This year, leading commercial banks are reevaluating their strategies to maintain or improve their cost-to-income ratio (CIR) amid rising IT expenses and the prospect of falling interest rates. According to Celent, IT spending at commercial banks grew by 5.6% in 2024 and will continue to rise at a compounded annual growth rate of 4.6% through 2028. This shift signals a move away from short-term cost-saving measures to a more strategic approach focused on long-term transformation. 

From Cost-Cutting to Strategic Cost Management 

The traditional model of cost-cutting through one-off, short-term tactics is being replaced with strategic cost management. This approach involves a holistic evaluation of expenses across technology, human resources, controls, and third-party expenditures. The goal is to establish a foundation for continuous optimization rather than periodic interventions. 

For many commercial banks, this transformation requires a shift in investment priorities. IT spending, which accounts for 11% to 12% of overall expenses at the average bank, has historically been allocated to mandatory compliance and maintenance activities. However, a growing focus on operations optimization and business growth is driving a reallocation of resources. 

The Role of Technology in Strategic Transformation 

Technology is at the heart of this strategic shift. According to Accenture, nearly two-thirds of banks currently allocate less than 25% of their IT budgets to transformative projects. However, this is changing as institutions recognize the need for investments in hyperautomation and other innovative technologies. Leading banks are leveraging technology to: 

• Automate processes for improved efficiency. 
• Free up resources for strategic initiatives. 
• Create integrated digital experiences, such as modernizing loan origination and servicing systems. 

Hyperautomation, in particular, is poised for significant growth, with 89% of firms planning to increase their spending in this area over the next two years. This shift not only enhances operational efficiency but also builds a sustainable platform for growth and innovation. 

What It Means for Hiring 

The move towards strategic transformation has profound implications for talent acquisition in the banking sector. As banks realign their operating models and prioritize digital transformation, they will require professionals with expertise in areas such as: 

• Automation and AI implementation. 
• Cloud-based infrastructure management. 
• Digital transformation strategy and execution. 
• Compliance and regulatory technology. 

Hiring managers will need to focus on candidates who can bridge the gap between technical expertise and strategic vision. Additionally, there will be an increased demand for professionals who can lead change management efforts, ensuring that new technologies are seamlessly integrated into existing workflows. 

Building a Sustainable Future 

As commercial banks seek to further improve their CIR, they must recognize the interplay between cost transformation and digital transformation. Key priorities for the sector include: 

• Realigning the Operating Model: Abstracting products and business lines into reusable, API-enabled capabilities. 
• Redefining Work: Assessing which tasks require human involvement and identifying opportunities for automation. 
• Applying Digital Thoughtfully: Striking the right balance between human and digital interactions in customer and user experiences. 

Conclusion 

The banking industry’s shift from cost-saving to strategic transformation represents a new era of growth and innovation. For commercial banks, success will hinge on their ability to integrate technology with a forward-thinking approach to cost management. For hiring managers, this transformation underscores the importance of attracting talent capable of driving these changes. 

If your institution is looking to build a team that can lead the charge in strategic transformation, now is the time to focus on the right talent. Let’s shape the future of banking together.