By Steve Dow
The quarterly board deck looks great.
Capital ratios: strong. NIM: holding. Deposit base: stable. Every slide is green. The CEO clicks through with confidence — another solid quarter in the books.
Then a director leans into her microphone. “JPMorgan is spending $20 billion on technology this year. How can we possibly compete with that?”
The room goes quiet. Not because nobody has an answer — but because everyone knows the real answer isn’t on any slide in the deck. The question is uncomfortable but leads to the most important strategic conversation happening in boardrooms across community and regional banking right now. And the answer, frankly, is both simpler and more urgent than most bankers want to admit.
Banks are data companies running on someone else’s software
Here’s a self-evident truth that most bankers already know but rarely say out loud: Banks are not software companies. They never have been. What banks are — and what makes them irreplaceable — is data companies. They sit on decades of transaction history, customer behavior, creditworthiness signals and community intelligence that no startup can replicate.
Fifteen years ago, Marc Andreessen famously wrote “software is eating the world.” That adage remains truer than ever, especially in banking. The mechanisms by which banks deliver value to customers? Those are increasingly made of software. Online and mobile banking. Digital account opening. Real-time payments. Fraud detection. Cash flow forecasting. The customer doesn’t experience your balance sheet — they experience your software interface.
And here’s the thing: Banks already outsource the vast majority of that software. Core platforms from FIS, Fiserv and Jack Henry. Digital banking layers from Q2, Candescent and others. The idea that banks build their own technology is, for most institutions, already fiction. The question isn’t whether to rely on external technology partners. It’s whether you’re choosing the right ones to solve problems quickly and stay ahead of the competition.
The speed gap is getting wider
That director’s question about JPMorgan’s $20 billion budget isn’t rhetorical. It’s existential. Regional and community banks cannot match that investment, and they shouldn’t try. What they can do is tap into the collective innovation of bank technology partners who are spending every dollar and every hour solving specific, narrow problems with an intensity no bank can replicate internally.
Fintech firms exist because they can move at a fundamentally faster speed. A fintech with 10 engineers focused solely on small-business pain points can iterate faster, test more and ship better experiences than a bank’s entire IT team juggling 15 priorities and a core conversion. That’s not a knock on bank IT teams; it’s simple math. Specialization wins.
And the competitive pressure isn’t theoretical. Nonbank providers such as Square, Chime, QuickBooks, and dozens of others now offer banking-adjacent services at what could be called “tech speed” — weekly releases, continuous improvement, interfaces designed by people who’ve never seen an AS/400 green screen. As Jamie Dimon warned years ago, “Silicon Valley is coming.” Well, it came. It’s here.
AI won’t be a savior
The emergence of AI and coding agents has only widened the gap. Fintech companies are already using these tools to accelerate their development cycles even further by shipping in days what used to take weeks or months.
It’s tempting for banks to look at the same tools and think, “Now we can build software in-house.” I understand that instinct. I spent years on the banking side before founding a fintech, and I remember the appeal of owning the roadmap. But I’d urge caution.
AI is a powerful tool, not a strategy. Writing code is the easy part. The hard part — the part banks consistently underestimate — is the lifecycle that follows: maintenance, upgrades, security patching, compliance updates, user research, QA, and the relentless iteration required to keep a product competitive. When you build internally, there is no vendor to call. No partner absorbing that complexity across dozens of clients and amortizing the cost. Every bug, every outage, every regulatory change lands squarely on your team.
Software development is still not in most banks’ DNA, and an AI copilot doesn’t change the genome.
Think about fintech as the new correspondents
For decades, community banks have relied on correspondent banking relationships to offer services they couldn’t provide alone: international wires, bond trading, interest rate hedging. No one questioned whether that model was sound. It was simply how smaller institutions competed with larger ones. No community bank would build its own bond desk, and the same logic applies to software.
Banktech partnerships are the modern equivalent. They allow banks to offer capabilities that would be impossible to build internally not because bankers aren’t smart enough, but because the economics and talent requirements don’t pencil out for a single institution. A banktech partner mutualizes that investment across hundreds of banks and delivers a better product as a result.
And yet, I still hear hesitation. “Fintech is risky.” “They might not be around in five years.” I’d push back: Many of today’s leading banktechs are backed by investors who understand banking deeply: former regulators, veteran bank executives, and institutional capital with long time horizons. The real risk isn’t partnering with a fintech. The real risk is standing still … while your competitors don’t.
Back to the boardroom
That director’s question deserves a real answer. Not a platitude about “digital transformation” or a vague promise to “explore AI.” A real answer sounds like this:
“We don’t need to outspend JPMorgan. We need to out-partner them. We need to surround this bank with the best banktech partners we can find. Companies that wake up every morning obsessed with the exact problems we’re trying to solve and let them run while we do what no fintech can: hold the charter, hold the deposits, and hold the trust of this community.”
The banks that will thrive in the next five years won’t be the ones that tried to become software companies. Winners will be the ones that understood what they truly are — trusted, regulated, data-rich institutions — and had the strategic confidence to partner with software companies to meet the evolving needs of their customers.
Steve Dow is founder and CEO of Needham, Massachusetts-based Monit, a financial intelligence platform for business banking. Focused on the small- to medium-size business market, Monit provides business customers with embedded “digital CFO” tools and enhanced analytics/targeting capabilities for bankers and marketing teams. Prior to Monit, Dow served as head of corporate strategy at Webster Bank and later helped lead the institution’s Business Banking group. Steve also ran Webster’s corporate investment fund and sat on the board of Payrailz, now a Jack Henry company.
