Monica Hovsepian is the Global Financial Services Lead at OpenText.
The financial services industry is undergoing a massive shift. As banking becomes more digital and global, institutions face growing business, compliance and regulatory risks. To stay ahead, they must modernize customer engagement while strengthening governance and transparency.
Where The Money Goes
Since 2007, banks have poured enormous resources into bolstering internal controls, yet risks keep rising. Banks globally spend $650 billion annually on IT, with 60% allocated to applications over infrastructure, signaling a focus on innovation. In 2024, financial crime compliance tech was projected to cost banks $34.7 billion, while operations demanded $155.3 billion. These aren’t optional upgrades—they’re essential safeguards against growing regulatory scrutiny.
Balancing Talent And Tech
Risk management spending is climbing, hitting $59.9 billion in 2024, and highlighting the relentless pressure on banks to stay ahead of regulatory changes, cyber threats and sophisticated financial crimes.
The human factor is just as critical. In a recent KPMG survey, 73% of participants predicted a rise in compliance focus, particularly around meeting heightened regulatory expectations. With 61% of firms expecting the cost of senior compliance staff to rise significantly, it’s clear that expertise and vigilance remain integral to effective risk management.
This dual investment in technology and talent illustrates a hard truth: Digital transformation is not just about innovation; it’s about survival. As banks modernize their operations, they must build on a foundation of robust cybersecurity, streamlined governance and dynamic risk management. The institutions that strike the right balance between transformation and resilience will not only lead the market but earn something even more valuable: customer trust.
How Banks Can Adapt
To balance modernization with resilience, banks should:
1. Strengthen cybersecurity.
Use AI-driven threat detection for real-time risk mitigation, adopt zero-trust security models, and continuously update security protocols.
2. Modernize systems.
Migrate to cloud-based infrastructure, implement open banking APIs, and automate routine processes to boost efficiency.
3. Enhance compliance and governance.
Use AI-powered tools for regulatory reporting, automate compliance monitoring, and ensure transparency to build trust.
4. Optimize customer experience.
Personalize services with AI-driven insights, simplify and digitize onboarding process, and offer omnichannel support via chatbots and mobile apps.
5. Invest in workforce upskilling.
Train staff in AI, blockchain and data analytics, foster a culture of continuous learning, and align IT, security and business teams on transformation goals.
6. Implement strong risk management.
Use predictive analytics to assess risks, automate fraud detection, and develop disaster recovery and business continuity plans.
Maximizing ROI In Digital Transformation
Banks can optimize spending by prioritizing high-impact compliance investments, conducting risk assessments to allocate resources efficiently, and using AI-driven compliance tools to reduce costs and manual errors. Adopting a zero-trust security model can strengthen cybersecurity while minimizing breaches.
Additionally, implementing phased digital transformation—starting with small-scale AI pilots before scaling enterprise-wide—can support a smooth transition while minimizing disruption. Banks can also leverage open banking APIs to integrate new capabilities without disrupting legacy systems, making it easier to modernize operations.
Choosing The Right Partners
Digital transformation is essential, but compliance costs are rising. Partnering with the right solution providers can streamline operations while reducing risks.
Key questions to ask providers include:
- How do you ensure adherence to global regulations?
- Can your platform grow with our needs?
- What AI-driven features enhance efficiency?
- Can you prove measurable business impact?
- What resources are needed for deployment and training?
When choosing a partner, there are also a few red flags you should look for, including:
- A lack of transparency: If a provider is vague about security measures or regulatory compliance, that’s a major warning sign.
- A one-size-fits-all approach: Banks need tailored solutions, not generic offerings that don’t align with specific needs.
- Weak integration capabilities: A solution that doesn’t seamlessly connect with existing systems can create inefficiencies and security gaps.
The Future Of Banking
In an era where the next disruption is always just around the corner, financial institutions must be proactive. The path forward lies in leveraging technology to enhance customer experience and create a resilient, compliant and future-ready organization. It’s not just about spending big bucks—it’s about making every dollar count in the fight against evolving risks.
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