As we approach the inauguration of a second Trump administration in January, one thing is certain: impactful change is inevitable. Institutions that quickly capitalize on these changes will find abundant opportunity. The banking community, in particular, will experience significant transformations.

Here are the top five shifts I foresee, and the technology considerations banks should be aware of:

1. Bank Mergers

The FDIC reports that there are 4,577 banks in the U.S. as of March 31, 2024, a decrease of 138 banks in the last three years. A pro-M&A Trump administration will likely accelerate this consolidation trend.

The Tech Impact: Bank acquisitions can be messy, with the consolidation of multiple operating systems being a costly and time-consuming endeavor. A dynamic, purpose-built data framework and ETL process can provide a quick and cost-effective way to ensure the data transformation critical to a successful merger becomes an early win.

2. Bank Regulation

In July 2023, the FDIC and the US Federal Reserve introduced Basel III Endgame rulemaking, increasing capital requirements for money-center banks by up to 21% and regional banks by 10%. After lobbying, regulators indicated a likely reduction to single digits. A more favorable regulatory environment could further reduce this impact, but the operational risk calculation will remain a key focus for regulators to ensure banks' operational resilience.

The Tech Impact: Initiatives to transform technology and data infrastructure at banks should continue. If banks are more profitable, the critical resources needed to fund these initiatives will be readily available. Ensure you are executing these transformation plans in an environment that allows your bank to push through big agendas.

3. Inflation Volatility

Inflation volatility, driven by tariffs, tax changes, and federal spending, is likely to create a more unstable funding environment for banks. Long-duration products would then see greater price swings, and wholesale funding markets experience more fluctuations. While funding regulations may ease, regulators will continue to demand more transparency on banks' exposure levels.

The Tech Impact: The FDIC and Office of the Comptroller of the Currency will demand more real-time data from banks, requiring treasurers and data teams to provide detailed analytics on liquidity and capital. A solid data culture, focused on scalable data ingestion, transformation, lineage, and masking, is key to meeting regulatory demands and delivering actionable insights.

4. Crypto

The Trump campaign's close ties with crypto leaders have raised expectations for a more favorable crypto trading environment in the U.S. Bitcoin's recent surge past $75,000 reflects optimism. Banks and financial intermediaries, after years of strategizing, are set to fast-track plans for trading and servicing crypto assets, moving from ideas to product development.

The Tech Impact: Crypto presents unique tech challenges for banks, from blockchain-driven real-time settlements to the complexities of crypto wallets and asset accounting. To support coin trading and perpetual futures, banks need to reassess their middle- and back-office systems, ensuring their tech stacks are ready for seamless integration of this evolving asset class.

5. AI

Big tech leaders have rallied around a second Trump administration, which could lead to friendlier regulatory oversight for AI in banking. AI's role in predictive models, risk assessment, product development, and management will accelerate. Under less restrictive regulations, C-suite leaders are empowered to drive AI adoption, but the risks of implementing AI poorly will remain significant.

The Tech Impact: AI is a powerful tool for financial institutions, but success depends on high-quality data. CTOs and CDOs must ensure data integrity and completeness by fostering a culture of data awareness. A strong foundation in data acquisition, modeling, and quality assurance will drive AI adoption and set banks on the path to transformation.

Conclusion

As we stand on the precipice of a new political era, the banking sector is poised for significant transformation. The shifts outlined — from accelerated mergers and acquisitions to the rise of crypto and AI — present challenges and opportunities. To navigate this evolving landscape successfully, banks must prioritize technological agility and data excellence.

Embracing dynamic data management solutions, fostering a robust data culture, and ensuring your tech stack is primed for innovation will be critical. The institutions that act swiftly and strategically, leveraging technology to meet regulatory demands and capitalize on new markets, will not only weather the changes but thrive in the years ahead.

At Arcesium, we stand ready to support our clients with cutting-edge solutions that drive success in this new banking paradigm. Together, we can turn the winds of change into a tailwind, propelling the industry forward.

Continue the conversation with me on LinkedIn. I hope you found this to be a beneficial article and invite you to share your thoughts and insights. If you would like to have a more in-depth discussion of the ideas I have presented here, please contact me directly.

This article originally appeared on LinkedIn.