Nasdaq and BCG Report Reveals How Banks Can Reduce Complexity and Unlock Opportunity

The global financial system has reached unprecedented levels of complexity, but banks now have better tools available to tackle these challenges head-on.

A new report released today, January 22, from Nasdaq and Boston Consulting Group (BCG), suggests that by embracing a systems-based approach powered by modern technologies like artificial intelligence and cloud computing, financial institutions can reduce the internal complicatedness that has spread as they’ve sought to meet the demands of an increasingly complex world.

"By leveraging modern technology and embracing a systems-based approach, we can unlock significant efficiencies and foster a more resilient and innovative ecosystem towards the dual goal of resilience and growth" said Nasdaq Chair and CEO Adena Friedman.

The report, "The New Growth Imperative: Cutting through Complexity in the Financial System" draws on surveys of risk and compliance officers at banks to understand their day-to-day difficulties. It details the costs they face from a complex global financial system and the consequences to their business, and surmises that a new approach with technology systems at its core would help many.

The Cost of Complexity

The environment banks face today is considerably more challenging than in the past. Research cited in the report shows that while external complexity increased more than sixfold throughout just over half a century, organizational complicatedness increased more than 35-fold in response. And the regulatory landscape has intensified, with new regulations now occurring at more than six times the rate seen during the Global Financial Crisis.

The stakes are high: major banks in the U.S. and Europe have paid $250 billion in non-compliance penalties over the past decade.

In examining why banks struggle to adapt, Nasdaq and BCG found that institutions have typically designed their processes and technology systems to meet immediate needs. The gradual rollout of new regulations has led to a patchwork of solutions, resulting in suboptimal operating models. And despite investing heavily in digitization—around $800 billion annually in technology—banks haven't seen meaningful declines in operating costs.

“The most effective solutions will require a comprehensive recalibration of people, processes, and systems,” said Tal Cohen, President of Nasdaq. “By shifting from lengthy manual processes to systems-based and people-led processes, human capital can be unlocked to focus on decision-making, risk management, oversight, analysis, and innovation.

Opportunities for Efficiency

The report advocates for a fundamental mindset shift: organizations need to move away from relying on people to handle manual, time-consuming tasks. Survey data shows banks are already indicating a desire to redirect resources away from manual processes: about one-fifth of risk and compliance operating expenditure currently allocated to headcount and contractors is expected to be reallocated over the next five years.

Instead, the report suggests employees should take on more forward-looking roles, implementing processes and managing technology to achieve desired outcomes. This systems-based model, where technology platforms form the foundation of risk and compliance operations, appears increasingly attractive to banks. The comfort level with cloud infrastructure among risk and compliance professionals has grown dramatically over the past decade, from 11% in 2014 to 93% today.

While the report focused on banks, its findings apply broadly to enterprises facing similar challenges.

The potential benefits are substantial: the report estimates that reducing complexity in bank risk and compliance functions alone could unlock up to $1 trillion in additional annual lending capacity. This could help address major economic and societal needs, including the estimated $80 trillion required over the next few decades to support the modernization of energy systems, digitization of the global economy and next-generation power solutions to enable advancements in AI.

Beyond freeing up capital, the approach could generate $25–50 billion in annual savings from risk and compliance operating expenditures. And these efficiency gains won’t come at the expense of regulatory compliance. Instead, by reducing manual tasks, organizations can redirect talent toward strategic planning and innovation, making them more adaptable to future challenges.

Download the report to learn more.