Why Regional Banks Are Reimagining Offshoring for Growth

The commercial banking landscape is undergoing a tectonic shift globally. Some of the key catalysts are the types of products and services being offered, competition from new players, an ever-changing regulatory landscape and rapidly evolving technological advancements in the form of artificial intelligence.

A Sector Under Pressure
There are roughly 4,300 Federal Deposit Insurance Corp.-insured commercial banks and savings institutions in the U.S. While larger banks typically have the resources and expertise to remain competitive in the market, it is the regional banks (between $10 billion to $100 billion in assets) and community banks (under $10 billion in assets) that struggle with challenges of declining margins, competition (from private credit funds, fintechs and large banks), regulatory and compliance costs, and increasing technological investments.

The Offshoring Inflection Point
For over two decades, offshoring in financial services largely implied transferring volume and process-heavy work — including fund reconciliation, loan servicing, customer support and credit reviews — primarily to workers based in Asian locations to reduce operating costs and leverage skilled talent. By shifting routine tasks offshore, employees can focus on specialized and other critical tasks.

Trends That Banks Are Following
Banks and financial institutions now consider offshoring model not just a mere cost optimization strategy. Offshore offices have transitioned into making strategic decisions themselves and contributing to key functions such as risk management, analytics and operational scalability. Since offshoring allows banking, financial services and insurance access to a large and specialized talent pool, critical functions such as stress testing, data and portfolio analytics, credit decisioning activities are also being increasingly transferred offshore. For commercial banks, offshore teams increasingly support the end-to-end credit lifecycle, including financial spreading, credit underwriting support, loan administration, covenant monitoring and regulatory reporting. With the evolution and adoption of AI, offshore operations are further strengthened with efficiency in repetitive and time-intensive activities such as financial spreading, document review and covenant monitoring. This allows onshore teams to focus on complex decisions and client relationship.

However, offshoring is not without risks. Despite the advantages, banks must carefully manage regulatory oversight, data confidentiality, business continuity and talent retention risks. Effective governance frameworks and diversified operating models remain essential.

Offshoring Model for Regional Banks
U.S. regional banks with smaller scale and budget constraints often face sustained growth challenges. They must compete against peers with the same scale and large players that increase customer expectations and have larger investments in AI technologies. Today, many regional banks in the U.S. have either already set up offshore offices or are in advanced stages of implementation.

Offshoring decisions are driven both by lowering the operational cost as well as developing scalable capabilities backed by round-the-clock coverage and specialized skill sets. Due to their scale and budgetary constraints, these banks do not normally set up their own centers overseas. Instead, offshoring happens through third-party vendors. Key functions being supported offshore now extend beyond routine and process-driven operations to include analytics, technology, credit underwriting support, portfolio monitoring and risk reporting, while borrower relationships, final credit approval and strategic decision-making remain with onshore teams.

One practical use case for regional bank offshoring stems from their holding approximately $1.5 trillion in commercial real estate debt. This signifies more refinancing and enhanced portfolio surveillance, which can be managed better if the workload is shared with offshore colleagues and infrastructure.

Offshoring is no longer just about reducing costs. For many regional banks, it is becoming an important way to build a more scalable and resilient operating model while accessing specialized talent and supporting business growth. AI is further accelerating this shift by helping offshore teams automate routine work, improve operational efficiency and deliver greater analytical support. As competitive, regulatory and technology pressures continue to evolve, banks that integrate their offshore teams into the broader organization, with the right governance, oversight and accountability will be better positioned to respond to changing market demands and serve their customers effectively.