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

In today’s rapidly evolving financial landscape, mid-tier and challenger banks face a unique set of challenges. Unlike global incumbents, these institutions must compete with digital-native entrants and meet rising customer expectations—often with far fewer resources. Yet, the imperative to modernize core banking systems has never been greater. Outdated technology is not just a cost center; it’s a barrier to innovation, agility, and growth. The good news? With the right strategy, partners, and technology, core modernization is more accessible—and more urgent—than ever before.

Legacy core systems, often built decades ago, are ill-suited to the demands of today’s digital-first customers. According to recent industry studies, outdated technology cost financial institutions $36 billion in 2022 alone, a figure projected to rise sharply in the coming years. For mid-sized and challenger banks, the stakes are even higher: legacy systems limit the ability to launch new products quickly, personalize customer experiences, and respond to regulatory changes with agility.

Modernizing the core is not just about technology—it’s about unlocking new business models, reducing operational risk, and enabling rapid innovation. Cloud-native, composable banking platforms allow banks to:

• Launch new digital products and services in months, not years
• Scale operations efficiently and securely
• Harness real-time data for hyper-personalized customer engagement
• Meet evolving regulatory and compliance requirements with confidence

Despite the clear benefits, many banks stumble on the path to core modernization. Common pitfalls include:

• 1. Treating Modernization as a One-Off Project:
  Many banks rush to build a new digital product or front-end app, expecting it to transform the business. Without addressing the underlying core, these efforts often result in fragmented experiences and technical debt.
• 2. Underestimating the Complexity of Legacy Integration:
  Attempting to digitize legacy processes without reimagining them for the digital age can lead to costly, slow, and unsustainable solutions. Successful banks focus on rethinking the entire customer journey and operating model.
• 3. Siloed Approaches and Lack of Agility:
  When business units operate in silos, banks risk duplicating efforts, increasing costs, and confusing customers. Enterprise agility—cross-functional teams, iterative delivery, and a culture of experimentation—is essential for sustainable transformation.
• 4. Over-Customization and Vendor Lock-In:
  Customizing off-the-shelf solutions to fit outdated processes can create long-term dependencies and stifle future innovation. Embracing open, modular platforms enables flexibility and future-proofs the business.

Cloud-native, composable platforms like Thought Machine and Mambu are transforming the modernization journey for mid-tier and challenger banks. Unlike monolithic legacy systems, these platforms offer:

• Modularity: Assemble independent components and connectors to create tailored solutions for specific markets or customer segments.
• Speed: Launch new banks or products in as little as nine months, as demonstrated by recent Publicis Sapient projects in Asia Pacific and beyond.
• Scalability: Seamlessly scale to meet demand, manage risk, and support growth—without the overhead of traditional infrastructure.
• Ecosystem Integration: Easily connect with fintechs, payment providers, and non-financial partners to deliver holistic, embedded experiences.

Publicis Sapient has partnered with leading mid-tier and challenger banks to deliver rapid, sustainable transformation:

• Digital Bank Launches in Record Time: In Thailand, a major retail bank partnered with Publicis Sapient to achieve a full-scale digital transformation in just 12 weeks. By leveraging Thought Machine’s cloud-native core, the bank unified account types and empowered customers to manage their finances seamlessly—setting a new standard for speed and innovation.
• SCB Tech X: Beyond Banking in Southeast Asia: Siam Commercial Bank, in collaboration with Publicis Sapient, launched SCB Tech X—a platform-as-a-service provider that modernizes core banking architecture, deploys platforms directly in the cloud, and rapidly develops new products. This ecosystem approach enables SCB to offer not just banking, but lifestyle services like food delivery and travel, embedding financial products into customers’ daily lives.
• Composable Banking with Mambu: By integrating Mambu’s SaaS cloud banking platform, banks can assemble and deploy new financial products five times faster than before. This flexibility is crucial for adapting to diverse regulatory and customer needs across markets.

1. Adopt a Platform Mindset: Move beyond product silos. Orchestrate digital ecosystems that deliver holistic value to customers, leveraging open APIs and modular architectures.
2. Prioritize Cloud and Data: Modernize core systems in the cloud to unlock agility, resilience, and real-time data insights. Use data to drive hyper-personalization and operational efficiency.
3. Foster Agile, Cross-Functional Teams: Empower teams to experiment, iterate, and deliver new products at speed. Break down silos and align around customer outcomes.
4. Leverage Ecosystem Partnerships: Collaborate with fintechs, technology providers, and non-financial partners to accelerate innovation and scale. Publicis Sapient’s curated ecosystem—including Thought Machine, Mambu, Form3, and Snowflake—enables rapid, end-to-end transformation.
5. Start Small, Scale Fast: Focus on delivering minimum viable products (MVPs) that solve real customer problems. Iterate quickly, learn from feedback, and scale successful solutions across the business.

With decades of experience and a proven track record in rapid digital transformation, Publicis Sapient is uniquely positioned to help mid-tier and challenger banks modernize their core. Our SPEED capabilities—Strategy, Product, Experience, Engineering, and Data & AI—enable us to deliver tailored, end-to-end solutions that drive growth, efficiency, and customer satisfaction.

Ready to accelerate your core modernization journey? Connect with Publicis Sapient’s financial services experts to discover how you can compete—and win—in the digital era, no matter your size or starting point.

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