According to research by Thought Machine and Forbes on core modernisation within financial services, 75% of banking leaders are already migrating some of their core functions to cloud-based networks and services.
But what should banks expect when embarking on this journey of core modernisation? We asked our panel of experts during the second session of our Banking Infrastructure Summit at Money20/20. Ninish Ukkan of Arvest Bank, Emily Heffelman of Accenture, UBS’ Ben Weiss, and Thought Machine Americas MD Barry O’Connell discussed the challenges and opportunities of core modernisation at our session ‘What to Expect with a Core Modernization Programme’.
Regional bank Arvest, which went live on Vault Core in 2022, took an "iterative, agile approach," said Ninish, who leads Arvest’s technology, engineering and data teams. He later added that getting an initial MVP live creates "a path to: Yes, this is possible. This is doable”. In other words, it validates the proof of concept, especially to those who aren't directly hands-on with a core modernisation project.
Managing director Emily Heffelman at Accenture advises global banks on technology initiatives and said decisively, "gone are the days of the big bang." The 'big bang' refers to replacing complex legacy systems, typically in a short time window, which is extremely high risk. Instead, Emily explained that modern cloud-native cores like Thought Machine's allow clients to "integrate into and coexist with their existing ecosystem", de-risking large-scale change programmes. She elaborated that Accenture recommends clients take a “capability-led approach” to identify solutions for gaps, run many test-and-learn pilots with specific new products, and bring business teams along to act as “champions of change”.
Working on migration to new core technology with many banks of different sizes worldwide has given us significant insight into the challenges and considerations they need to make to migrate successfully. For most banks now, coexistence is the most logical approach, enabling them to test the new technology without committing to decommissioning existing technology too soon. This iterative approach de-risks the process but requires careful planning, which we have explored here with Publicis Sapient.
The panellists all agreed succeeding with enterprise-scale core modernisation requires more than just installing new technology. As UBS's Ben Weiss stated from experience, you must engage compliance, risk, and operations executives early on, not attempt to "build in a vacuum" with only technologists and isolated product teams. Ben also emphasised the challenges of shifting employee mindsets steeped in mainframe legacy systems.
Ninish highlighted the need for continual communication during multi-year core modernisation initiatives to maintain momentum and stakeholder support. As he put it, "If you're not communicating regularly to your stakeholders, your senior leaders, then you're not creating enough buzz, and you're not generating buy-in, then there's no collective momentum, especially when you're on a multi-year journey, which you need to ensure everybody is still excited."
Banks undertaking the task of core modernisation can expect a viable path to success. This path involves taking an iterative approach instead of attempting overnight big bang transformations, fully embracing modern systems, engaging critical internal business stakeholders beyond IT, developing talent and skills for the future state, and communicating progress regularly to executives and the board.
