Banking and Lending Technology Market Update, Spring 2026 (Houlihan Lokey)

Summary

• The report's six key themes include AI adoption across banking products, digital transformation, open banking as a growth platform, loan origination system evolution, AI and M&A by market leaders, and a healthy 2026 outlook.p.13
• Only approximately 26% of banks say they are confident they can align AI initiatives with current regulatory requirements.p.15
• 43% of financial institutions still operate decades-old legacy core systems, and only 12% of banks have a well-defined and resourced AI strategy.p.15
• Neobanks and mobile banking command the highest valuation multiples, at a median of 14.1x EV/EBITDA 2026E.p.23
• The Fed held rates steady at 3.50%–3.75% at both its January and March 2026 meetings.p.20
• Houlihan Lokey expects the M&A market to stay active in 2026 for both strategic and PE deals, particularly in 2H, if macro conditions stabilize.p.23

Key insights

1. AI is becoming foundational across financial services, embedded in banking software, lending workflows, marketing engines and digital channels.p.14
2. More than 90% of data users at banks report that the data they need is often unavailable or takes too long to retrieve, and 81% cite data quality as a top challenge.p.15
3. The expected TAM CAGR for the AI lending market (2025–2030) is 20%.p.15
4. 53% of bank executives believe their firm should allocate more resources to tech and innovation.p.15
5. The Fed's supervision and regulation division has shrunk 30%, and banking regulations have been loosened.p.20
6. Banking and lending technology growth and venture deal volume has fallen at an approximate (7%) CAGR from 2023 to 2025.p.23
7. Digital lenders trade at a median of 6.7x EV/EBITDA 2026E and credit marketing companies at 7.9x.p.23
8. Banking and lending software is down (41%) since January 2024 and (81%) since January 2025.p.24