Industry Spotlight: Core Modernization for Mid-Tier and Challenger Banks—Accelerating Transformation with Limited Resources

The Modernization Imperative for Mid-Tier and Challenger Banks

Mid-tier and challenger banks are at a pivotal crossroads. The digital banking revolution, once the exclusive domain of global giants, is now a necessity for every institution seeking relevance and growth. For these ambitious banks, legacy technology, mounting regulatory demands, and the relentless pace of customer expectations create a unique set of pressures. The question is no longer if core modernization should happen, but how quickly and effectively it can be achieved—especially with leaner resources and less margin for error than their larger counterparts.

Unique Pressures—and Opportunities

Unlike top-tier incumbents, mid-tier and challenger banks must balance agility and innovation with cost efficiency and risk management. They face:

• Agility Demands: The need to launch new products and services rapidly to compete with fintechs and digital-first banks.
• Complex Compliance: Navigating increasingly complex regulatory requirements with robust, auditable, and flexible systems.
• Customer Expectations: Delivering seamless, personalized, omnichannel experiences at speed.
• Cost Constraints: Maintaining and patching legacy systems is expensive and stifles innovation, making modernization both a necessity and a challenge.

Yet, these constraints also create opportunities. With the right approach, mid-tier and challenger banks can leapfrog legacy limitations, outpace larger rivals, and deliver differentiated customer experiences.

Strategies for Rapid, Resource-Efficient Transformation

1. Embrace Cloud-Native, Composable Platforms

Cloud-native core banking platforms such as Thought Machine and Mambu are game-changers for mid-tier and challenger banks. Unlike traditional monolithic systems, these platforms offer a composable, API-first architecture that allows banks to assemble best-of-breed components tailored to their needs. This flexibility enables:

• Launching new digital banks or products in as little as nine months
• Rolling out new features and services up to five times faster than before
• Scaling securely and compliantly, with built-in support for local regulations

By leveraging SaaS-based platforms, banks avoid heavy upfront investments and ongoing maintenance costs, freeing up resources to focus on customer experience and growth.

2. Accelerate with Proven Methodologies and Accelerators

Transformation is complex, but it doesn’t have to be slow. Proven methodologies—such as Publicis Sapient’s SPEED approach—help banks move from idea to launch at breakneck speed. By assembling multidisciplinary teams and working in agile sprints, banks can:

• Identify and prioritize customer pain points
• Rapidly prototype and test new solutions
• Integrate new core platforms with existing systems, minimizing disruption

This approach was exemplified in the rapid transformation of a leading Thai bank, where a full-scale digital transformation—including a new business model and robust technology foundation—was delivered in just 12 weeks. By building on a cloud-native core and leveraging agile delivery, the bank launched a unified digital experience that adapts quickly to market changes and evolving customer expectations.

3. Leverage the Power of Ecosystem Partnerships

No single technology or provider can address the full spectrum of needs in today’s banking environment. Successful banks bring together a curated ecosystem of best-in-class partners—including Mambu, Thought Machine, Form3, and Snowflake—to deliver holistic, future-ready solutions. These partnerships empower mid-tier and challenger banks to:

• Modernize payments and core banking infrastructure
• Harness data for real-time insights and personalized engagement
• Scale securely and compliantly in the cloud

Deep relationships with leading fintechs and cloud providers ensure that clients benefit from the latest innovations—without the risk and complexity of going it alone.

4. Navigate Regulatory and Legacy Constraints with Confidence

Mid-sized banks often face the dual challenge of navigating complex regulatory environments and integrating new platforms with existing legacy systems. Proven methodologies address these hurdles head-on:

• Regulatory Alignment: Ensuring all solutions meet local compliance standards, from data residency to customer privacy
• Legacy Integration: Seamless integration with existing systems, minimizing disruption and risk
• Agile Delivery: Fostering a culture of experimentation and continuous improvement to test, learn, and iterate at speed

Practical Tips for a Successful Core Modernization Journey

• Start with a Clear Vision: Define your business goals and customer outcomes. Modernization is not just a tech upgrade—it’s a business transformation.
• Embrace Coexistence: Avoid risky “big bang” migrations. Run legacy and new cores in parallel, gradually migrating products and customers to minimize disruption and ensure business continuity.
• Leverage Proven Accelerators: Use frameworks and accelerators to reduce time-to-market and avoid common pitfalls.
• Prioritize Data: Ensure data is accessible, normalized, and ready for real-time use—unlocking the potential for AI-driven insights and personalized experiences.
• Partner for Success: Work with transformation partners who bring deep industry knowledge, regulatory expertise, and a robust ecosystem of fintech collaborators.

Real-World Impact: Case Studies in Rapid Transformation

• A Leading Thai Bank: In just 12 weeks, a major retail bank unified all account types and empowered customers to manage their finances seamlessly. By leveraging a cloud-native core and agile delivery, the bank now enjoys rapid product innovation and a platform built for future growth.
• OSB Group: OSB Group, a leading UK specialist lender, partnered with Publicis Sapient to build a greenfield core banking platform powered by Mambu and a suite of fintech tools. Within 12 months, the new platform launched, delivering 90% straight-through onboarding, 13 self-service options, and real-time customer insights. The result: a scalable, customer-first foundation for future growth, improved operational efficiency, and a significant boost in deposits.
• Composable Banking with Mambu: By integrating Mambu’s SaaS platform, banks across APAC have been able to assemble tailored, composable architectures that meet local needs and regulatory requirements, launching new digital propositions in record time.

De-Risking Migration and Managing Coexistence

Core modernization is inherently complex and involves risk, but these can be proactively managed:

• Adopt a migration-first approach: Plan migration strategies early, focusing on minimizing reputational, technical, and operational risks.
• Automate controls: Use real-time, data-driven decision-making and automated testing to ensure quality, speed, and compliance.
• Upskill and manage talent: Invest in upskilling existing staff and attracting new talent to support new systems and ways of working.
• Communicate frequently: Maintain momentum and engagement across the organization with clear, consistent communication about the transformation journey.

Why Publicis Sapient?

With over 30 years of digital innovation experience, 100+ financial services clients, and a network of 40+ technology partners, Publicis Sapient brings unmatched expertise to core modernization. Our customer-centric approach, proven methodologies, and deep industry knowledge make us the partner of choice for mid-tier and challenger banks seeking to:

• Modernize their core efficiently and cost-effectively
• Accelerate time-to-market for new products and services
• Harness data and AI for real-time insights and personalized experiences
• Compete—and win—against larger incumbents

Ready to Accelerate Your Transformation?

The future of banking belongs to those who can adapt, innovate, and put the customer at the center of everything they do. Whether you’re looking to modernize your core, launch new digital products, or build a data-driven organization, Publicis Sapient is your partner for what’s next. Connect with our experts to discover how we can help you build the bank of the future—faster, smarter, and tailored to your market.