A joint report by Nasdaq and Boston Consulting Group (BCG) reveals that financial institutions could achieve between $25 billion and $50 billion in annual savings by streamlining their Risk and Compliance functions.

The report, titled “The New Growth Imperative: Cutting through Complexity in the Financial System,” highlights how external complexity, such as evolving regulations and technological advancements, has driven a sharp rise in internal complicatedness within banks. This layered response has inflated costs and hampered efficiency, but modern technology presents an opportunity to reverse this trend without compromising effectiveness.

According to Nasdaq Chair and CEO Adena Friedman, addressing these challenges requires a systems-based approach that leverages technology to reduce redundancy and enhance innovation. Simplifying processes in areas like compliance could free resources for critical investments in digitization, energy modernization, and AI-driven solutions. BCG CEO Christoph Schweizer notes that embracing these changes could unlock up to $1 trillion in lending capacity, emphasizing the need for financial institutions to recalibrate their people, processes, and systems for greater efficiency and competitiveness.

The report also underscores a growing industry trend toward strategic partnerships with technology providers, as only 22% of professionals prefer in-house solutions. By shifting from manual to systems-based operations, banks can focus their human capital on decision-making and innovation. Nasdaq’s President, Tal Cohen, highlights that modernizing these systems is not just about cost savings but preparing for an AI-enabled future. With regulatory complexity increasing and the financial system more interconnected than ever, the report calls on bank leaders and regulators to adopt innovative approaches that balance resilience with growth.