Adopt vs Adapt: Time to Rethink Your Core Banking Strategy?

Financial institutions are changing how they use technology to deliver exceptional banking experiences and strengthen business performance. For decades, they would pride themselves on meeting new demands by customizing their core systems right down to the finest detail – an approach that was once regarded as a strategic advantage but is now increasingly viewed in a very different light.

Rather than helping them to stay competitive, there is a growing realization that heavy customizations are, in reality, slowing down innovation. With the blistering pace of technology advancements, increasingly high customer expectations, and ever-evolving regulatory demands, hard-coded customizations create system interdependencies, introduce additional risks, and often result in lengthy implementation projects where valuable time is lost as the competition moves ahead.

Today, many of the technology executives I meet with are taking the opposite approach. Rather than tailoring their core systems themselves, they’re adopting complete, cloud-native software with ready-to-use customer journeys – often delivered as-a-service.

In this SaaS model, the vendor handles the underlying infrastructure and maintenance, while advanced integration tools and extensibility frameworks allow financial institutions to safely tailor proven solutions without needing to make deep (sometimes irreversible) changes to their ecosystem – a prime example of an “adopt” approach in practice.

Crucially, this frees them to focus their time and resources on “last-mile” areas where there is a strong business case for value creation much closer to the customer, such as the customer experience.

Fundamentally, though, many priorities remain the same. Ensuring the highest levels of security, regulatory, and resilience standards, for example, are still top priorities. But financial institutions are now under even more pressure to differentiate in a competitive market and improve their cost-income ratios – without compromising on these standards.

Adopting proven technology gives them a clear path to achieving these objectives.

Why is technology adoption accelerating?

The increasing sophistication of SaaS and cloud technology has made their adoption even more practical and attractive – but there are other important drivers of technology adoption, too:

• Cloud migration: As financial institutions continue to move from on-premises legacy systems to SaaS and cloud platforms, the ability (and need) to manage deep customizations, naturally, diminishes.
• Increased resilience: Supervisory bodies around the world are not only demanding proof of operational resilience (with the introduction of the EU’s DORA¹ in 2025, for example) but they are also increasingly advocating for automation over manual processes, which are often prone to error and time-consuming. Modern platforms include pre-built automation features such as workflows, triggers, integrations, and events. As these cover common business practices, custom codes or manual workarounds are not needed for many tasks.
• Cost efficiency: With many financial institutions under pressure to improve their cost-income ratio amid rising operational costs and inflation, standardizing technology has become a critical lever. By reducing complexity and minimizing maintenance costs, they can simplify their operations, lower long-term costs, and free up resources for innovation.

To illustrate this momentum, last November I spoke to two of our Tier 1 clients, who both highlighted a common challenge: that repeatedly piling on hard-coded customizations was hampering their product innovation and operational resilience due to the risks and lengthy timelines involved.

In response, they shifted to an adopt strategy, leveraging software and committing to updates every two years (many financial institutions are now even aiming for annual updates). This approach ensures their technology, and therefore all banking-related activities, are always current. This is just one example where adopting rather than customizing is emerging as a smarter way to build resilient and innovative banking ecosystems.

More than a technology shift  

Of course, we don’t expect customizations to disappear entirely, but we are seeing a culture shift whereby decisions to customize are becoming far more measured. The default is no longer to customize, but to rationalize – ensuring business needs are fully understood and that any changes won’t simply create additional technology layers that are difficult to maintain and compound costs in the long term.

For many players, this means breaking free from what has become an unproductive cycle of innovation and instead adopting software that provides the modular building blocks and flexibility to compete in today’s fast-moving market.