The Business Case for a Modern Core

Modernizing a banking core makes all the technological sense in the world. And with the right partners and capabilities, it makes even better business sense.

Atul Ajith Mathews
Atul Ajith Mathews – Head of Marketing, NAM

Digital transformation is a top priority for all financial institutions today. While each journey is different, most involve a shift in how an institution approaches technology as a component to fundamental business strategies. While change is never easy, it can be smooth and lucrative with the help of partners and new technological capabilities.

Experts in the field from Temenos and Cognizant, a technology and services consulting firm, recently sat down to dive deep and discuss how IT is shaping the future of banking. Panelists included Sanjay Bhanot, Head of Business Architecture and Transformation at Cognizant and Edward Merchant, Head of BFS Consulting Americas, Cognizant. From Temenos, James Buckley, Executive Vice President Strategic Accounts, participated as well

Modern core is future-proof

All agreed that a modern core, especially one able to adapt to multiple clouds, frees a bank from the capital expenditures that stay on the books for a prolonged time. Moving to an OpEx model from a CapEx makes more business sense. Also, on a digital core composed with different capabilities and with different partners, a bank can scale with greater agility, which makes it a key risk management tool.

Banks benefit from migrating to OpEx from CapEx

It makes better business sense to forgo buying hardware, as such investments remain on the books for a while, which decreases agility over time. Moving to an OpEx model from a CapEx model goes most smoothly when transitioning to API architecture with cloud providers who can manage on multiple cloud providers, because one size doesn’t fit all. IT should support business, not get in the way of it.

Getting IT off the critical path has always been the Nirvana from a business point of view. The business always has its strategies, and usually it’s the IT function that’s holding it back.”

—James Buckley, Executive Vice President Strategic Accounts, Temenos

Risks go down, rewards go up

Modernizing a core increases agility without upping the risks associated with pivoting and adapting to change. With the right partners and the right core provider, a bank can plan—and fund—its modernization plans to provide better products, services and solutions with minimal risk. Composability lowers risks, cuts costs and more importantly, it boosts revenue, because it allows banks to draft and execute gameplans and strategies more quickly and efficiently.

Software providers make staying modern easier

Software providers can integrate innovative technologies and new ecosystem players much more efficiently and rapidly than any single institution. Take AI. Many banks examine use cases for AI, but they are unable to scale it and use it comprehensively from an organizational point of view without proper partners.

So, by virtue of going to a solution that’s fit for purpose for the financial services industry, banking in this case, what they can get is an organization that is thinking through and solving scalability and manageability solutions associated with this modern technology—managing the risks and dealing with the regulatory concerns. And therefore, they can focus more on how they use Gen AI in order to create value as opposed to how do they spend their time controlling Gen AI to keep them from incurring liabilities.”

—Edward Merchant, Head of BFS Consulting Americas, Cognizant

Times to market go faster and smoother

Transformation journeys go quicker, and the business benefits become apparent much earlier in the transformation journey. The notions that migrations are fraught with risks are overblown. Banks can expect faster times to market, they can see the benefits more quickly and on a continuous basis over the transformation journey. Reusability is becoming more important and so is the ability to access upgraded products and services.

The approach is definitely getting more agile, iterative, incremental—with an MVP-oriented mindset in planning this whole transformation.”

—Sanjay Bhanot, Head of Business Architecture and Transformation, Cognizant

Banks get more flexible in the face of spry competitors

The ability to add different components on a plug-and-play basis for multiple purposes is a good enabler for banks looking to simplify how they conduct business.

The current landscape that most banks haveis horrendously, horrendously complex, partly by consequence of acquisition and mergers, but partly as a consequence of all the investments they’ve made over 40 years in IT. It’s really ‘brittleware’ rather than software. At this stage it’s exceedingly difficult to change. So, there’s an ability to use the cloud world to simplify.”

—James Buckley, Executive Vice President Strategic Accounts, Temenos

Adapt to changing markets

Banks today must be ready to adapt to changing demands by market and by segments. The healthcare available to them gets better but challenges may arise in financing access to those services. On the cloud and with the right ecosystem of partners, a bank can become an enabler, a concierge of those services.

Customers really expect solutions, not only just products and services, which means banks are not only just manufacturers of product and services, but they have to become more integrators of services basically by seamlessly integrating capabilities offered by other providers.”

—Sanjay Bhanot, Head of Business Architecture and Transformation, Cognizant

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Atul Ajith Mathews
Atul Ajith Mathews – Head of Marketing, NAM