Nasdaq Whitepaper Defines How Midsize Banks Can Modernize and Scale Amid Complexity

The pace of change from new technologies and real‑time operations to evolving regulation and geopolitics has raised the complexity of the U.S. financial system.

America's mid-sized banks—historically categorized as those under $100 billion in assets—are navigating this pivotal transition.

After years focused on stability amid regulatory pressure and economic volatility, many institutions are now shifting toward growth. But as they scale, they face a steep rise in operational complexity, regulatory demands and technology requirements that can derail expansion if not properly managed.

Nasdaq recently published a white paper, "Redefining Growth for America's Mid-Sized Banks: A Guide for Banks and Regulators at a Critical Inflection Point," to help these institutions and their regulators determine their best path forward.

Drawing on interviews with C-level executives, insights from the Nasdaq-Listed banks and third-party research conducted with BCG in late 2024, the report outlines a blueprint that balances modernization with responsible growth.

The stakes are significant. Banks that embrace modern digital capabilities can reduce their costs by 10–20% in risk and compliance alone—amounting to $25 billion to $50 billion in savings across the sector. If reinvested, those savings could generate up to $1 trillion in annual lending capacity.

Here are Five Key Insights from the White Paper:

1. Growth Requires Careful Preparation

Banks are pursuing diversified growth strategies: expanding core business across geographies and products, strengthening local community presence, and adding new lines of business-like capital markets and wealth management.

Macroeconomic conditions are aiding dealmaking. Stabilizing interest rates are supporting valuations; easing deposit pricing pressure and improving loan growth provide tailwinds.

Regulators are signaling greater openness to bank M&A, with some institutions reporting faster‑than‑expected approvals. M&A activity is rising, 125 deals were announced in 2024, up from 98 in 2023 opening new pathways for expansion.

As regional and community banks re‑engage M&A, they must prepare for exponentially greater complexity, particularly on the regulatory and operational fronts. Approaching the $100 billion threshold triggers enhanced supervision and new reporting and oversight requirements.

Operationally, scalable systems and streamlined processes are essential to support growth without straining internal infrastructure.

Managing both is critical to sustaining momentum and achieving long-term profitability.

2. Modernization Demands Coordinated Changes Across People, Processes, and Systems

Sustainable scaling for banks demands a holistic approach driving modernization across their people, processes, and systems.

• People: Modernization across people means shifting teams from manual oversight to strategic analysis by equipping them with better tools and data. Success hinges on modern hiring practices, cultural change, cross‑functional collaboration, targeted skill‑building, and active user engagement.
• Processes: Improvements center on standardizing and automating risk and compliance workflows to reduce friction and improve responsiveness. Transparent, well‑governed processes are especially critical during M&A integrations when disparate systems must be harmonized.
• Systems: Modernization includes investing in cloud-native, AI-ready platforms that grow with the company and provide leaders with real-time insights. It also means working industrywide to build shared infrastructure for risk management and resilience.
• Emerging models like consortium analytics for financial crime management are allowing institutions to analyze patterns across networks without compromising data privacy.

Banks that progress across these dimensions will be better positioned to serve their communities, expand services, and compete effectively.

3. Cloud platforms and Unified Data are Foundational

Legacy infrastructure becomes a bottleneck as banks scale. Cloud-native platforms are now essential, enabling the scalability, flexibility and speed needed to handle complex functions without compromising performance or compliance. Confidence in cloud adoption has surged from 11% a decade ago to over 90% today, making it the backbone for AI deployment, real-time data access and future-ready architecture.

Equally critical is a unified data strategy. Many mid-sized institutions still operate with fragmented data environments and siloed systems that hinder efficiency and erode regulatory trust. The consequences are real: rising personnel costs, resources diverted from strategic analysis to manual reporting, lack of a single source of truth for capital and risk clarity, and inaccurate reporting that undermines regulatory relationships.

One CEO of a U.S. regional bank emphasized this point: "Our data environment, and access to real-time data, is a core enabler that will power our next generation of innovation."

4. AI Requires Enterprise-Wide Coordination

Most banks are experimenting with artificial intelligence, but only 25% have integrated AI into their overall plans. The rest have a looser approach, e.g., with individual champions driving department-by-department initiatives rather than coordinated enterprise strategies.

To unlock AI's full potential, banks must embed it into core workflows across front and back office operations while establishing governance frameworks and ethical guardrails. Success means standardized processes for reliability, clearly defined high-impact use cases and keeping people in the loop. AI should augment human judgment, not replace it.

As one CEO of a Mid-Atlantic regional bank noted: "We want our customer-facing staff to go up every quarter and our non-customer-facing staff to go down. Technology, and AI specifically, is the path to do that."

5. Executives Seek Clearer Regulatory Frameworks

Banking leaders emphasized the need for more transparent oversight that’s aligned with their core risk objectives. While they appreciated recent regulatory focus on core areas like capital, liquidity and credit, they stressed that regulation in other domains—particularly operational risk and consumer compliance—must be proportionate and tailored to each institution's unique circumstances.

Executives called for clearer frameworks around liquidity management, capital adequacy and stress testing and made clear that well-defined expectations from regulators would improve compliance outcomes. As one CEO put it: "Tell us exactly what you want, and we will provide it. Clarity—tailored by risk and segment—is really important."

Leaders also advocated for more information-sharing among peers, with regulators facilitating the exchange of best practices for commonly faced challenges. They suggested risk-based M&A supervision with accelerated approvals for well-rated institutions and leveling the playing field by applying equal oversight to fintech entities offering bank-like services.

Looking Ahead

Looking to the future, the financial landscape will continue getting even more complex, making it even more important and urgent to find new approaches.  As these banks near critical inflection points, whether regulatory, technological or competitive, the stakes rise. These moments are not just about compliance. They’re a chance to modernize infrastructure, elevate talent, and build scalable, sustainable growth engines. Nasdaq developed this paper to help banks and their regulators navigate this inflection point with clarity and confidence, offering practical steps to scale efficiently, manage complexity, and build durable, responsible growth.

Read the full white paper.