S3 | E2: Driving Banking Innovation in 2025 - Insights from Joseph Berry at KBW

In this episode of the Risk Intel podcast, Joseph Berry, Co-head of Investment Banking at KBW, joined host Ed Vincent to share his insights into the evolving landscape of banking and FinTech and what will drive innovation in 2025. Joe discussed critical topics ranging from data analytics and customer profitability to the role of mergers and acquisitions (M&A) in driving innovation. Listen or watch the full episode below or read the summary to learn more.

Data is the Currency of the Future

A recurring theme in the discussion was the central role of data in shaping the future of banking. Joe emphasized that data is more than just an operational necessity; it is the currency of the future, driving competitive differentiation. He pointed out that many banks, despite housing vast amounts of data, lack the tools to conduct advanced analytics and understand profitability dynamics within their customer base.

"Banks are sitting on a treasure trove of data, but the problem is, many don’t know how to unlock its potential. Advanced analytics can tell you which customers are profitable and which ones aren’t—down to the $50 level."

For example, Joe highlighted the case of StrategyCorps, a firm specializing in analyzing checking accounts. By breaking down customer profitability into $50 increments, the firm empowered banks to identify which customers to retain, incentivize, or let go. Joe also noted that such granular insights are critical for banks to compete effectively, especially as FinTechs and neobanks continue to disrupt the market.

Embracing Technology: A Strategic Imperative

Joe later underscored the urgency for banks to embrace technology to remain competitive. He acknowledged that historically, only the largest banks, like JPMorgan and Bank of America, could afford to develop their own tech platforms. However, for mid-sized and smaller institutions, leveraging modern core providers and FinTech partnerships has become essential.

He highlighted a shift in the market, with banks increasingly turning to FinTechs or BankTech providers for innovative solutions. This trend is driven by the need to enhance user experiences and compete against digital-first platforms. Joe also cited examples of FinTech acquisitions, such as DocFox’s merger with nCino, to illustrate how banks and core providers are accelerating their technology adoption by acquiring established FinTech solutions.

M&A and Partnerships: The Path to Growth

Joe delved into the convergence of banking and FinTech through M&A and strategic partnerships. He noted that partnerships often begin as reseller agreements or commercial relationships, which evolve into full-scale acquisitions once the synergies between the two parties become apparent. For example, DocFox’s commercial relationship with nCino led to an acquisition that enhanced cross-selling opportunities and margins for both firms.

"The pace of M&A between FinTechs and banks is only going to accelerate. There’s a race to capture market share, and those partnerships will drive innovation on both sides."

This trend is expected to accelerate in 2025 and beyond, as banks and FinTechs race to capture market share. Joe observed that only 130 banks in the U.S. have over $10 billion in assets, creating intense competition among technology providers to secure relationships with these institutions. At the same time, smaller banks and credit unions are increasingly adopting streamlined, cost-effective technology solutions to stay competitive.

The Rise of Community Banks and Credit Unions

Towards the end of the conversation, Joe highlighted an interesting development: credit unions are often outpacing small banks in technology adoption. He attributed this to their consumer-focused business models and the support of consortiums that facilitate the acquisition of cutting-edge technology. In contrast, smaller banks have struggled to keep up, often due to limited resources and the dominance of larger acquirers in M&A transactions.

Joe also touched on the challenges faced by community banks, which now find themselves competing not just against each other but also against tech giants like Amazon and Walmart. To survive, these institutions must leverage innovative solutions tailored to their unique needs, including lightweight enterprise risk management (ERM) tools and modular tech stacks.

Conclusion

Joseph Berry’s insights highlight the transformative role of data, technology, and strategic partnerships in the banking industry. As financial institutions navigate an increasingly complex landscape, leveraging these elements will be critical for staying ahead of the curve. Whether through data and advanced analytics, FinTech partnerships, or targeted M&A strategies, banks must embrace innovation to thrive in a competitive market.

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For financial professionals and FinTech enthusiasts, KBW’s upcoming events offer valuable opportunities to connect with industry leaders and explore the future of banking innovation.

The Winter Financial Services Conference | February 12-14 | Boca Raton, FL

This event will focus on larger-cap banks, financial institutions, and FinTechs, creating a platform for dialogue between public companies and investors.

Buyers and Builders Conference | April | Napa Valley

This unique event will bring together venture investors, early-stage startups, and established financial institutions to explore opportunities for growth and collaboration.

Joe emphasized that fostering an ecosystem approach is essential for driving innovation and ensuring the long-term success of the financial services industry.

‍Learn more about KBW events here