Reinvent or be replaced: the new urgent reality for commercial banking

Why is the need for transformation more pressing now than ever before? Ramamoorthy points to three fundamental drivers that are shaking the foundations of commercial banking.

1. Client expectations have been redefined

This shift is about consumerization of experience. Whether they’re 30 or 55, today’s corporate treasurers, CFOs, and business owners expect commercial banking to work as smoothly as the digital platforms they use every day.

2. The competitive landscape has been redrawn

Banks are no longer just competing with each other. API-first fintechs, neobanks, and even ERP and payments platforms are bypassing  traditional services, offering embedded credit, cash-flow tools, and instant payments natively within business workflows.

With the global fintech market projected to approach $300 billion, incumbents cannot afford to treat this as a side threat. This is now a battle for primary relationship ownership.

3. The cost of inaction is prohibitive

Slow onboarding is no longer just inconvenient — it’s expensive. Many banks still take months to onboard a new commercial client, leaving millions in potential revenue unrealized. At the same time, labor shortages, compliance costs, and rate volatility are squeezing margins.

As KPMG highlights, 86% of U.S. banking leaders believe adopting AI will provide a competitive advantage, but most lack mature measurement tools to track ROI. Inaction is not a neutral choice; it actively erodes profitability and market share.

The future of commercial banking lies in embedding financial services within the client’s workflow, not merely upgrading the portal.Businesses don’t want to manage banking — , they want it to happen invisibly inside their ERP, accounting, and logistics systems.

Artificial Intelligence is the enabler. Ramamoorthy sees AI as the single biggest game-changer, predicting that the next 18 to 24 months will determine the winners and losers.

• Treasury management will shift from reactive cash reporting to predictive liquidity planning, powered by AI copilots.

• Business lending will adopt embedded BNPL-style models, enabling instant credit decisions at the point of need.

Boston Consulting Group echoes this urgency in its 2025 report The AI Reckoning Is Here:

Ramamoorthy compares this shift to the leap from modem-based systems to web banking — it’s a non-optional upgrade for survival.

Where does this leave the trusted Relationship Manager (RM)? The AI revolution will elevate rather than replace them. Instead of being buried under administrative tasks and manual data gathering, the RM will be empowered by AI copilots that surface insights, highlight risks, and suggest next best actions. This enables the RM to become a strategic advisor, orchestrating the entire client relationship and providing highly personalized, data-driven guidance.

KPMG emphasizes that this evolution is as much about governance and enablement as it is about technology. Without clear metrics and role redesign, banks risk missing AI’s full potential.

Commercial banks hold a valuable asset that fintechs can’t replicate: client trust and long-standing relationships. But trust is not permanent.

The next few years will separate the leaders from the laggards. The banks that will thrive are those that:

• Embed themselves in client workflows

• Deploy AI at scale — with governance, measurement, and cultural adoption

• Elevate the RM role into a proactive, insight-driven client orchestrator

As BCG puts it, the moment of AI reckoning has arrived. For commercial banks, adopting AI-powered, embedded banking is becoming less a growth opportunity and more a strategic necessity.

Navigating this new landscape requires more than just a vision; it demands a modern technology foundation built for agility and scale. Backbase’s AI-powered Banking Platform is designed to help commercial banks make this transition without a disruptive "rip-and-replace" of their core systems.

Here’s how Backbase addresses the key challenges:

• Unified client and employee experiences: Our platform breaks down internal silos, creating a single, consistent view of the customer for both clients and Relationship Managers, turning RMs into the strategic advisors of the future.

• Speed to market: Backbase provides pre-built, accelerator journeys for critical processes like digital onboarding, treasury management, and lending. This allows you to deliver new, AI-ready digital experiences in months, not years.

• Embedded banking, made easy: With an API-first architecture, our platform enables you to easily extend your banking services into the third-party ERP and accounting systems where your clients operate daily.

The imperative to reinvent commercial banking is here. Backbase provides the platform and expertise to ensure you lead the change, not get left behind by it.