Re-engineering the bank for growth: PwC

Fragmented to federated: Re-engineering for connected growth

Banks across every business line—consumer, commercial, capital markets, and wealth—are confronting the same reality: client expectations are moving faster than their ability to respond.

For two decades, the industry advanced through channel innovations such as digital deposits, mobile banking, and peer-to-peer payments on the retail side — and through the digitization of treasury, cash management, and electronic trading in corporate and capital markets businesses. These were critical to customer satisfaction, but they left core systems largely untouched. The result is an infrastructure and an organization still optimized for vertical scale, not horizontal speed.

That structure is now a liability. Technology followed business into silos. Each line of business built its own stack, its own data model, and its own client lens. That model worked when innovation meant better channels, but not when growth depends on connected experiences and integrated advice. Liquidity management, private credit access, intergenerational wealth transfers, and AI-driven personalization are redrawing financial flows across the economy and the globe. At the same time, banks face a multi-shock environment: rate volatility, regulatory recalibration, and the acceleration of technology cycles. Shocks now hit harder, fade faster, and penalize hesitation. Today, customers expect banks to operate as one enterprise. Growth, profitability, and trust now depend on how well banks can coordinate horizontally—across business, operations, and technology—to deliver seamless experiences that match how customers actually live and operate.

Banking’s infrastructure and organization are still optimized for vertical scale, not horizontal speed. That structure is now a liability.

Meeting this challenge requires more than incremental fixes. It demands re-engineering—creating the data, governance, and delivery models that can connect business lines and their technology foundations. This is not about centralizing control; it’s about building connective tissue across an increasingly federated organization. Banks that learn to work horizontally can move faster, serve customers better, and unlock growth capacity others cannot.

Customers are moving faster than banks

This shift is already visible in how customers manage liquidity and value exchange.

Clients are reshaping the most basic function of banking—how liquidity is stored, priced, and moved. Deposit balances are fragmenting across money market funds, stablecoins, and embedded finance platforms as customers chase yield and convenience. U.S. money market funds reached $7.2 trillion in 2025, with retail balances up 16% year-over-year, according to Investment Company Institute data. Stablecoin issuance has more than doubled over the past four years, signaling how customers now think of liquidity as mobile and diversified rather than static and stored.

Small businesses are embedding finance directly into their operating systems, bypassing traditional intermediaries. These firms want banking capabilities integrated into accounting, commerce, and payroll workflows—not delivered as stand-alone products. The result is that the perimeter of banking is expanding even as direct relationships with banks narrow.

This evolution extends beyond deposits. Payments, once a utility, are now a competitive frontier. Instant, transparent movement of value has become the standard, and customers expect settlement, visibility, and analytics in real time. For banks, the challenge is not just keeping up with these flows but anticipating them. PwC’s Financial Services Industry Survey 2025 finds 45% of banking executives identify payment and transaction platforms as their largest competitive threat, reflecting how deeply new entrants are reshaping the foundations of liquidity and payments.

Commercial and mid-market customers often face similar disruptions. Private credit has grown to $1.7 trillion globally, according to Preqin, increasingly funding deals once dominated by banks. CFOs expect real-time liquidity visibility, with more than 80% prioritizing dashboards over static reports, according to the Gartner CFO Survey, 2024. Meanwhile, PwC’s Financial Services Industry Survey 2025 shows 41% of banking and capital markets leaders say technology-driven disruption of capital flows will most shape strategic decisions over the next three years. The message is clear: customers are moving money faster than ever before—and they expect banks to move with them.

While banks are adapting to these market pressures, their back offices are feeling the strain of expanding data and reporting demands from investors and regulators. Reporting to supervisors has always been part of the business, but the scope and specificity have increased dramatically. New filings such as FR 2052a, FR Y-14A/Q/M, and FR Y-15 require thousands of additional data elements. Beyond collecting and submitting this information, banks must respond to targeted feedback and mandated actions that can directly affect capital, liquidity management, and operational practices. The outside influence—and the precision of that influence—has never been greater, driven by the dual goals of investor transparency and financial system resilience.

Capacity as the strategic imperative

The industry’s next wave of competition will likely be defined by capacity for growth—financial, operational, and technological.

Historically, scale created that capacity. Larger balance sheets funded modernization and absorbed risk. But scale no longer guarantees advantage: cost structures remain stubborn, legacy systems slow delivery, and data silos constrain innovation—holding back customer experience and growth.

Technology should now be the lever for increasing capacity. Re-engineering the enterprise can free capital and talent trapped in complexity, enabling faster product development and smarter balance sheet use. AI offers one leap forward, automating analysis and improving risk precision. But equally transformative is the shift in how technology is managed. Banks should move from large-scale engineering to engineered outcomes—from counting the amount of code delivered to measuring value created.

Yet the data show that while technology intensity within banking is increasing, it is not re-engineering banks for better outcomes.

Median data processing expenses continue to rise faster than other noninterest costs. Five-year compound annual growth rates are in double digits for some regional and superregional banks, according to a PwC Insights Factory analysis. Operating leverage also remains relatively fixed. Even among the larger institutions, compensation still represents roughly 55%–60% of total expenses, and expense ratios hover near 60%–70% regardless of scale.

Much of this reflects a modernization paradox: banks are adopting cloud infrastructure and advanced data tooling faster than ever, but often without the engineering discipline or financial operations rigor to translate those investments into efficiency. Suboptimal workload design, underutilized cloud capacity, and siloed development patterns are inflating cost bases instead of simplifying them. Until modernization can be paired with systemic engineering and disciplined financial management, technology intensity will remain a cost, not a catalyst.

More tech intensity, similar operating outcomes

These patterns suggest that scale spreads costs but also embeds inherited complexity. This evidence ties directly to the broader theme of capacity for growth—highlighting how inherited complexity prevents banks from scaling efficiently and turning investment intensity into agility. Without structural change, technology investment often risks deepening fragmentation rather than creating agility. Our survey shows banking executives expect technology and software to account for 46% of total assets within two years, up from 40% today—evidence that technology intensity will keep rising, even as many institutions struggle to turn that investment into agility and impact.

Without structural change, this evidence ties directly to the broader theme of capacity for growth—highlighting how inherited complexity prevents banks from scaling efficiently and turning investment intensity into agility. Without structural change, technology investment risks deepening fragmentation rather than creating agility. PwC’s Financial Services Industry Survey 2025 shows that 43% of executives have delayed or reduced major technology initiatives due to integration challenges or slow ROI, with 54% citing integration complexity as the primary barrier. These findings underscore how inherited complexity is not just a cost issue—it is a strategic constraint that can slow transformation and diminish competitive advantage.

AI offers one path forward. Its ability to automate analysis, connect data silos, and generate predictive insights can accelerate decision-making across credit, liquidity, and operations. When combined with scalable data architectures, AI can become the mechanism through which banks can translate information into integrated experiences.

Why this wave is different

This transformation cuts deeper than any previous cycle. Real-time payments processed 343 million transactions worth $246 billion in 2024, nearly doubling year-over-year, according to The Clearing House. FedNow already connects 1,400 institutions, while tokenized deposits and programmable payments are moving into production. AI-enabled forecasting, dynamic credit modeling, and intraday capital tracking are now table stakes for competitiveness. Legacy batch systems and organizational silos cannot keep up.

Banks that can unlock and leverage their data horizontally hold a natural edge. Their scale of client interactions, transaction histories, and market exposures is unmatched, but much of this value remains trapped behind product-aligned architectures and compliance silos. The institutions that can access and connect data—linking it across products, customers, and markets—can generate insights that fintechs and private credit funds cannot replicate. Data becomes both a moat and a multiplier: it informs real-time risk decisions, enables personalized engagement, and helps banks to anticipate flows rather than simply respond to them.

Data becomes both a moat and a multiplier: it informs real-time risk decisions, enables targeted client personalization, and allows banks to anticipate flows rather than simply respond to them.

AI is at the center of this transformation. PwC’s Financial Services Industry Survey 2025 shows that 55% of executives rank generative or agentic AI as their top investment priority for 2026, and 58% expect it to have the most transformative impact on their industry within three years. But realizing that potential depends on re-engineering processes and systems to capture outcomes rather than generate activity.

PwC’s survey highlights how volatile this environment has become. Sixty-eight percent of executives say their organizations reassess technology priorities at least quarterly, the highest rate across all financial subsectors. Yet only 10% describe their current technology as leading-edge in AI integration. As innovation accelerates, many institutions are trapped between ambition and fragmentation.

The implication is clear: the ability to operate across clients' needs—integrating business and technology—will help define future value creation.

Shifting ownership of change

Creating capacity for growth is not just a technology project—it is a leadership test. In the past, business lines often set direction while technology and operations were left to make it work—usually with separate budgets, timelines, and limited influence on the outcome. The result was friction, duplication, and systems held together by persistence more than design. The new model distributes responsibility. Speed and autonomy now live within the business, where data, applications, and AI models are increasingly owned and managed by the teams closest to the client. Centralized IT help provide the backbone—compute, security, and connectivity—as ubiquitous and dependable as electricity. The real advantage comes from orchestration: aligning these distributed capabilities so customers experience one brand, not a patchwork of products. Federating for speed should be matched by orchestrating for unity.

PwC’s Financial Services Industry Survey 2025 reinforces this urgency. Thirty-four percent of executives believe more than 20% of their traditional business will be captured by non-traditional providers within two years, up from 13% today. Ninety-six percent agree that survival will require deeper collaboration between incumbents and new entrants. This shift toward co-creation signals that ownership of transformation can no longer be confined to one function or division—it should span the enterprise.

Building capacity for growth

To build capacity, leaders should recognize that technology alone doesn’t create capacity; orchestration does. Business, operations, and technology leaders should synchronize strategy, delivery, and investment. Re-engineering for horizontal collaboration can offer the blueprint for doing so—modular, data-driven, and adaptive.

The agenda for leadership is clear:

1. Engineer outcomes, not projects. Shift delivery metrics from hours coded to measurable business value and client impact.

2. Execute tech-enabled transformation. Focus on modernization where it can drive business outcomes—whether re-engineering deposits, payments, brokerage, or lending platforms. Technology investment should target measurable improvements in customer experience, operating efficiency, and growth capacity.

3. Address data holistically. Build a unified data strategy that can connect reporting, insights, and AI. Treat data as an enterprise asset that fuels regulatory transparency, operational intelligence, and personalized customer engagement.

This is the playbook for turning volatility into opportunity. Banks that can operate horizontally—integrating data, decisions, and delivery—will likely define the next generation of value compounders.

From knowing to doing

Yesterday’s innovations could be bolted on; today’s cannot. Banks that rewire their organizations—connecting business and technology execution across divisions—can create capacity for growth and coherence. Those that do not will likely see customers, flows, and relevance migrate elsewhere.

The next era of banking will be defined not by scale but by integration and adaptability. Re-engineering the bank is the new price of admission to a client-driven, AI-enabled era of finance.