FI spending priorities target efficiencies and competitive differentiation

This article first appeared in the May BAI Executive Report: Unlocking value through technology optimization. Find more articles within covering the tech decision-making spanning CX, fraud, core updates and more.

Top 2025 technology priorities for U.S. banks indicate a push toward optimization to enhance security, boost efficiency and harness data to manage risk and respond to customer needs faster and more effectively than competitors.

This emphasis emerged from topical leadership conferences, in regularly updated BAI/ProSight research and in an Integris survey of more than 1,000 bank executives late last year.

Despite the biggest banks largely beating first-quarter expectations, executives remain cautious amid softening loan demand and lingering recession concerns. Results among smaller banks have been more mixed; however, technology investments aimed at boosting efficiency and enhancing digital customer experiences remain consistent themes across the industry.

“Most community banks are looking for efficiency everywhere they can get it,” says Cal Roberson, vice president of the financial institution division at Integris and author of “Understanding U.S. Banks’ Annual IT Spend in 2025.”

“Banks really want operational efficiency because it is one of the best drivers of profitability,” Roberson says.

As banks grapple with operational costs, economic uncertainty and mounting security threats, technology optimization is essential to maximizing ROI. Legacy core systems, however, remain a major cost center and barrier to digital transformation—highlighting the urgency of modernization.

The late-2024 survey, which included responses from banks with between $3 million and $20 billion in assets, is the second annual report for Integris, a managed IT services provider based in Cranbury Township, N.J.

“In the first report, we found that basically none of the executives (4%) actually had an IT budget, even though we’ve found that it’s often the second- or third-largest expense for a bank,” Roberson says. Instead, many banks have IT spend spread across different business units, creating a lack of visibility that can also make ROI assessments elusive.

What’s clear for IT spending on systems, storage, applications and staff, as well as broader strategic technology priorities, is the primacy of cybersecurity.

In fact, 98% of bank executives ranked “fear of cyber breach” as a top three driver of current IT spending. Although the number of primary data breaches in the U.S. dropped from a record high of 2,842 in 2023 to 2,577 in 2024, TransUnion’s latest data shows an increase in breach severity. The cost of a breach for the financial sector is also 25% higher than other industries, averaging $6.08 million per incident, according to IBM.

As banks and other industries embrace new technology to modernize their operations, fraudsters are also investing in technology to create more sophisticated and targeted attacks, and financial institutions will remain high on their list of targets. Modernizing cybersecurity defenses in banking is essential.

AI implementation lags bullish expectations for early growth

For Temenos Chief Product Officer Sai Rangachari, the Integris survey priorities ring true; however, he believes artificial intelligence (AI) would be next on the list. “I haven’t had a single conversation in the last few months that didn’t involve AI,” he says.

The banking software provider recently conducted its own survey with Hanover Research, showing that 75% of banks are exploring the potential for generative AI, but less than half have actually deployed it.

Those results echo findings from an earlier ProSight survey in which:

• 30% of financial institutions said they were already using AI
• 33% said they plan to use AI in 2025
• 24% said they have no plans to use AI

While generative AI is newer to financial institutions, Roberson points out that artificial intelligence underpins many of the other top technology priorities, including data analytics and cybersecurity, where banks have long used machine learning for pattern recognition.

For newer AI applications as well as digital transformation investments, especially among smaller and rural banks, Roberson says there’s more of a “wait-and-see” approach as executives focus on other ways to drive efficiency and increase deposits.

“Community banks just don’t know where they’re going to get the most bang for their buck with additional spend,” Roberson says. “They’re curious about things like AI and digital transformation, but I hear the term ‘dry powder’ all the time. They’re waiting to deploy it once they see the areas where other banks are being successful.”

Reaching the limits of legacy core infrastructure

As banks consider their technology roadmaps going forward, Rangachari says digital transformation should be driving everything else—from risk management to cybersecurity to customer experience to data analytics.

“At some point, if you don’t transform your legacy technology, it starts limiting your ability to invest in other areas,” he explains. “This cost will continue to exacerbate the problem as higher perceived risk (of transformation) often leads to inaction while banks struggle to recruit new talent to work on legacy technology.”

Roberson agrees: “The banks are very limited on what they can get done with their legacy cores. There’s been a big push for the core providers to at least develop an API, so the banks can be more innovative with ancillary products and services.”

Large banks are pouring billions into innovation and modernization with the challenge of where to focus those dollars for the greatest strategic impact, Rangachari says. At the other end of the spectrum are community banks and credit unions that are often constrained by limited budgets, relying on strong local relationships and looking for end-to-end solutions that can deliver efficiency and value without overstretching resources.

Regional banks are caught in between because they must compete with the digital muscle of national players while trying to preserve the personal service that sets them apart, he continues.

One regional bank working with Temenos is starting its core modernization with the commercial banking platform—its primary growth area. By building a modern foundation there first, the bank plans to gradually retrofit its legacy retail systems, aligning transformation with its strategic priority of gaining commercial market share.

A large bank is tackling transformation one point solution at a time, gradually replacing outdated functions without disrupting core operations. In both cases, the approach reflects a growing trend: aligning tech investment to strategy, not just replacing infrastructure, according to Rangachari.

This “progressive modernization” is less risky and requires less initial investment than full-scale replacement. A phased approach also gives banks the opportunity to preempt problems.

For example, data mapping is a significant pain point for most modernization projects. AI plays a big role in helping banks map data more efficiently while also identifying blind spots or trouble areas in advance, Rangachari explains.

Charting the path forward: Customers over products

“The efficiency of your staff is directly tied to the quality of your IT service and support. You’ve got to get that piece right first,” Roberson adds. “If done well, strong IT support improves bank efficiency, and from there, you can confidently invest in new technologies. It’s hard to generalize across all of banking, but investments that speed up lending, onboarding or deposits almost always pay off.”

Ultimately, investing in technology that will drive ROI depends on who your customers are and what they need—whether providing accounting software as part of your small business banking offering, cash flow forecasting tools tailored to crop cycles and equipment purchases or preapproved loan options based on the age of an accountholder’s automobile.

“That’s the shift: proactive, personalized engagement powered by analytics,” Rangachari says. “It’s not about having the data. It’s about what you do with it.”

Digital transformation is not just about refreshing the front end. “You can’t transform just one layer,” he continues. “Your data is likely siloed, and that’s the real cost of not modernizing the core or approaching transformation holistically.”

That focus on data integration and personalized value delivery aligns with broader industry trends. In its latest analysis of 2025 banking priorities, Accenture emphasizes the need to shift from a product-centric model to one that puts the customer relationship at the center.

“New technology will not only allow [banks] to understand individual customers better; it will also enable them to deliver personalized advice and experiences, and tailor offerings to their specific needs,” writes Michael Abbott, senior managing director, global banking lead at Accenture.

To realize ROI from technology investments, banks must break down technological and cultural silos that undermine efficiency and customer insight.

The payoff? Deeper engagement, stronger loyalty and higher customer lifetime value, which will be critical advantages as banks face ongoing uncertainty and prepare for what’s next.

Loraine DeBonis is a contributing writer for BAI.