The 13th meeting of The Clearing House Annual Conference provided a timely forum as market participants focused not only on forecasts for the future of banking and payments but also on how these landscapes are being meaningfully reshaped by trends currently underway.
Over two days of discussions among senior financial services executives, CEOs, technologists and policymakers during the New York conference, one message was continually surfaced: the velocity of change across financial services is accelerating, driven by modern technologies, evolving consumer demands and ongoing changes to the policy landscape. Further, it was widely acknowledged that institutions that adapt early to these changing dynamics will define the next generation of financial services.
Regulatory reform provides tailwinds for the banking industry
The regulatory reset underway in Washington will play a significant role in reshaping the financial services environment. After years of what numerous speakers at the gathering described as regulatory “mission creep,” prudential agencies are now re-examining regulatory and supervisory expectations with a new focus on material financial risks, transparency and predictability.
Jonathan Gould, the Comptroller of the Currency, made this explicit, noting that the OCC is pivoting away from trying to address all risks in favour of focusing on those financial risks that are material. Gould emphasised that too many supervisory findings in recent years had focused on nonmaterial issues — such as documentation and administrative controls — rather than the fundamental risks that determine a bank’s safety and soundness.
As Gould put it, the Office of the Comptroller of the Currency “will refocus on the things that matter most. … If you’re focused on everything, you run the risk of being focused on nothing.”
Randy Guynn, Senior Advisor at the Board of Governors of the Federal Reserve System echoed this perspective, noting that the Fed’s reorganisation of its supervisory structure, including a reduction in Washington staff and streamlined leadership layers, will push examiners to prioritise what truly matters. He said the shift reflected the need to reprioritise “because we don’t have the luxury of doing a bunch of things that aren’t material.”
From an industry perspective, these changes represent a healthy realignment towards the real-world impacts of regulation. It was noted that too often, banks had been cited for matters requiring attention based on administrative or process-oriented findings that had little bearing on true risk. The panellist believed the renewed focus on materiality would strengthen the supervisory process because it aligned expectations with genuine safety-and-soundness concerns.
From the vantage point of the investment community, Tom Michaud, CEO of Keefe, Bruyette & Woods, said this regulatory reset was creating genuine economic tailwinds. He emphasised that banks now have a supportive macro environment, with regulatory clarity adding to the momentum generated by having the longest inverted yield in 47 years now behind them.
“Banks were not designed to thrive” in the prior environment, Michaud noted. The shift toward consistency and predictability would allow banks to invest more confidently in growth, technology, and customer experience.
Betsy Graseck, Managing Director, US Large Cap Banks and Diversified Financial Research at Morgan Stanley, added that institutional investors viewed the new regulatory environment as a major driver of bank valuations.
Panellists also noted that the regulatory and supervisory changes emanating from Washington have swung the pendulum, particularly in the context of consumer financial protection. State attorneys general are now assuming a larger role as consumer protection becomes more decentralised. With the emergence of AI and digital finance, there may be new risks created for consumers that require close monitoring, panelists cautioned.
AML reform: a regime ready for modernisation
When it comes to addressing anti-money laundering (AML) and sanctions enforcement, the most pressing message was that modernisation is overdue. As banks look to embrace newer technologies, a reliance on the requirements of older regulatory models has made it hard to deploy next-generation tools, especially as the complexity of cross-border payments grows.
Stablecoin legislation creates a new payments framework
Congress’s passage of the GENIUS Act into law represents the most significant federal action on digital assets since the emergence of cryptocurrency. The act establishes federal oversight for stablecoins — including reserve, liquidity, disclosure and examination requirements — and gives banks a clear path to issue their own.
Former House Financial Services Committee Chair Patrick McHenry described how the act was the result of a five-year bipartisan effort to bring digital assets into the regulated perimeter and emphasised that the bill was shaped heavily by the New York Department of Financial Services’ model for regulating digital assets.
Michael Miebach, CEO of Mastercard, said stablecoins were now a serious contender in payments because they could reduce friction caused by cutoff times, prefunding requirements and batched settlement.
Similarly, Robin Vince, CEO of BNY, emphasised that tokenised assets — whether stablecoins or deposits — could transform asset mobility and liquidity management.
With the GENIUS Act providing clearer rules, responsible innovation is poised to move ahead.
Payments are evolving to meet consumer demands — but innovation is creating new pressure points
The emergence of digital assets and stablecoins is only part of the evolution happening in payments. The payments ecosystem is undergoing rapid realignment, driven by consumer expectations, merchant economics, modern technology and platform competition.
One of the larger misconceptions surrounding the evolution of the payments space is that the industry’s move to faster payments equates to increases in fraud. However, fraud rates on the RTP® network remain significantly lower than ACH, checks or cards, noted Hamdija Custovic, Managing Director of Emerging Payments at Bank of America. Social engineering, phishing and account takeovers now constitute the vast majority of incidents, and banks are continuing to build newer safeguards and educate customers about fraud and the numerous ways that fraudsters can target specific individuals.
Customers are utilising more innovative tools outside of bank-created offerings. From embedded finance to wallet-based transactions, payments are increasingly made within third-party apps, not bank accounts. Serge Elkiner, General Manager of Early Warning’s PAZE® product, pointed out that wallets are driving new use cases across gig work, peer-to-peer (P2P), subscription commerce and gaming. For instance, the trend of using real-time disbursements for delivery drivers, gig economy workers and content creators places additional operational pressures on corporates, which must now support 24/7 treasury operations.
The evolution of the payments space is also creating challenges for the industry. With the acknowledgement that customers will always expect payments choice, such as instant payments, ACH, cards, and now payments enabled by stablecoins and tokenised assets, financial institutions and technology providers need to continue to build solutions across all rails that offer fast and secure transactions.
Financial services companies are throttling up their use of AI
Financial services companies are accelerating their use of artificial intelligence, and the conference made clear that AI is already delivering meaningful benefits across the industry. Speakers consistently described AI as a transformational force that will reshape financial services by improving bank cost structures, customer interactions and risk management.
Charlie Scharf, Chairman and Chief Executive Officer at Wells Fargo, emphasised this progress, explaining that developers are now 30–40% more efficient using generative AI coding tools. He also noted that Wells Fargo was seeing AI-driven efficiencies in “credit memos, call center support and internal documentation”.
Gunjan Kedia, Chief Executive Officer at US Bancorp, added that US Bank views AI as essential to running a more agile and operationally efficient institution.
Another area where AI is proving indispensable is cybersecurity. Todd Conklin, Chief Information Security Officer and Head of Security Engineering at The Clearing House and former Chief AI Officer at the US Department of the Treasury, stressed that large banks were increasingly turning to AI for cybersecurity and fraud defense because modern cybersecurity was impossible without employing AI for defensive purposes.
Even with AI providing productivity, cybersecurity and operational advantages, panellists emphasised that the technology’s rapid evolution brings significant challenges. Several executives highlighted the shift from traditional, task-based AI to agentic AI, where autonomous systems can perform multi-step workflows and even interact with other AI agents.
This shift introduces new governance and accountability concerns. Stephanie Wake, Director, Emerging Technology Public Policy Advocacy, Citi, cautioned that agentic AI required entirely new governance structures. She raised questions about oversight, asking what happens when AI agents oversee other AI agents, and emphasised that Citi had already created an agentic AI center of excellence to begin addressing these issues. The need for thoughtful regulation also emerged as a core concern. Conference participants agreed that AI regulation is coming, and that the industry cannot afford to allow overly rigid rules to hinder innovation.
A financial system at a strategic crossroads
The themes at this year’s Annual Conference reveal an industry that is rapidly evolving while regulatory recalibration is taking shape, providing banks with a more predictable environment in which to operate. Digital money is moving from the margins to the infrastructure layer, with stablecoins and tokenised deposits beginning to redefine how value is stored and moved. Payments are simultaneously modernising, creating a more complex landscape of rails and partners, while customer expectations for faster and easier payments increase. And, throughout, artificial intelligence is advancing at a speed that forces institutions to rethink how they operate, manage risk and compete.
Banks are working to consistently deliver advances in payments speed, data quality and security to provide new services that meet evolving customer expectations. The goal is to deliver these capabilities to customers while ensuring payments interoperability, trust and resilience. Institutions that step forward now — thoughtfully, transparently, and in collaboration with regulators and peers — will define the next generation of financial services. Those that wait may find the market has advanced without them. The decisions made today will determine who leads, who adapts and who gets left behind.
