Mid-Market Banks Must Adapt or Be Absorbed

*This article appears in the fourth quarter 2025 issue of Bank Director magazine.

Historically, mid-market banks thrived by focusing on the fundamentals: building a strong deposit base, maintaining sound underwriting, proactively managing risk and allocating capital wisely. Today, the environment is far more demanding and uncertain. Economic anxiety is rising. Loan portfolios are stressed. Trust has eroded after high-profile bank failures. The stakes have never been higher. Banks must continuously prove their value against larger, tech-savvy competitors without the same scale or resources.

We define mid-market banks as those with assets ranging from $5 billion to $30 billion. These institutions serve as the foundation of community-driven financial ecosystems but lack the resources of superregional or global banks. The reality is mid-market banks are disappearing — fast. At a 3.7% annual consolidation rate, up to four in 10 banks could be absorbed within the decade.

Mid-market banks now face intense competition, heightened customer (and employee) expectations and unrelenting operational demands:

• Competitor reach: Superregionals and global banks now compete digitally in every market.
• Big tech pressure: Technology giants have raised the bar for seamless, personalized customer interactions.
• Cyber and fraud threats: Escalating cyber risks divert leadership focus and funding from innovation.
• AI: While AI still carries plenty of buzz, it’s no longer just a tech trend. Banks that move beyond experimentation are beginning to unlock real gains.

Banks are using digital transformation to address these challenges. However, acute operational challenges and a focus on reducing costs force many to delay or dilute transformative investments.

The Legacy Playbook
Many banks attempt to adapt to these external forces through tactics such as:

• Implementing point solutions to address specific needs, such as deposit growth.
• Overly relying on current vendors for innovation and product development.
• Experimenting with agile or product management to improve time to market.

While these are practical steps, even flawless execution may leave mid-market banks vulnerable in the long term. Surviving — and thriving — requires a deeper transformation.

Five Bold Moves for Business Adaptability
Adaptability is more critical than ever for mid-market banks. We have identified five bold moves for mid-market banks to overcome today’s challenges and secure a sustainable growth path:

1. 1. Build an adaptable technology architecture: Transition from fragmented, interconnected applications to a platform-based architecture that fosters agility. By creating an “experience hub” that leverages enterprise data, banks can deliver real-time insights, automate operations and improve the customer experience.
   2. Increase technological sophistication: A bank’s degree of adaptability is directly tied to its level of technological sophistication. Commit to a road map to increase sophistication.
   3. The core is not the core anymore: Over time, take the core “out of the middle” and relegate it to its primary functions of ledger and transaction management. In the interim steps, “hollow” the core with application programming interfaces (APIs) or integration platforms to enable innovation independent of the core vendor.
   4. Create continuous human and investment capacity: Treat the balance between running and changing the bank as a continuous discipline — one that optimizes, automates and reimagines work to free up human capacity and sustain transformative investment.
   5. Prioritize outcomes over buzzwords: Shift the focus from trends like being agile to building an operating model that emphasizes the customer and employee experience, operational efficiency and measurable outcomes. Success is about what works for your bank and those you serve — not what’s fashionable.

Adapt or Be Absorbed
Running a mid-market bank is harder than ever, but with the right mindset and strategic investments, success is achievable.

The treadmill of disruption is only accelerating. Mid-market banks that fail to prioritize adaptability will be left behind — or be acquired.

Now is the time to ask: 

• Does our technology strategy enable rapid response to threats and opportunities? 
• Are we delivering truly differentiated experiences for customers and employees?
• Can we scale efficiently to be a buyer, not a target?

The future belongs to the adaptable. Is your bank ready?