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Articles May 13, 2025

Unlocking the Benefits of Modern Core Platforms in Banking

Anna Hegeler Rodrigo Bortoloto
Authors
Anna Hegeler, Rodrigo Bortoloto

In today's fast-paced financial landscape, modernization is not just a buzzword, it's a necessity. Financial institutions are under immense pressure to stay competitive while meeting ever-evolving customer demands. Economic pressures, stringent regulatory requirements, and rapid technological advancements are reshaping the industry. In our prior article, we delved into the challenges posed by legacy core systems. Next, we'll explore how modern platforms can transform these challenges into opportunities, offering significant benefits that drive growth and innovation.

Modern core banking platforms are defined by real-time processing, robust customer management, and scalability. They leverage cloud-native architectures for flexibility and cost-efficiency, utilizing APIs for seamless integration with third-party services and microservices for independent development and deployment. Security and compliance are ensured through encryption and firewalls, while advanced technologies like AI and machine learning enhance hyper-automation and transparency. Additionally, a focus on user experience design ensures intuitive and user-friendly interfaces for customers.

Banks with Modernized Cores Are Already Seeing the Cost Savings

Core modernization involves upgrading and replacing outdated systems that support a financial institution's operations such as transaction processing, interest and fee calculation, fraud detection and prevention, and payment processing. Cloud-native cores streamline operations, reduce costs, and enhance organizational efficiency. For example, in 2022, Santander launched its Gravity project to build an in-house core, migrating 80% of its IT infrastructure to the cloud. This move has reduced maintenance costs by 70% and improved scalability by enabling parallel processing and real-time testing without disrupting normal business operations. The cloud migration also allowed Santander to cut its IT infrastructure energy consumption, contributing to its responsible banking targets.

Similarly, Zions Bank completed an 11-year core banking modernization, transitioning from its legacy system to TCS BaNCS. This transformation unified all lending operations, simplified the IT landscape, and enabled faster time-to-market for new products. While many banks still rely on nightly batch jobs or data transfers, Zions Bank is moving to a real-time processing system for posting transactions to accounts.

AI Enhances Personalized Digital Experiences

Customers increasingly expect real-time, seamless digital banking experiences. They demand instant access to services, such as real-time payments that allow them to transfer funds immediately, whether they are paying bills, sending money to friends, or making purchases. They expect tailored recommendations, like personalized financial advice and product suggestions based on their spending habits and financial goals.

Leveraging AI and advanced data analytics are key to delivering seamless digital banking experiences and enabling hyper-personalized services. Nubank, for instance, built its proprietary cloud-based core from the ground up, enabling rapid scalability and innovation since its inception in 2013. This infrastructure allows Nubank to support more than 100 million customers across Latin America, providing highly personalized and efficient services, such as creating a feature to promote transparency and balance management in households with multiple accounts. Nubank leverages AI and data analytics to offer customized financial advice, instant credit approvals, and real-time transaction notifications, significantly enhancing customers’ experiences.

In the UK, Chase launched its retail operations on the 10x Banking Core, a modern, scalable platform built on microservices and accessible via APIs. This platform enables Chase to deliver seamless customer experience with differentiated product features. Chase plans to transition its US retail core to Thought Machine's cloud-native platform, Vault Core, to accelerate product development, enable real-time processing, and deliver personalized services.

Banking Cores Need to Adapt to Navigate Regulatory Changes

Modern, cloud-native core systems also provide financial institutions with significant advantages in adapting to regulatory requirements. Features like microservices architectures, real-time data processing, and API-first designs allow banks to quickly implement regulatory changes without costly and time-consuming overhauls.

Cloud-based architecture enables banks to centralize and manage rate and fee structures dynamically, providing real-time updates to customers through digital channels. This level of transparency is difficult — or impossible — to achieve with legacy cores that rely on batch processing and fragmented data sources. Modern cores are also typically designed with built-in compliance tools, including automated data tagging, encryption, and standardized APIs that optimize regulatory reporting.

Key regulatory landscape focus areas include:

  • Open Banking and Data Sharing: Financial authorities are driving greater interoperability between banks and third-party providers, requiring secure access to customer data through standardized APIs.
  • Dodd-Frank Act and Financial Stability: Originally enacted to enhance financial oversight and prevent systemic risks, the Dodd-Frank Act continues to shape regulatory expectations for banks, particularly in areas such as risk management, capital requirements, and stress testing. While some provisions have been modified over time, ongoing considerations around financial stability, bank supervision, and consumer protection could lead to further adjustments, particularly in response to economic conditions or financial sector disruptions.
  • Consumer Rights: Policymakers continue to focus on financial transparency, fairness, and accessibility. Efforts include strengthening disclosures, preventing deceptive practices, and ensuring consumers have greater control over their financial data.
  • Data Standardization: As financial oversight bodies push for uniform data formats, banks systems must support structured, machine-readable information that facilitates compliance, enhances interoperability, and improves reporting accuracy.
  • Fee Transparency: With more scrutiny on hidden or “junk” fees, banks are increasingly required to provide clearer, upfront disclosures on account fees, overdraft charges, and payment processing costs.
  • Data Privacy and Protection: With frameworks such as GDPR, CCPA, and CFPB-driven security requirements, financial institutions must implement strong privacy controls, encryption, and consent management to safeguard sensitive customer information.
  • Real-Time Payments, FedNow, and Instant Payment Processing: The rise of real-time payments and government-backed initiatives like FedNow are reshaping transaction settlement. Banks must upgrade their core systems to support instant payments while maintaining robust fraud prevention and reporting measures.

With ongoing policy shifts, financial institutions will need to stay agile, leveraging modern core banking systems to comply with evolving regulations while maintaining a competitive edge in the market.

Modern core banking platforms are essential for financial institutions to thrive in today's dynamic and regulated environment. By adopting cloud-native architectures and advanced technologies like AI and blockchain, banks can enhance efficiency, reduce costs, and deliver personalized experiences. These systems also ensure robust compliance, enabling swift adaptation to regulatory changes.

In our next article in the series, we will explore how financial institutions can approach building a core modernization strategy.

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Anna Hegeler

Manager, Management Consulting

Anna is a product management consultant with over seven years of experience in digital transformations and delivering customer-centric products and technology across financial services, government, and logistics. Known for simplifying complex topics and challenges into actionable strategies, Anna is passionate about understanding customers and exploring new technologies.

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Rodrigo Bortoloto

Rodrigo Bortoloto

Fellow, Systems Integration

Rodrigo has over 20 years of experience specializing in architecture, design, and construction of complex distributed, integrated enterprise applications running on-premises and in the cloud.

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