The Transformation Officer Mandate: Organizing Banks for the Future
Banks have been talking about digital transformation for decades. As early as the 1950s, they were exploring automated information processing technology. It has been a topic ever since:
- A 2007 Capgemini study found 90% of banks were seeking to have a common architecture for transformation.i
- Three of the top five transformation challenges identified by McKinsey in 2017 pertained to digitization.ii
- In a 2024 Bank Director survey, 61% of bank leaders said that leveraging technology is a strategic priority for the board.iii
Seventy years have passed, and banks are still transforming. Today, they face a challenge somewhat like an urban planner for a rapidly evolving metropolis. They are designing infrastructure for residents and businesses for the future. Many possible needs and jobs don't even exist yet.
Over time, transformation has shifted from isolated program offices to a core strategy. Banks are elevating transformation to the C-suite with a clear organizing principle. They want to enable money flows and asset lifecycles from end to end.
The city planning challenge
Walk through any major bank's technology infrastructure, and you'll encounter what resembles less a modern metropolis than a sprawling collection of neighborhoods built across decades. Banks have been built on on-prem, server-based technologies, and mainframe-based technologies over the course of the last 40 or 50 years. They’re the products of an amalgamation of acquisitions, business units developing their own technologies, groups finding solutions that work for them, and homegrown technologies implemented by people who are long gone.
The result is a mosaic of technologies. Large banks can have hundreds or even thousands of systems supporting capital markets alone. But it’s not a case of obsolescence. Many of these technologies still have utility and provide an edge that allows a business unit to create P&L for a bank. Mainframes continue to offer excellent functionality in maintaining critical data going back decades.
But, at the same time, everyone understands that this model doesn't allow for the type of growth that will be part of the decades ahead. We're seeing the emergence of digital assets, the digitization of assets, an increase in global banks, the development of new asset classes, and the adoption of innovative strategies. The pressure for transformations is driven by increasing costs and dynamic data requirements.
This scale of change has necessitated a fundamental shift in approach. Most banks now have transformation officers, a role that didn’t exist 5 years ago, leading teams that oversee projects aimed at transforming banks over a period of anywhere between 3 and 10 years.
Mapping the metropolis: the asset lifecycle as organizing principle
The early part of these projects is all about discovery across the entire organization, from equities to credit, rates, FX, and repo desks. What do we have that is critical? Where do we want to go? How do we get there?
On one hand, there are many commonalities. Everything revolves around the same core questions about securities, trades, execution, settlement, compliance, and reporting. But at the systems level, every asset class and step in the process may have its own underlying technology and data. Full consolidation may seem like an impossible nirvana, but it sets the horizon to strive for.
One of the biggest shifts in thinking is that it’s the asset lifecycle that drives the transformation, rather than the latest hot technology. The forcing function is P&L. Just below that is the fact that the landscape of asset classes and their lifecycles is evolving, requiring infrastructure that can accommodate not only traditional securities but also digital assets and financial products that don't yet exist.
Building for unknown future residents
The unknown future state is the fundamental challenge. If what you're doing now is trying to get your data ecosystem right, but the things that will determine whether it is right are things that won’t emerge for 10 years, how do you proceed?
By its nature, the process of transformation never ends, because markets continue to evolve. Wherever a bank is heading in the coming year, its priorities will inevitably change over the next 3 to 5 years. That level of strategic volatility calls for keeping transformation dynamic so that building for today’s priorities can also support tomorrow’s changes.
Three layers of infrastructure
Transformation officers and the programs they lead need to address three levels of infrastructure: technology, data, and operations. These three interconnected layers must work in concert.
The technology layer involves rationalizing massive numbers of systems into unified platforms while embracing cloud as critical infrastructure. Banks must decide what to keep from their mosaic of legacy technologies and what to replace with systems that can handle both traditional and digital assets. The challenge is taking a unified approach to serve multiple asset classes rather than perpetuating unique solutions for each. These decisions become the foundational infrastructure that everything else will run on.
The next layer is the data ecosystem. All the source systems produce and egress data, but there's no normalization of that data. By addressing those challenges in the data ecosystem, banks accomplish three things. They buy themselves time. They increase ROI from the underlying technologies. And they hedge their bets for future opportunities. For example, with healthy data, they can more easily replace a trading system by remapping the data versus addressing every other use case and integration.
Finally, the operational layer is already experiencing revolution. The reality of 2025 is that AI has created a tidal wave of change in operations within banks. It's filtering into every single function, creating efficiencies, handling reconciliations and exception reports, and accelerating settlement cycles with a speed and efficacy that is bowling people over.
The recipe for success or failure
The recipe for success is to have a plan with buy-in from senior management, all your business units, and your technology teams. That plan must ensure it's not a single layer but instead an integrated view of processes. Planning for change at all three layers of infrastructure means that transformation affects not only infrastructure but capability.
Success also depends on governance and alignment at the very top. Transformation fails when there's not a top-down mandate. Elevating transformation to the C-suite doesn’t solve the challenges unless banks integrate it across their entire organizational vision.
There are still many institutions where senior leadership is focused on their asset class and clients, making them slow to adopt new technologies. The result is that transformation stumbles over blockers, such as a business unit that keeps its technology because it still generates bottom-line value, or a technology team that insists on building something in-house when a better business case is to buy.
Pragmatic planning
Transformation success depends less on any one successful implementation or initiative and more on whether it allows a bank to pivot at any given point in time, given an evolution in technology, regulation, and market dynamics. The pragmatic view is to continue working on initiatives planned for the immediate future while remaining ready for change. If they can achieve 90% of their goals today, they know there will be another set of challenges in the next few years (or sometimes, months).
By creating robust, common underlying utilities — data, technology, operations — they can continually evolve the city to support whatever complex jobs and commerce the future brings. As BCG has estimated, putting a transformation office in place can improve value creation by up to 50%.iv The cities that thrive will be those that create systems capable of evolving with their ever-changing residents, even the ones who haven't arrived yet.
Authored By
Ted O’Connor
Ted is a Senior Vice President focused on Business Development at Arcesium. In this role, Ted works with leading financial institutions in the capital markets to optimize data, technology, and operational needs.
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[i] Capgemini, 2007. https://www.capgemini.com/es-es/wp-content/uploads/sites/16/2022/12/World_Retail_Banking_Report_2007_0.pdf
[ii] McKinsey, 2017. https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/culture-for-a-digital-age#/
[iii] Bank Director, 2024. https://www.bankdirector.com/article/2024-technology-survey-envisioning-your-banks-future/
[iv] BCG, 2024. https://www.bcg.com/publications/2024/how-to-create-a-transformation-that-lasts
