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Article
13-Jan-2026
Key takeaways
Banking merger success isn’t measured by financials alone. The real differentiator is whether institutions can intentionally integrate their cloud and IT estates.
Accidental architecture is a hidden liability. Without deliberate modernization, merged banks inherit complexity that drags on growth and resilience.
A merger is more than a transaction—it’s a redesign mandate. Banks that use consolidation to rebuild their digital foundations will set the pace for the industry’s next decade.
By Mike Gardner, Vice President, Technology Consulting
Behind the scenes of the U.S. banking industry’s recent consolidation boom lies an uncomfortable truth: many institutions are running on cloud environments they never intended to build. Nearly 60% of the CEOs running banks and financial institutions say they arrived at their current cloud setup by accident, not design, according to the 2025 Kyndryl Readiness Report. And that’s a precarious foundation as M&A activity accelerates.
There are many sound reasons for banks to engage in M&A: Mergers create economies of scale, they bolster earnings, and they combine different strengths to build a more complete institution. But they can also lead to major technology challenges when disparate systems need to be unified. For banks that get it right, a merger is a launching point for modernizing the IT estate, an opportunity to retire outmoded legacy systems and to position the newly constituted organization for future growth and differentiation.
However, when banks get it wrong, the consequences can be catastrophic, locking customers out of their accounts and incurring millions in regulatory penalties and reputational damage. More often, banks land somewhere in the middle, with a hodgepodge of systems that accrue technical debt and create a drag on growth. Those risks don’t exist in a vacuum. In fact, they become far more consequential when layered onto already complex digital estates that many banks bring into a merger scenario. In banking M&A, cloud and IT integration aren’t back-office concerns — they are now the primary determinant of whether a merged institution creates value or destroys it.
Higher stakes ahead
After a decade of relatively muted dealmaking during the post-2008 regulatory tightening, M&A activity has surged — with 2025 producing near-record global deal value and dealmakers reporting a ‘bulging pipeline’ for 2026. Strategic consolidation is expected to continue as companies pursue resilience amid economic and geopolitical uncertainty, and competition for technology and talent intensifies.
Through this wave of consolidation, some institutions will emerge stronger and better positioned to navigate the myriad financial, regulatory, and geopolitical hurdles that the future will bring. Others may struggle to keep up, and their new size will become a burden.
It’s against that backdrop that the successful integration of technologies becomes critical. Companies that make smart decisions, invest prudently and accept the disruption as an opportunity are more likely to be among the winners. Adding to the mix of calculations is the advent of artificial intelligence, which increases the urgency to ensure IT decisions made today can serve the organization of the future. Other considerations, ranging from cybersecurity to digital sovereignty concerns to the eventual arrival of quantum computing, only heighten the stakes.
58%
of financial services leaders say their current cloud environment “happened by accident” rather than by design
Source: Kyndryl Readiness Report
61%
of financial services leaders say they struggle to keep up with the pace of technological change
26%
of financial services mission-critical networks, storage, and servers that are at end-of-service, according to Kyndryl Bridge
Drawing a roadmap
Fortunately, there is a road map for steering a newly merged organization through these obstacles.
It starts long before the merger is ever announced, as part of the pre-deal due diligence process. All aspects of the organization’s IT – including architecture, security, data, cloud, applications, and more – should be evaluated to identify potential red flags. Even if no problems rise to the level of scuttling the deal, knowing if massive investments are necessary could shape negotiations. And the better the understanding of the current IT estate – both technology assets and personnel capabilities – the smoother the integration will be. A thorough understanding of the systems being acquired could help prevent unwelcome surprises later. Critical to this is a complete inventory of systems and applications to identify redundancies.
Next, the bank needs to envision what the future IT estate will look like. This is perhaps the most essential step. Will the new institution maintain two systems in parallel (and with them, higher costs)? Will they fully combine under one existing system (and manage the associated migration risk)? Or will they replace both legacy systems with something new (and take on the challenges of vendor selection and implementation)?
That spurs further questions: Will data and core banking workloads remain on mainframes, move to the cloud or be part of a hybrid environment? Understanding the implications and tradeoffs of all the options requires a sophisticated knowledge of IT infrastructure. Organizations without the internal expertise would be wise to enlist outside support.
There are numerous potential pitfalls. Rushing the process can lead to bugs, outages, downtime and lost productivity. Inconsistent data formatting can hinder integration. Legacy systems can leave the newly merged company vulnerable to cyberattacks. And IT estate implementation issues can prevent banks from realizing the business value of their mergers.
To do, or not to do
In one cautionary tale, a bank opted for a “big bang” approach to account migration, rather than completing the work in properly phased intervals. The attempt to move millions of accounts over one weekend failed spectacularly – locking millions of customers out of their accounts (prompting nearly 80,000 of them to leave), and exposing the bank to millions of dollars in regulatory fines and client remediation.
Contrast that with the successful merger of two regional banks into Truist – the seventh-largest bank in the U.S. Truist adopted a cloud-first modernization strategy, working with multiple cloud providers, and took a phased approach, first migrating digital channels before moving core banking functions. The process required reconciling more than 100 applications used by the two banks and migrating nine million customer accounts to the new system. The result was a digital-first bank positioned for the future.
The lessons from these examples demonstrate that a merger’s outcome can hinge on whether leaders treat IT integration as a strategic redesign, instead of a technical chore.
The real opportunity is to use consolidation as a valuable moment to rebuild the digital estate with intention — simplifying architectures, retiring legacy systems, strengthening resilience, upskilling employees and designing for an AI-enabled future. In an era where accidental architectures have become hidden liabilities, the banks that integrate with purpose will be the ones that unlock lasting value.
