Commercial banks prioritize improving digital hygiene to reduce costs, improve operations, and elevate customer experience

Commercial banks want to gain business value from their IT investments. To achieve it, they seek outcomes such as modernization, CX enhancement, risk and regulatory compliance, and AI enablement from their professional services partners. In our recent (one-of-a-kind) commercial banking assessment, HFS Horizons: The Best Service Providers for Commercial Banks, 2025, we asked commercial banking leaders interviewed as references for this study to comment on the primary value their IT and business service provider partners deliver today and are expected to deliver in two years.

The HFS Horizons model aligns closely with enterprise maturity. Respondents indicated that the primary value realized today is largely Horizon 1—functional digital transformation focused on digital and optimization outcomes (54%). In two years, the focus will continue on digital and optimization outcomes (51%) as the industry strengthens its digital hygiene to better serve large customers while also expanding to effectively cater to small and medium enterprise (SME) clients.

Currently, about a third of commercial banks are tapping their service providers to support enterprise transformation (34%). While modernization needs abound, this focus will be downplayed in the coming years. The most significant value shift in the next two years is to Horizon 3 initiatives. Commercial banks want to leverage their modernization initiatives to help them expand their footprint and increase their relevance to commercial customers with broader liquidity offerings, non-banking services, and other ecosystem plays. Commercial banks must choose their partners based on the value they seek; incumbents may be the convenient choice, but they must demonstrate updated and relevant value.

The Bottom Line: Modernization is essential for commercial banking success in 2025.

Commercial banks own the high-value relationships within their firms, but they must play catch-up with their retail banking siblings. They must seriously up their digital customer experience game by shifting from manual processes and people-led engagement running on legacy tech. The competition is intense, with commercial clients diversifying their relationships across banking institutions, non-bank lenders, and nimble fintechs gaining ground. Consistent priorities around customer experience, new business models, and enabling better business transactions necessitate modernization to secure each bank’s future—goals that commercial banks can achieve with the help of their service provider partners.