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In 2025, banks face a complex challenge where cost management and revenue diversification are critical for maintaining profitability. With rising operational expenses, pressure on net interest income, and regulatory demands, the industry must find more sustainable strategies. Let’s take a look at the key challenges banks are grappling with and the approaches they can adopt to overcome them.
Banks’ operating expenses have surged in recent years. Among U.S. banks with over $10 billion in assets, compensation costs alone grew by 4.1% year-over-year, reaching $149.6 billion in the first half of 2024, according to Deloitte. This spike is driven by performance-linked rewards in revenue-generating divisions such as trading, wealth management, and investment management, alongside competitive pay to attract top talent in fields like machine learning and generative AI.
Compliance costs remain a significant challenge. With new regulations—such as open banking, Basel III Endgame, and updated debit card swipe fees—taking effect in 2025, banks are under pressure to adapt. A recent study revealed that the cost of financial crime compliance for U.S. and Canadian banks reached tens of billions, encompassing investments in anti-money laundering software, know-your-customer systems, and infrastructure upgrades. To address these cost pressures, banks must rethink their expense management strategies.
Adopting new technologies (like machine learning for fraud detection) triggers compliance obligations, overwhelming compliance teams as regulatory complexity grows. Add to that new market expansion, audits, third-party consultants and operational adjustments, and your organization is bleeding money again.
Making a smart investment in a regulatory compliance platform like Regology, despite the upfront cost, will help eliminate superfluous expenses thanks to the latest developments in compliance-related AI. It helps maintain agility in adapting to new regulations and save on both apparent and hidden costs, highlighted below.
Discovery costs
Manual compliance processes—such as tracking regulatory updates, analyzing applicability, and implementing changes—are very labor-intensive, costing teams a lot of time, and are often error-prone. Without automation, a team of compliance specialists might spend weeks reviewing a new regulatory update like Basel III Endgame. By automating the monitoring and analysis process, Regology reduces this effort to hours, allowing teams to focus on implementation instead of discovery. This could save a mid-sized bank hundreds of thousands of dollars annually in labor costs spent on tasks like cross-referencing physical repositories and databases or updating spreadsheets.
Read about How a Top 20 U.S. Bank Leverages Regology
Local expertise costs
As banks expand into new markets, managing compliance across multiple jurisdictions becomes increasingly complex and costly. A bank entering the EU market, for example, will face GDPR and PSD2 compliance requirements. Regology’s jurisdiction-specific insights help streamline these efforts, reducing the need to hire local compliance experts or external consultants, saving tens of thousands in upfront costs.
Read about The Challenges of Multi-jurisdictional Legal Research
Vendor management costs
Banks often outsource compliance-related tasks, such as AML system updates or policy audits, at significant expense. By automating regulatory change management, compliance mapping and workflows, Regology reduces the need for external consultants, saving tens to hundreds of thousands of dollars annually depending on the bank’s size and complexity.
Read about How a Regional Bank Improves Compliance with Automated Impact Analysis
Audit preparation costs
Regulators frequently audit financial institutions, requiring comprehensive documentation and evidence of compliance. Preparing for audits manually consumes significant resources and could take a compliance team weeks, costing thousands in staff time that could be otherwise spent on revenue generation. Regology centralizes and automates documentation, reducing this process to days and saving up to 80% of preparation costs.
Fines and penalties costs
Non-compliance can result in hefty fines, reputational damage, and customer attrition, as we saw in 2023 when U.S. regulators imposed $2.7 billion in fines for AML and KYC violations. Efficient compliance management ensures that updates are implemented on time and accurately. Banks can avoid these costs by using Regology to automate timely regulatory updates and get as accurate of a compliance program as possible.
Banks must also invest in training programs that equip their workforce with expertise in AI governance, ethical AI practices, and technical implementation to ensure these systems operate securely and responsibly.
As banks work to manage rising compliance costs and integrate advanced technologies, the need for a skilled workforce is equally important. Upskilling employees in RegTech and compliance frameworks allows banks to navigate evolving regulatory demands while improving efficiency. By using online learning platforms, offering targeted in-house training, and collaborating with RegTech vendors, banks can provide their teams with the tools to succeed in a cost-effective manner. A workforce well-versed in these technologies can help minimize compliance risks, streamline operations, and support sustainable growth, aligning with the broader need for operational resilience and financial stability in 2025.
As banks prepare for the challenges of 2025, they need to take a balanced approach to managing costs and growing revenue. This means building a culture that values smart spending, adopting AI and automation to streamline operations, diversifying income sources, and embedding risk management into their strategies. By using tools designed to keep up with regulatory changes, banks can stay compliant while also improving efficiency and resilience.
Although the road ahead may be complex, it is far from impossible. With a focus on sustainable cost management and innovative thinking, banks can adapt to shifting demands and position themselves for long-term growth.
If you would like to learn more about how Regology’s customers are using the platform to automate their compliance and save resources, read the case studies here. You can also reach out to us to schedule a free demo of the platform!
