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The commercial banking business model is changing

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A more strategic approach begins with addressing how to effectively meet client needs

While banks of all sizes are evaluating technology-led transformation, their conversations are often limited to functional improvements such as onboarding or credit decisioning. This kind of around-the-edges experimentation might enhance customer experience and improve efficiency, but it lacks the depth necessary to differentiate and define the bank over the next three to five years.

We believe a more strategic approach begins with addressing how to effectively meet client needs—needs that keep shifting due to the growing use of technology and the entry of nontraditional competitors. In fact, a number of basic banking products already have shifted beyond the control of the bank itself. Non-banks are displacing an increasingly large part of the commercial lending market, and a growing number of companies are building payments and treasury management operations in-house.

Three principles to shape the next move

1. M&A is an option, but will not solve the problem alone

Scale-driven advantage is often mentioned as a requirement for serving the largest segments of the market in the most efficient and technology-enabled manner. However, the ability to reach the “needed” scale of a top five bank through consolidation is highly unlikely. Many smaller banks will need to find other ways to outflank their larger competitors and maintain or increase their relevancy.

2. Embrace data, but only if committed to data guiding business decisions

Can banks continuously adapt to improve how they use data? In our experience, most institutions are very good at understanding their customers but this is now a baseline expectation for how the industry uses data. Rather, banks should begin to ask whether they are linking their data to business decisions and adjusting their business processes accordingly. Few organizations have made this transition smoothly.

3. Counter the tech spend of universal banks with an ecosystem approach

New digital technologies are raising the pressure to use IT to the company’s advantage rather than using it to support the business. Most detractors will point to the disparity in tech spend where scale has an overwhelming advantage—top universal banks spend 12 times that of the top regional banks on technology.

But this unreachable technology investment can be replicated as long as the costs associated with the commodity aspects are reduced or shared. One option is with an open architecture, financial institutions can leverage larger ecosystems of innovation without incurring heavy capital and maintenance costs.


The traditional service model grounded in local relationships and substantial technology spend may no longer be viable. As the largest US banks grow significantly faster than their regional competitors and the structural shifts continue in core areas such as corporate, the long-standing dynamics will be reshaped. 

Given this evolution in commercial banking, a strategy of how to replicate the unreachable - through novel uses of data, partnerships, and technology flexibility - will be crucial. Outspending the Big Three, or out-innovating tech-based competitors, has become a nearly insurmountable task.

Contact us

Julien Courbe

Financial Services Leader, PwC US

Roland Kastoun

Principal, Strategy&, PwC US

Gary Shub

Principal, Strategy&, PwC US

Tel: +1 (617) 515 6497

Rahul Wadhawan

Principal, Strategy&, PwC US

Pinaki Dhal

Director, Strategy&, PwC US

Tel: +1 (312) 307 7852

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