Core Modernization Playbook

How to Effectively and Securely Modernize Your Bank

The Core Banking Conundrum

There are two statements upon which almost every bank leadership team will agree:

Their current core technology stack is struggling to keep up with the rapid shift to the digital-first, seamless interactions their customers, colleagues, and partners expect.
Replacing these technologies is risky, complex, and expensive.

Yet, the shift to modern core technologies is inevitable. Every year, banks are investing more time and money just to maintain the status quo. New regulations, rising digital expectations, and open banking are pushing legacy systems to the limit. Workarounds have made change riskier and more expensive. With increasing digital transactions and rising customer expectations for personalized interactions and connected offerings, these challenges will only become harder to overcome.

Aligning to Customer Expectations

'Digital-first' engagement vs. slow & fragmented systems
Connected offerings vs. manual and costly operations
1:1 personalization vs. lack of scalability
Rapidly evolving needs vs. slow change and go-to-market

Key Statistics:

48% | 37% | 1 in 10
12% | 40% | 51%

Replacing core systems is no easy task. In the past, the easiest way for a CEO or CIO to lose their job was to propose a core system transformation and then fail to deliver it. The success stories are far outnumbered by the failures: programs that overran, overspent, and ultimately failed to achieve real value.

But times have changed. New technologies—from cloud to new core banking solutions, to the surrounding ecosystem of SaaS solutions—have matured, been proven, and now enable differentiated services. More progressive, iterative approaches to core modernization can significantly mitigate transformation risks.

Put simply, the time to transform is now.

Benefits from Core Modernization

Maximize the benefits by taking a holistic perspective on how new core capabilities can transform your bank:

Re-orient your architecture to put data and people, rather than core systems and products, at the center of your bank
Leverage new techniques and technologies to progressively shift from old to new platforms and de-risk the transition
Drive new ways of working to accelerate the pace of change while managing critical risks

Growth Accelerator

New sources of growth
Enhanced personalization to increase customer lifetime value
Ability to respond quickly to changing market or regulatory conditions
Automated and more efficient services
More effective colleague collaboration and satisfaction
Enhanced intelligence and decision making through data

Technology Resiliency

Moving off aging, costly, and risky legacy technologies
Reduced reliance on on-premise infrastructure
Significant improvement in technology run & change costs

The Bank of the Future: Data at the Center

A modern core banking system does one thing and does it well: product, ledger, and transaction management. The bank’s data is available in one place, released from the core for insights, AI, and servicing. An event-driven architecture enables better products and propositions by composing best-in-class capabilities alongside the core.

Modern Core Banking Architecture

Engagement Channels: Mobile, Web, API, ATM, Branch
New Core: Accounts, Transactions, Products, Core Banking Software
Data Platform: Cash Forecasting, Product Insights, Personalized Offers, Servicing
Non-core Bank Services: Payments, Customer, KYC, ID&V, Fraud & AML
Event-Driven Integration

This architecture allows for long-term, strategic differentiation leveraging the latest technologies. It is powering leading challenger banks and incumbents successfully moving onto new modern platforms. For example, the fastest-growing digital-only commercial bank in MENA.

New Progressive Modernization Approaches

These approaches can de-risk the transition from old to new platforms. New technologies and techniques enable a progressive transition, significantly reducing risk while enabling earlier value unlocks from new strategic platforms.

Transition Stages:

T0: Legacy Core
Engagement Channels → Middleware → Legacy Core → Downstream Systems (Reporting, Finance, GL, Data Warehouse)
T1: Multi-Core Routing
Engagement Channels → Middleware → Multi-Core Routing → Legacy Core & New Core → Data Aggregation Platform → Downstream Systems
T2: New Core
Engagement Channels → Middleware → New Core → Downstream Systems

This pattern is being deployed by leading incumbent banks globally, including the largest banks in the UK/EMEA and APAC.

Managing Modernization Risks

Core modernization is complex and involves risk, which can be proactively managed and mitigated.

Typical Modernization Risks:

Technology Risks
- Risk of business disruption when changing multiple core systems at the same time
- Risk of data security being compromised
- Migration risks, such as losing data, single event migration, and brand impact
- Risk of the solution architecture being misaligned to business and tech needs
People Risks
- Risk of capacity constraints from running two operating models simultaneously
- Risk of losing talent and their knowledge
Business Risks
- Risk of gaps in board sponsorship of modernization
- Risk of limited capacity for concurrent change
- Risk of market shifts requiring a scope revamp
- Risk of costs increasing significantly, threatening completion
- Risk of business and IT operating in silos due to misaligned priorities
Regulatory Risks
- Risk of non-compliance to regulatory requirements due to system changes

Driving the adoption of new agile ways of working can both accelerate the delivery of the new platform and mitigate these risks through data-enabled oversight.

A Proven Approach to Core Modernization

A successful core modernization program is not a technology project. It is a business-led transformation, enabled by technology, that requires a clear vision, strong sponsorship, and a relentless focus on value. The most successful programs follow a proven approach:

Step 1: Define the Vision and Value Case

Confirm the urgency for modernization and ensure leadership commitment to address the most critical challenges
Avoid a narrow “case for change” that fails to unlock the full potential or drive commitment from the full leadership team
Understand major success factors, including lessons learned from similar transformations

Checklist:

Compelling case for change
Buy-in from the full senior leadership team
Understanding of the major shifts required
Alignment on how to address critical success factors
Investment to initiate the program
Confirmed delivery leadership team

Step 2: Shape the Modernization Journey

Establish foundational elements while validating key elements of the new modern capabilities
Avoid a strategy roadmap that results in long early investment with limited early value unlocks
Focus on enhancing the capabilities of a modern architecture, not just the legacy core
Don’t delay foundational research around data, cloud, and emerging new capabilities

Checklist:

Program team established
Foundational enablers in place
Roadmap confirmed
Critical milestones in place and linked to benefits case / OKRs
Teams established with strong momentum towards initial launches

Step 3: Mobilize and Deliver Value Early

Build and prove the foundation with internal and public releases to mitigate delivery risks and accelerate benefits

Checklist:

Iterative release approach confirmed and proven through initial launches
Mechanisms in place to transform existing operations as the new platform expands
Progressive migration patterns and oversight established
Value assurance mechanisms in place to track achieved vs. target outcomes
Sign-off for continued investment

Step 4: Scale and Industrialize

Scale the solution by progressively transitioning capabilities from legacy to new solutions
Continue to expand the new platform across retail and wealth
Drive value and innovation through new and differentiated products, services, and customer experiences, leveraging modern approaches and data-driven personalization
Unlock maximum ROI through open communications
Gradually but quickly complete the transition from old to new platforms
Operate in parallel as needed, including iterative patterns and risk mitigation
Use progressive modernization levers to manage the transition
Finish the 'cutover' period by systematically synthesizing operational and data platform handover
Decommission the old core and surrounding solutions as the new platform expands
Sustain the change: the bank is now able to operate the new modernized platform and has capabilities for continued improvement

Checklist:

Progressive modernization mechanisms established to de-risk migration
The majority of the bank’s services now operate on the new platform
Modernization has achieved the target ambitions
The bank is now able to sustain the change and is significantly more adaptable to changing market circumstances

Publicis Sapient Is Here to Help

Embarking on core modernization for your bank can be daunting. But with proper planning and partnerships, success is within reach. Challenges are inevitable, but maintaining focus and team enthusiasm will see you through.

Choosing the right partner, experienced in modern core banking solutions, is critical. They can help you define your goals, accelerate your journey, and avoid major pitfalls from similar programs.

Success in modernization requires clear strategy, compelling customer experiences, and agile delivery leveraging modern technology. Embracing digital transformation unlocks innovation, automation, and personalized services.

Publicis Sapient is here to help you explore the possibilities of core modernization. With our expertise, stress-tested methodologies, and unique SPEED capabilities, we ensure customer-centric banking products and provide support to navigate challenges, accelerate delivery, and realize value.

Whether you are starting out on your journey or struggling to achieve your modernization ambitions, we are here to help.

SPEED Capabilities:

Strategy: Confirming the value potential and the shifts required to unlock
Product: Evolve propositions and services at pace and scale
Experience: Create differentiated services for customers and colleagues
Engineering: Build modern solutions to achieve your ambitions
Data: Put 'data-at-the-center' of how your bank operates

Contact:

David Murphy
david.murphy@publicissapient.com
Abhishek Bhattacharya
abhishek.bhattacharya@publicissapient.com
Zachary Scott
zachary.scott@publicissapient.com
Cian Ó Braonáin
cian.obraonain@publicissapient.com

About Publicis Sapient

Publicis Sapient is a digital transformation company. We partner with global organizations to help them create and sustain competitive advantage in a world that is increasingly digital.

We operate through our expert industry consulting, experience, engineering, and data, combined with a culture of curiosity and deep industry knowledge. This enables us to deliver meaningful impact based on our clients’ business needs, unlocking the real value and experiences that customers truly crave.

Our agile, collaborative approach equips our clients’ businesses for lasting change through the careful fusion of data, digital, and cloud technologies. Publicis Sapient helps global banks transform and run at United Capabilities with 20,000+ people and over 50 offices worldwide.

For more information: www.publicissapient.com