign risk scores and direct analysts towards the most urgent alerts. A Bank of England survey found that 75% of responding UK financial firms were already using AI. Some AI fraud systems have intercepted up to 92% of fraudulent activity before transaction approval. Such results help explain the investment case: institutions need tools that improve detection while making better use of finite investigative resources.
Quantum’s two timetables
Quantum computing calls for patience, though its potential uses bear directly on the economics of banking. Systems could improve arbitrage detection, derivatives pricing, credit scoring and calculations of economic capital. These applications help explain why financial institutions are expected to be among the earliest adopters once the technology becomes commercially viable at scale.
Quantinuum estimates that investment in quantum computing by banks and financial institutions could rise from $80m in 2022 to $19bn in 2032. Hardware remains the principal constraint, with error correction and fault-tolerant systems still in development. Commercial scale-up is expected between 2030 and 2035. Investors assessing the opportunity therefore need a timetable that reflects the technology’s development, rather than assuming that an attractive use case promises imminent revenue.
The security implications are more pressing. A sufficiently powerful quantum computer could break widely used public-key encryption. Such a machine could arrive as soon as 2029, although the timing remains uncertain. Financial institutions may consequently need to prepare for the threat well before they can reap the broader commercial benefits.
Quantum key distribution offers an early application in secure communications. Commercial deployments began in late 2024, with banks already exploring its use to protect data moving between data centres. For investors and strategists, quantum thus presents two distinct considerations: the long wait for computing applications to scale and the nearer need to protect financial information.
Insurers give augmented reality a purpose
Augmented reality has had a less convincing reception in banking. Although the global market is forecast to grow from nearly $30bn in 2024 to more than $87bn by 2029, most banks and wealth managers have ended their early initiatives. Insurers are finding uses tied to specific operational needs.
Claims teams can use AR to support remote inspections, while underwriters can visualise risks before damage occurs. Environmental risk offers a particularly useful application: showing a customer the potential consequences of an event can make the reasoning behind an underwriting decision easier to understand. The commercial appeal lies in giving the technology a defined job within an existing process.
There may yet be openings elsewhere in finance. If smart glasses gain consumer acceptance, payments providers could use AR to reduce friction at the point of purchase. Banks could develop interactive AR tools that allow regulators and customers to examine environmental investment claims more closely. Few such tools currently exist, leaving room for vendors able to demonstrate a clear regulatory or commercial use. For prospective investors and acquirers, that evidence will matter more than growth forecasts for the wider AR market.
Discover further insights
To learn more, download The future of financial services: insights for investors & M&A dealmakers, published in association with Sterling Technology – the provider of premium virtual data room solutions for secure sharing of content and collaboration for the investment banking, private equity, corporate development, capital markets and legal communities engaged in financial services and insurance M&A dealmaking and capital raising.
