Proven strategies to drive successful bank mergers

February 04, 2025

Bank consolidation is expected to continue as financial institutions seek ways to contend with pressure from investors to boost profits, especially with high interest rates that make it tough to grow organically. And with rate cuts by the central bank in late 2024, there are deals to be had.

If your bank is considering a merger or acquisition, it is likely your C-level executives and board are focused on expanding your geographic footprint, broadening your offerings and driving growth. As many banks’ mergers and acquisitions (M&A) progress, they have found that may just be the beginning. An array of unexpected rewards often factors into the equation, unlocking greater value for customers who entrust you to care for their money when it is at rest, in motion or at work.

Find the right match

Your M&A journey may start with the quest for a bigger customer base and greater assets. However, as you define the new operating model, access your mutual IT infrastructures and create a systems conversion plan, you may find that your good merger has the potential to become a great one.

On the technology side, you may discover that the bank you’re acquiring has superior technical innovations that bring added value to what you already own, or you may learn that their back-office processes are cleaner and simpler than yours. Similarly, from the human perspective, you might uncover talented individuals eager to unleash their experience and bring new perspectives to the business.

Think ‘ecosystem’

As you take stock of your newly combined technologies and processes, you’ll find similarities and differences, strengths and weaknesses, redundancies and gaps.

Remember, you don’t have to limit yourself to what you find in your pooled collection of operational tools. This is an opportune time to look outside your four walls – or eight walls – and contemplate what it would require to create a true best-of-breed ecosystem.

For example, explore where the merged entity stands with the adoption of artificial intelligence (AI) and data analytics. According to the 2024 FIS® Global Innovation Research, around three-quarters of U.S. and U.K. bank executives plan to increase spending in this area in the coming year. These capabilities are important during an acquisition because AI can save hundreds of man-hours by expediting mundane tasks, such as cleansing the data that must be merged.

As you continue your M&A journey, expanding the use of AI, machine learning and advanced data analytics will become essential because you’ve likely more than doubled the volume of data coming from all corners of two organizations, not to mention external sources. It’s essential that you have the intelligent tools you need to spot overarching trends and patterns of behavior, ultimately positioning you to forge deep, lasting bonds with your blended customer base.

The same applies to other capabilities that hold the potential to create strong ecosystems. Which of the two banks has the best payments technology, or is now the time to explore outside options? Ask the same question about your cybersecurity safeguards, your fraud protection, online banking platform, lending systems, compliance technology and treasury capabilities. Take a hard look at all your third-party partners: Do they represent best of breed?

Now is your chance to seize the opportunities.

Double down on crime

Along with the rewards come the risks as an M&A heightens your vulnerability to cyberattacks and fraudulent activities. As your two banks merge, an array of tools and applications provided by any number of providers are coming together, as well, creating potential points of exposure all along the way. When those discontinuities open, you must expect that a cybercriminal or fraudster stands ready to exploit any weakness.

The 2024 FIS® Global Innovation Research indicates that banks around the world are taking steps to protect themselves.

79% of banks around the world are preparing to implement real-time alerts within the next one to three years. ¹

More than 90% of banks around the world are planning to add pattern recognition and cross-channel fraud detection in the same timeframe.¹

With a merger or acquisition underway, now is not the time to allow security to take a back seat. To the contrary, you need to create and implement a well-defined security program with accountable executives and sufficient resources and investment to prevent damaging breaches.

Still, cybercrime and fraud are going to happen. You’re under siege every day, every second. There is no way to achieve 100% protection of your banks and your customers.

That said, you must find the balance between protecting yourself against loss without becoming overly protective and disrupting the customer experience.

After all, if your customer can’t get their money or use their card, you risk doing damage to the relationship. Given the sensitivities around an M&A, this is the wrong time to alienate a customer.

Partner up

Given the complexities and high stakes of merging two financial institutions, it’s imperative to follow a methodology that is proven in the marketplace.

You must find a fintech partner with a record of leading clients successfully through the process, a partner that can help you define your target operating model, evaluate systems conversions and assess your IT infrastructure.

A seasoned partner can help you uncover potential cost savings, identify risks and prioritize investments for growth.

Together, you and your technology partner will develop an effective transition plan that outlines all the steps along the way, complete with defined roles and responsibilities. Based on previous successes, your partner can go far beyond the technical steps: They can help you manage employee realignment and retention and communicate appropriately with all stakeholders – investors, customers, regulators and employees – at the right points along the way.

Lead and grow

Despite shifting economic and political factors, most industry observers expect bank consolidation to continue for the foreseeable future. If an M&A is the right path for you, be sure to find the merger that brings the greatest synergies, not just in geographical and financial presence, but also in terms of the technologies, processes and cultures that will come together. Take advantage of the moment to elevate your operations from a disparate collection of point solutions to a true banking ecosystem with best-of-breed components.

Because risk runs high during M&A activity, take decisive steps to protect your converging banks and customers from financial crime threats. Finally, develop a detailed transition plan that defines accountabilities for each step to ensure you emerge a stronger, more modern financial institution that is ready to lead and grow.

¹FIS, Global Innovation Research 2024 surveyed 2,000 firms across financial services and other industries in the U.S, U.K., Singapore, Hong Kong and Australia.