• Banks' legacy core systems — the software layer into which all of the organization's operations feed — have become so outdated that they're materially hurting banks. Above all, legacy core systems aren't equipped to make the most of an increasingly valuable resource: data.
  • This inability to handle data efficiently creates several major handicaps that are holding banks back. These include lapsing security, redundancies, slow response times, and an inability to easily integrate with third parties. Altogether, such issues mean banks are unprepared for an environment in which responsiveness to rapidly changing conditions is essential.
  • The banking industry recognizes the scale of the problem, but few banks have so far initiated core system replacement projects, or "overhauls." This is due to the vital nature of the core layer, and the duration and expense of replacing it — overhauls can cost billions of dollars, and may take between 10 and 15 years. Most banks choose the familiarity of inefficient old systems, deciding the risks outweigh the benefits of replacing them.
  • However, overhauls are now a necessity in a digital landscape, and effective implementation can make these institutions better positioned to compete. New generation cores have been designed by developers to directly address the problems with legacy systems. They offer seamless data sharing and optimized storage capacity, as well as built-in digital layers and cheaper storage.
  • While these projects entail multiple risks and outlays, many pitfalls can be avoided by taking the right precautions. Banks’ anxiety about taking the plunge to replace their systems is not unfounded — according to Cognizant, only 25% of all system overhauls are successful. However, overhauls are usually tripped up by poor management decisions, rather than technical snafus. This means avoiding implementation problems is largely a matter of proper scoping and planning.


Banks' core software systems serve as “the heart of all the systems operating in a bank and its central data ledger,” according to Cognizant. But these systems, implemented decades ago, have failed to keep pace with greater volumes of both regulatory and transaction data in an increasingly digital marketplace. In this environment, banks are becoming more and more dependent on efficient data processing for analyzing customer behavior to personalize products and improve service, and to conduct compliance checks in the face of [...]