“Out of intense complexities, intense simplicities emerge.”
—Winston Churchill
Gonzo denizens, if we have seen anything in our recent work with clients, it’s that the technology ecosystem at banks has quickly grown much more complex. Even a small bank can have dozens of vendor contracts, and at larger banks, that number can run into the hundreds. One of the major contributors is all the new investments financial institutions have been required to make for expanded delivery, customer engagement, and risk.
Just consider for a moment the expansion of the vendor/product ecosystem in these four areas:
Risk/Fraud. With expanded delivery channels comes expanded fraud. Financial institutions now need solutions for fraud that address myriad areas:
Checks
Cards/payments
Identity verification
Identity monitoring
BSA/AML
Customer behavior anomaly
Multi-factor
OFAC
Cybersecurity variants
Marketing. My associate Amanda Swanson illustrated the ecosystem of bank vendors and products aimed just at Marketing. Marketing systems across these 12 categories involve at least several hundred vendors—the image includes just a sampling. And while traditional CRM systems can cover many of these areas, a host of newer vendors with specialized capabilities will be added to the ecosystem, if they haven’t already been.
Payments. To traditional debit/credit, ACH, mobile/branch deposit, wires, and bill pay, add newer expanded investments in:
P2P
A2A
Real-time payments
Payments hubs
Stablecoins and crypto, whatever that environment will look like
Yes, core systems. At least we only have one back-end accounting system, right? Well, not so fast there. We are now hearing about the need to migrate from core system to core “platforms.” My plain-English definition of a platform is a front-end that will access multiple back-end modules from a variety of legacy cores and some new ones. The promise is a single experience and seamless integration that masks any back-end complexity. Time will tell. (Wait. Why did I have a sudden flashback to Universal Loan Origination systems?)
These are just four high-level examples, and anybody reading this could immediately start adding to the list. Factor in business intelligence, AI, managed services, and other new investments, and the ecosystem becomes even more complicated.
There are several things complexity can bring, but let’s just focus on one: cost. Complex system environments are more expensive. This is reflected in the technology spending numbers that Cornerstone tracks. Our 2025 data shows that financial institution technology spending now totals:
11% to 20% of all non-interest expense, with a median of 15%
0.3% to 0.6% of assets, with a median of 0.4%
Institutions with a heavy retail focus spend $1 in every $5 of NIE on technology (note that this does not include debit/credit card transaction processing costs)
This is roughly 50% higher than six years ago, and in five years, given the required future investments, it would not be surprising if most banks saw technology spending at 20% to 25% of NIE.
System complexity can’t be avoided, but we have seen best practices for managing the costs. Here are some suggestions:
Track and take advantage of “developmental” to “commoditized” pricing trends. Any early versions of systems are priced to support development, not based on what a rational market will pay long term. As systems mature, pricing becomes more rational. This happened with core, digital banking, payment processing, and lending systems. It will happen again with newer systems. Know when that pricing cycle turns and take advantage of it.
Always look at suite versus best-of-breed options when renewing any system contract. In newer systems, functionality can vary greatly among solutions, and there will be a proliferation of best-of-breed solutions. However, when any type of system matures, functionality differences decline, and suites emerge. Financial institutions must always ensure that the functionality and design differences justify best-of-breed solutions and related pricing.
DO NOT let contracts auto-renew, especially your top 10 in terms of cost. I have worked with the Cornerstone team that provides vendor services, and I am floored by how many banks and credit unions have allowed contracts to auto-renew when there is a clear opportunity to take advantage of commoditized pricing. Feel free to ignore this suggestion if you like throwing money down the drain.
Take control of the cost of interfaces and application programming interfaces. For about forever, integration has been the biggest frustration IT groups express. It will only get worse and more costly as system ecosystems expand. Already, many of our clients have decided that they will need to have internal talent and resources to manage APIs and other interfaces, or they have looked for partners to manage them. Quality and speed of delivery are clearly other factors in this decision.
Make sure your technology roadmap factors all of these considerations into the future picture. Roadmaps address many things, of course, but one of them should be marking when these types of decisions need to be made to address complexity.
My partner Steve Willams once said that one of the biggest challenges of banking is translating the complexity of the business into a simple, elegant experience for customers. Smarter banks will do this successfully, and at the best possible cost of delivery.
“It's complicated, I get frustrated
Right or wrong, love or hate it
It's complicated, you can't sedate it”
—Bon Jovi
Terence Roche is a founding partner at Cornerstone Advisors. Follow him on LinkedIn and X.