Gaps in talent, IP, and R&D are derailing commercial banking transformation

Commercial banking is stuck in the digital past

Commercial banks are lagging behind their retail counterparts in digital maturity. Unlike retail banking, transformation in wholesale banks demands complicated technology such as real-time capital visibility, straight-through processing, and more. Meanwhile, fintechs and non-bank lenders erode banks’ traditional market strongholds, putting banks at risk of disintermediation without bold action.

In HFS’ recent, one-of-a-kind assessment of commercial banking, HFS Horizons: The Best Service Providers for Commercial Banks, 2025, we interviewed commercial bank executives and service provider partners. Our research uncovered that banks rate their providers decently on execution and innovation capabilities—average client rating: 8.4, average partner rating: 8.3—but critical gaps remain. In this two-part DVP series, we unpack the key challenges: Part 1 dissects the execution shortfalls undermining delivery, which we will discuss in this DVP. In contrast, part 2 explores the innovation gaps holding back transformative outcomes for commercial banks.

Execution is shallow without a substantial scale of talent, and employee attrition undermines delivery

Service providers have pockets of domain expertise but are struggling to deliver commercial banking capabilities at scale. High attrition further compounds the issue, making retaining knowledge and talent in long-term transformation programs harder. A key point to note here is not the lack of industry or SME expertise but rather its scale. Expertise exists but is siloed or just at the leadership level, limiting impact. Strong leadership helps win projects, but a hollow domain-specific talent pool impacts execution quality and timelines.

Commercial banking has a steep learning curve owing to complex business processes and the technology landscape. Service providers risk falling short without serious investment in training, development, attraction, and retention strategies. Banks, in turn, are left with underwhelming outcomes and stalled digital journeys. Commercial banks rely on service providers for critical talent, domain expertise, and experience to provide a broad range of support across the commercial banking value chain. Trained employees are also a great source of fresh, practical innovation that commercial banks urgently need to drive meaningful modernization. Perceived gaps in the skilled resource scale put client relationships at risk. Thus, service providers must address this swiftly to cater to the rising demand for modernization and transformation.

Service providers are falling short on commercial banking specific IP

A key barrier to commercial banking transformation is the lack of scalable, domain-specific IP from service providers. Most rely on generic solutions, falling short in areas such as treasury, trade, and real-time risk intelligence, slowing implementation and innovation. Mid-tier providers drive much of the underperformance, though gaps in value proposition and articulation of execution and innovation span all tiers. To meet the evolving needs of commercial banks, providers must invest in differentiated IP, sharpen their go-to-market strategies, and articulate value with greater clarity.

The Bottom Line: Commercial bank leaders must prioritize providers with visible investments in talent and proven commercial banking IP.

Enterprise leaders must prioritize service providers with proven commercial banking IP, sustained investments in R&D, and the ability to scale talent effectively. They should not settle for providers that show up strong in pitches but weak in sustained delivery. Strategic transformation needs long-term thinking and the foundational capabilities to back it up.