Rewiring Banking DNA with Smart Tech Investments — Part 1
Over 60% of bank tech spend goes to keeping existing systems running — not to innovation or customer transformation. Despite budgets growing at 9% CAGR, most banks are seeing sluggish agility and underwhelming ROI. This edition, drawing on BCG's Tech in Banking 2025 report, maps the three strategies separating winning banks from the rest.
Why Most Bank Tech Investments Miss the Mark
In today’s digital-first world, banks are spending more on technology than ever before. But here is the paradox: over 60% of that tech spend goes to “Run-the-Bank” (RTB) operations, not toward innovation or customer-centric transformation. Despite annual tech budgets growing at approximately 9% CAGR, many institutions still struggle with sluggish agility, complex architectures, and underwhelming ROI.
This edition draws on BCG’s May 2025 report “Tech in Banking 2025: Transformation Starts with Smarter Tech Investment,” applying its findings to the Indian and global banking context.
The Hidden Challenges Inside Tech Budgets
Some of the core issues draining value from banking tech investment:
- Legacy infrastructure too costly to modernise
- Disjointed vendor ecosystems and tech stack complexity
- Opaque tech governance with limited cost accountability across business teams
- Rising vendor lock-ins and “tool tail bloat”
According to BCG, top banks spend more than 10% of revenues on IT, and compliance eats up another 10%+ of that spend — often treated as a sunk cost rather than a strategic investment.
What Winning Banks Are Doing Differently
1. Simplify Tech Stack and Refocus Spend
Consolidate products and unify customer journeys via horizontal platform architectures. Cut overhead roles and boost the share of builders — top performers achieve 75%+ developers versus PMs. Embed APIs to streamline onboarding and reduce operational friction.
One global bank saved 50–80% on onboarding costs by streamlining platforms across consumer, commercial, and international business lines.
2. Turn Compliance into Resilience
Smart banks treat regulatory spending as an opportunity to enhance resilience, not just a burden.
- Build digital twins for scenario planning — cloud outages, supply chain risks
- Automate risk simulation and link to business continuity plans
- Proactively engage with regulators to anticipate shifts rather than react to them
3. Track and Measure Impact
Leading institutions deploy build-to-test frameworks, AI-powered development pipelines, and cost-to-value analytics to ensure each dollar of tech investment translates into customer and business outcomes. Investment without measurement is theatre.
The Diagnostic Question for Today’s Banking Leaders
If your bank is spending heavily on technology but seeing marginal improvement in customer experience, agility, or profitability, the problem is not the ambition — it is the allocation. The question is not “are we investing enough?” but “are we investing in the right things, and are we measuring what matters?”
Part 2 of this series covers how progressive banks are rebuilding core tech muscles — from AI-driven data ecosystems to IT infrastructure modernisation.
Source: BCG, “Tech in Banking 2025: Transformation Starts with Smarter Tech Investment,” May 2025.