Digital banking in 2026 is shaping up to be an efficiency race driven by ERP connectivity, instant payments, and the shift toward small business “hub” experiences. In this episode, Debbie Smart previews what the 2026 State of Commercial Banking reveals about where AI is becoming practical, why integration is the real battleground, and what banks need to deliver to stay primary in the relationship.
[Webinar] 2026 State of Commercial Banking
Cheryl Brown
Welcome to The Purposeful Banker, the podcast brought to you by Q2, where we discuss the big topics on the minds of today's best bankers. I'm Cheryl Brown. Welcome to the show.
In our last episode, Jim Young and Anna-Fay Lohn talked through some of the Q2 PrecisionLender data analysis in our upcoming 2026 State of Commercial Banking webinar and the accompanying report. So today I wanted to invite Debbie Smart, Q2 senior product marketer and another contributor to the State of Commercial Banking, to talk about some of the other topics that will be covered in the report and that webinar that's on February 10. I'll put a link to it in the show notes so that you can register.
So welcome to the show, Debbie.
Debbie Smart
Thanks so much, Cheryl. I'm happy to be here.
Cheryl Brown
So you've been one of the presenters of our annual State of Commercial Banking webinar for several years now. And some of the same topics have been a focal point throughout that time. Topics like payments modernization, fraud, serving the small business segment. But there's a few new topics in this year's report, specifically around AI—of course, everyone's talking about AI—and M&A activity. When you look at the digital banking story coming out of 2025, what feels most different heading into 2026?
Debbie Smart
That's a great question. So I think what feels most different heading into 2026 is how real and immediate everything feels, like the race is on. For the last few years, like you said, digital banking has been very heavily focused on automation and efficiency and things like ERP integration, and APIs have become hot topics for a reason. But what feels different to me now is how intentional that focus has become, especially around use cases, solving very specific business problems. And so, automation has been part of the story for a while, but now the emphasis is really on the right automation applied at the right time, inside the right workflows, truly meeting the customer where they are.
And then also, AI feels really different heading into 2026 because it is growing at a pace that feels like exponential growth on steroids. I mean, it's crazy to me, right? How incredibly fast it's growing, like faster than any other banking technology we've seen before.
And if you think about it, we've seen some pretty big disruptions, especially I can say that as someone who's been working long enough to remember when all these things were new, but I think about just over my lifetime or over my career, right? The PC, the internet, smartphones. AI is growing even faster than that. It's roughly three times faster than PCs, and almost twice as fast as the internet.
And so that speed alone is forcing banks to move out of experimentation, and to be much more intentional about where AI actually adds value. It's not a standalone initiative anymore, right? It's getting woven into all the tools and workflows that the digital banking teams use every day. So that is a really big deal to me.
And there are a couple of other things that jumped out to me. I feel like businesses are getting less patient. They've been waiting in some regards for banks to help with automation and efficiency for a very long time. And now they are actually putting emphasis on looking to move to other banks if they don't get what they need. So that's just putting more pressure on the financial institutions to continue to work on improving efficiency and removing friction.
And then just one last comment, I think that same focus on efficiency and execution shows up in M&A. We all know that deal volumes have grown a lot, and that momentum is carrying into 2026 for sure. But what's different is what's driving those deals. A lot of them now are really treating technology as a primary driver, not something that they're going to sort out later. So definitely a lot ... There's always planning involved, right? When financial institutions are dealing with new things and disruptive things, but I feel like the emphasis is now on execution and delivery, even more so than on the planning. It's time to start focusing on where the rubber hits the road.
Cheryl Brown
So yeah, I mean, AI—I cannot count the number of times that AI comes up when I'm scrolling on any social media platform, or just looking at the news. AI is such a common topic, but when you get right down to it, yes, it's disruptive this year. We can expect to see big things from it this year. What do you think it's going to specifically mean for commercial banking? Why is AI so important for commercial banking, specifically?
Debbie Smart
Yeah. So even though AI is still in its infancy, it really is getting more practical and it's happening very fast like we talked about. And that's why it's such a big part of the commercial banking conversation. It's helping to solve some very real problems that banks and businesses are dealing with.
One of those problems is scale. Payments are getting faster. There are more events, more exceptions, more moments where things need attention, and the manual processes we've been using just don't keep up. So AI can help sort through all that activity and make sure that teams focus on what actually matters.
And then another problem is friction, right? Businesses want banking to fit into how they already work. They don't want extra steps, extra reviews, more back and forth. So AI can help reduce some of the friction that we've put in place by just helping us cut down on the noise, highlighting those things that are really the most important, and making it easier to take action without necessarily adding extra steps.
And then I think one other layer is precision, right? Static rules only go so far. So what AI can help us do is holistically look at behavior and timing and history and patterns—all these things that help banks be more accurate without slowing things down.
So it's definitely become a huge, huge focus and the stats support this. More than half of financial service executives rank AI as a top priority investment for 2026, and then nearly 60% of them expect it to be the most transformative force in the industry within the next three years. So that's really saying something.
Now, at the same time, only 10% say that their AI integration feels leading edge. So there's urgency, but again, it's still early. One last stat that I think we need to keep in mind is that we're not the only ones using AI. The bad actors are too, right? Criminals are using it. In fact, more than 90% of decision makers say that they're seeing more financial crime tied to AI. So that just raises the bar for everybody.
Cheryl Brown
Well, and that's a great segue into my next question, because fraud is another key focus area for State of Commercial Banking. It has been for a few years now. And I'm sure you'll highlight some of the fraud data we've curated in the webinar, but what stands out to you regarding this ongoing hot topic? What can you preview for us?
Debbie Smart
You know, it's so amazing to me. I feel like the last several years I’ve talked about like fraud's just gone up again and gone up again. That's not changing. What stands out to me is just how much it continues to grow. It is not tapering off, right? It continues to accelerate, and the cost to deal with it is also accelerating.
So this clearly shows up in the data. About two-thirds of organizations reported an increase in fraud events. And when those events happen, the impact really goes far beyond the dollar loss, the actual dollar loss of the item. For every dollar lost to fraud, financial institutions spend close to $6 when you factor in things like their investigations, their recovery, their customer support. And that number has also been rising year after year, so it really adds up fast.
And then, it just is amazing to me—and again, it has to do with technology, the capabilities that the bad actors get—but check fraud continues to be such an incredible problem: 63% of organizations experienced attempted or actual check fraud, and those losses across the Americas are now over $20 billion a year. So that's another thing that just continues to accelerate.
So what's also changing is the pressure that's created by speed, right? As payments move faster, fraud prevention has to happen earlier, and that's why precision matters so much right now. It's where AI can start helping us be practical. It gives banks a way to be more precise without adding friction. So for example, instead of relying on static rules alone, AI can help make those decisions more precise. As I talked about earlier, really bringing everything together.
Banks have always tried to flag risky activity, but AI reduces false positives by helping us understand the patterns and the context, not just exact matches. A good example of this is AI-powered payee name matching. So what that helps us do is recognize normal variations that a bank can step through when something truly looks off versus catching small things that are false positives and just slow everything down.
And then, strong fraud prevention also becomes a relationship issue, right? Not just a risk issue. Because if banks can be precise without adding friction, then the businesses feel protected, but in a way that doesn't slow them down. And that shows up in the data as well. More than 90% of leaders say that good fraud prevention actually helps grow the business, and that's because the business starts trusting the financial institution even more, and so it can strengthen the trust, which strengthens and grows the overall relationship.
Cheryl Brown
Yeah. It never stops surprising me how much we still use checks. I've said this many times on this podcast before, that it's just shocking to me that we're still writing checks for things. And yet, I'm a Girl Scout leader and I had a mom hand me a check for cookies the other day. So it's still there.
But talking about payments, let's switch to another topic just a little bit. And you talked about this a little bit earlier, is payments modernization. As someone who's totally enmeshed in the commercial payments industry, you've had a lot of conversations around faster payments, including via RTP and FedNow, and the growing demand for ERP integration. So of course, this topic continues to be a focal point for State of Commercial Banking, but how do you see payments modernization evolving in 2026?
Debbie Smart
One of the things that I think is really interesting is, yes, the use of those things are growing and we'll talk about that, but it's amazing to me the expectations of business customers now. Like what I'm seeing is so much pressure put on financial institutions to offer instant payments, that is coming from customers, like the businesses are voting with their feet. Nearly half say they've already changed banks to get access to faster payments and another large group said that they would. So that's a pretty strong signal, right? The faster payments are no longer a roadmap item, they're becoming table stakes.
And in the adoption, you can see that as well, with the traction that we're getting, even though it's a small part of the overall payment piece. But the RTP network processed more than 125 million transactions in the fourth quarter of 2025, totaling over $400 billion. And they now have more than 1,100 participating institutions.
And then FedNow is also growing. They have over 1,500 financial institutions and that's a 44% year-over-year increase. They have banks participating, banks and credit unions participating across all 50 states now. So, definitely a lot of pressure from the customers.
Same thing is happening in the world of ERP integration, right? That integration also remains table stakes for efficiency. Businesses want their payment activity, their reports, their confirmations, exceptions, everything to flow into the systems they already use, like I said earlier, meeting them where they are. And so that's why ERP connectivity continues to be one of the most requested capabilities that we see, and why the connection layer is increasingly moving to API-based instead of file-based, although file-based still plays a role there too. But we definitely see the move toward API.
So to me, payments modernization is about meeting the rising expectations of speed and data and integration. They all matter, and banks that can deliver on all of those can make sure that they stay primary in the relationship.
Cheryl Brown
It comes down to the big word: efficiency. Companies are looking to be efficient. Banks are looking to be efficient. We all have to do more with less in this day and age, it feels like. So, when it comes to efficiency, pretty much everything we've talked about today—the use of AI, faster payments, fraud defenses—it centers on making businesses and the FIs that serve them more efficient. Are there other ways that we'll see that drive for efficiency play out in 2026, in your opinion?
Debbie Smart
Yeah, absolutely. And we've seen this in a couple of areas in 2024, 2025, but we're really going to see acceleration in 2026. One of those areas is on the M&A side. Activity is clearly on the rise, right? Global M&A value surged more than 140% year over year. And in the U.S., bank deal activity hit a four-year high in the third quarter of 2025. It had 52 deals announced, totaling more than $16 billion.
But what's interesting is it's not just about the increase in deals; it's why they're happening. Efficiency and technology are playing a really big role. Payments modernization. About half of the banks say that efficiency gains and cost savings are now a top attribute when they're looking at M&A targets, and the deals are really about simplifying platforms, scaling technology, and again, modernizing payments and modernizing other systems.
So from a digital banking perspective, what that does is it puts a spotlight on integration. These efficiency gains only show up on platforms that come together in a real clean way where customers don't feel disruption.
And then the other area where I feel like efficiency is really playing a role is actually in digital banking, embedded fintechs. So businesses already rely heavily on fintech tools to run their operations. In fact, about 75% of SMBs already work with or plan to work with a fintech. And that's driving digital banking more toward a hub model, right? So instead of forcing businesses to jump between tools, jump between computers—swivel chair, we call it, right? I'm on one computer and I turn and get on the monitor or a different screen of another. We want those things to all come together in one place. And, if we can give businesses access to the capabilities they need that sit adjacent to their direct financial stuff with their bank, things that they use like for payroll or invoicing, there are myriad things, that gives them the efficiency if they can log into one place to manage all of those things. And so, it's another area where I see a heavy push on efficiency.
Cheryl Brown
We all want that, right? None of us wants to do our job with having to get into four different programs to execute one payment or ... We all want it to be easier. And so I think that's what it comes down to, right? It's just, let's make the world easier for the people who work in those businesses. Let's make the world easier for our customers.
Debbie Smart
Absolutely. In fact, if you think about everything that we've talked about, efficiency is really showing up, in my opinion, with scale, integration, simplification, and orchestration. I think across the board, no matter what topic you're on, all of those things play into it.
Cheryl Brown
Yeah. So before we wrap up today, I wanted to ask you for a word. On my team at Q2—I'm on the Content Marketing team—and we started doing this the past few years where we begin the year in a team meeting with each of us choosing a word for the year, and then we kind of keep each other accountable to our word throughout the year. We pin it at the top of our Teams chat, and we refer to it. So it's something that identifies where your priorities lie or something that you're striving for this year. So if I were to ask you to choose one word for commercial banking in 2026, what would you choose?
Debbie Smart
One of the words I've used, I think repeatedly in this conversation with you, is “intentional.” And I think what I mean by that is banks are being more deliberate about how they pursue efficiency, where they invest, how they modernize. There's less experimentation and truly more execution. So I feel like “intentional,” that's the word.
Cheryl Brown
Intentional. I love it. I'm going to pin it. I'm going to pin it. We'll come back to it next year. We'll see if we were intentional this year.
Debbie, as always, it's great to have you on the show. I love talking commercial banking with you, and thanks for taking the time to be here.
Debbie Smart
Yeah. I enjoy it as well very much. Thank you.
Cheryl Brown
Listeners, you can hear more from Debbie and our Q2 colleagues, Gita Thollesson and Anna-Fay Lohn, in the 2026 State of Commercial Banking webinar. It's at 1 p.m. Central Time, February 10. I'll put a link in the show notes for you, or you can also find it at hub.q2.com/webinars.
And if that time doesn't work for you, no worries. If you register, we'll send you the recording and you'll get early access to the full report. So you'll get that a couple of days before everybody else can get it.
So of course, you can catch more episodes of The Purposeful Banker wherever you listen to podcasts, including Apple, Spotify, and YouTube, and you can learn more about the company behind the content at q2.com. Until next time, this is Cheryl Brown, and you've been listening to The Purposeful Banker.