Despite the complexity and risk of core transformation, many very large banks are questioning whether their existing core systems can carry them forward.

These institutions have unique requirements and considerations for modernization compared with community and regional banks. This blog is the first in a four-part series that examines the drivers and benefits of core modernization.

For decades, most of the nation’s largest banks have relied on core systems built for a very different era, an era defined by its batch windows, siloed data, and monolithic control. In many cases, the providers of these high-end core systems have not delivered the needed investment to modernize the solution, leaving some of the world’s largest and most reputable banks looking for the path forward. They need a solution that meets today’s reality of instant payments, heightened customer expectations, embedded finance, and AI-powered services.

While change is inevitable, large banks have been understandably reluctant to undertake core transformation, because their existing cores are proven and capable of handling huge volumes of transactions. To accommodate customer and market demands, they have cobbled together complex tech stacks on top of their cores, which require vast resources to maintain and hinder their ability to be agile, and hence, competitive.

Because their environments are likely to be much more customized, larger banks face a tougher challenge when it comes to core modernization than smaller banks. Community and regional banks are more likely to partner closely with a single vendor for much of their technology and can take advantage of ongoing core modernization efforts spearheaded by their technology partner.

With the systems large banks rely on, product launches take months instead of days or weeks. Integrations are costly and brittle. Real-time data is hard to access, making it difficult to deliver personalized offers or fuel AI workflows. And every year, a growing share of IT budgets is spent just “keeping the lights on,” leaving little room for innovation.

This is no longer just an operational headache; it’s a business risk. Analysts predict that over the next five years, 30–50% of today’s retail banks could disappear if they fail to innovate.¹ Competitors with modern technology stacks can spin up products faster, delight customers with personalized experiences, and monetize new payment and data opportunities.

1. “Glacial Innovation Rates Must Thaw Fast or Retail Banks Face 2030 Failure,” Boston Consulting Group, April 2024

The Case for Making the Move

For very large banks, core modernization is no longer about a technology upgrade; it’s about driving business outcomes. These banks need a platform that is:

• Cloud-Optimized: Built to scale elastically, deploy updates continuously, and operate at tier-1 scale without custom infrastructure.
• API-First & Data-Open: Exposes data and transactions through secure APIs and event streams, enabling real-time visibility and integration with fintech ecosystems.
• Extensible: Lets banks design and differentiate products, not just configure templates, so they can compete on innovation.
• Resilient & Compliant: Meets growing regulatory expectations for operational continuity, auditability, and transparency.
   

Why Finxact

Finxact was purpose-built to meet these needs. It’s a complete reimagining of what a core can be. Finxact’s dual-entry ledger and its fully exposed data model feed real-time insights to AI engines, fraud monitors, and customer engagement platforms.

By replacing technical bottlenecks with a composable, cloud-native platform, Finxact can transform the core into a growth engine. Institutions using Finxact are already operating at scale with more than 35 million positions in production. They are launching new products in days or weeks, not quarters.
 

The Road Ahead

For very large banks, core modernization is no longer a future project to be budgeted “someday.” It’s the foundation for relevance in a market that moves faster every quarter. The risks can be managed by taking an incremental approach, and the rewards can be realized along the way.

See how Finxact powers transformation, and explore what a modern core can do for your bank at Finxact.io.

And look for the next installment in this series, where we’ll explore the three biggest engines driving modernization today: AI, personalization, and real-time payments. That will be followed by installments that explore the cost of doing nothing and what a future-ready bank looks like when core modernization is complete.

1. “Glacial Innovation Rates Must Thaw Fast or Retail Banks Face 2030 Failure,” Boston Consulting Group, April 2024