The banking sector in the USA is still reeling from the disruption of 2023. While the larger banks dealt with unprecedented customer outflow, mid-sized banks seemed to weather the storm better, powered by their strong retail deposits. According to McKinsey, “midcap banks with such granular, low-cost retail deposit bases didn’t just weather the 2023 crisis more effectively; they also outperformed in 2024.”¹ Retail deposits are more stable than commercial deposits, but does this mean that mid-sized banks are safe from any future disruption? Unfortunately, the answer is no, as they are not immune from the impact of market changes, and it is important for them to fortify other lines of business and even explore new revenue streams.

A Changing Customer Base Threatens Stability

Let’s first understand why mid-sized banks have such strong retail deposits. The answer lies in their customer demographics. 42 percent of their customers are baby boomers, or consumers born before 1965.² This older population still places a lot of trust in traditional banking systems and are reluctant to move their money around or experiment with new entities like fintechs or neo banks. This ensured near time funding stability. But this generation is already ageing out of the banking system and their share of balances is expected to fall to just 20 percent by 2035, with millennials and gen Z customers accounting for 43 percent of retail banking revenues.

These younger customers are significantly different from the Baby Boomers. They expect digital-first engagement, they demand hyper-personalization, and they are absolutely not afraid to move their business to other entities that deliver what they want. Younger customers already feel that mid-sized banks do not deliver as much value as bigger institutions. And smaller banks, with their heavy reliance on physical branches, in-person engagement, and legacy banking systems cannot offer the digital, on demand, and personalized experience that young customers want. Without some drastic and urgent changes, their share of retail wallets will continue to decline.

From Efficiency to Expansion: Unlocking New Revenue Streams

Of course, the first place to start is the digital transformation effort. Mid-sized banks need to fastrack their transition with cloud-native systems that can cut through organizational banks to gain a holistic idea of customer relationships and roll out personalized offerings. They must integrate AI and advanced data analytics to improve customer engagement, and boost operational efficiency. But is this enough to protect revenues in a disruptive market scenario? The answer, unfortunately, is no.

The key to long-term growth lies in exploring revenue streams beyond retail. Strengthening corporate banking practices will diversify revenue streams and balance the pressures of declining retail profitability. But they have to keep in mind that corporate customers and treasurers are significantly more demanding than retail ones. They expect transparent and competitive pricing, and banks must be equipped with tools that can deliver this consistently.

Reinventing Account Analysis for the Next Era of Banking

The much-neglected function of account analysis can prove to be a valuable differentiator as mid-sized banks revamp their corporate banking strategy. For decades, account analysis was considered to be a static back-office function used for managing pricing and billing for corporate treasury services. But as corporate treasury customers continue to demand greater transparency and visibility into their accounts, and more efficient ways of managing liquidity, account analysis can prove to be a powerful offering.  Modernizing it with intelligent offsetting, hybrid interest, dynamic credits, and real-time analytics allows banks to deepen relationships, build trust, and improve profitability across both retail and corporate portfolios. Done right, account analysis becomes a growth driver for midsized banks.

With a modernized account analysis function, banks can:

• Offer real-time visibility into liquidity, helping treasurers optimize cash pooling and improve forecasting

• Compete for customer balances with innovative offerings

• Offer actionable intelligence and transparent operations that enhance customer trust

Middleware: The Smarter Path to Transformation

Unfortunately, legacy banking systems that operate in silos across product lines lack the agility and flexibility required for delivering modernized account analysis solutions. Fortunately, banks don’t have to embark on a risky and expensive core replacement journey to do this. They can simply opt to deploy a robust, cloud-native, microservices-based revenue management system that can be deployed as middleware over their legacy cores. It can separate the system of records from the system of engagement to help drive innovation and operational efficiency across all banking functions. It can integrate data from multiple sources in real time, combine earnings credit and interest management, ensure intelligent offsetting, and offer actionable insights. With such a solution banks can enhance customer experience, reduce operational overheads, plug revenue leakage, and future proof their growth.

The future of mid-sized banks will depend on their ability to diversify revenue streams, modernize legacy functions, and meet the rising expectations of a digital-first customer base. Strengthening corporate banking with intelligent, real-time account analysis is not just a defensive strategy but a growth opportunity that can unlock transparency, personalization, and efficiency at scale.