As the banking sector grapples with economic uncertainty, rising operational costs, and evolving customer expectations, a clear message emerges from McKinsey’s March 2025 report: banks must simplify to grow. Traditional efficiency drives have yielded short-lived results, and the rising tide of compliance requirements, outdated tech stacks, and fragmented processes continue to undermine productivity.
The Hidden Cost of Complexity
Over the past decade, the cost of delivering banking products like mortgages has soared—not just due to inflation, but because of layered regulatory requirements and inefficient workflows. The average cost to originate a mortgage doubled from $5,100 in 2012 to $11,600 in 2023. Meanwhile, productivity at US banks has been declining by 0.3% annually since 2010, even as most other industries have improved.
This trend isn’t just a financial drain—it erodes customer satisfaction and burdens employees with redundant, low-value tasks.
The Simplification Solution
The report introduces a powerful concept: “Simplification at Scale”—a strategy that banks can adopt to radically rethink their operations. It starts with a fundamental shift: moving from isolated cost-cutting tactics to a comprehensive overhaul of how work is done.
Key pillars of this transformation include:
- Streamlining operations: Cutting non-core business units and reallocating resources to high-ROI areas like digital services and wealth management.
- Rethinking operating models: Reducing bureaucracy and improving the ratio of client-facing work vs. internal administration.
- Embedding agile thinking: Shorter design cycles, faster testing, and quicker time-to-market across product development.
Scaling with Impact
Simplification alone isn’t enough—scale is the multiplier. By leveraging technologies such as generative AI, banks can reduce fraud, accelerate underwriting, and enhance customer support with automated systems. Several case studies in the report show how targeted AI implementation resulted in up to 30% productivity gains and 20% improvements in customer experience.
Furthermore, optimizing branch footprints, automating dispute resolution, and encouraging customer self-service are strategies that not only save costs but also boost satisfaction.
The Customer Experience Imperative
Customer-centric design is no longer optional. Today’s users expect omnichannel access, transparency, and personalized offers. Simplified operations make it easier to deliver these expectations, enhancing loyalty while also reducing the time and cost of service.
Banks that succeed in this new era will be those that treat simplification not as a one-time project, but as a strategic imperative. When done right, simplification at scale drives better productivity, happier customers, more engaged employees, and sustainable profit margins.
As McKinsey notes, “A large, complex system doesn’t organically reinvent itself.” It must be disassembled, redesigned, and rebuilt for resilience—and the time for that transformation is now.
