Redefining banking cost models in the quest for profitability 

Summary

Redefining banking cost models is a critical priority as banks face mounting pressure on profitability from increased competition, regulatory demands, and macroeconomic challenges. This report examines how banks are moving beyond traditional cost-cutting to embrace sustainable cost optimisation, focusing on efficiency, digital transformation, and new operating models. It explores the impact of digitisation, automation, and legacy IT transformation on banking cost structures, and highlights the shift towards customer-centric strategies that balance cost control with growth. Key areas covered include branch transformation, modernising core banking platforms, technology investments such as cloud, AI, and intelligent automation, and the strategic choice between insourcing and outsourcing digital ecosystems. The report also analyses the rising importance of digital distribution costs and the need for banks to optimise customer acquisition and channel management. Through case studies and analysis of leading APAC banks, the report addresses questions such as: What are the emerging cost categories in banking? How can banks modernise their infrastructure for agility and resilience? What strategies help reduce digital distribution costs while enhancing customer experience? How can banks leverage embedded finance and ecosystem partnerships to drive profitability? This comprehensive guide is essential for banking leaders, strategists, and technology decision-makers seeking to build resilient, future-ready cost models in the evolving financial services landscape.