Discussion

10 key takeaways: Core modernisation decoded

By Sonia Vieira and Emily Capon

In an era where fintechs are redefining the financial landscape, the challenge for traditional banks isn’t just about keeping up—it’s about reimagining core banking from the ground up. On the 5th February, senior leaders from European financial institutions, fintechs and data centrals came together in Copenhagen to attend Breaking the legacy: How leading banks are reinventing themselves for the future, an Engine breakfast seminar hosted in partnership with Nordic Fintech Magazine, PwC and AWS.

The morning unpacked the key drivers behind core modernisation, Engine’s innovative approaches and technology to reshaping core banking solutions, followed by a workshop that provided actionable strategies for attendees to take away and apply. Here are 10 key takeaways from the event:

1. The opportunity cost of not modernising is massive. Banks that resist change risk losing customers to fintechs and challengers who can pivot and innovate at pace. With new players like Nubank already surpassing 100 million customers in Latin America, the first neobank to reach this milestone outside of APAC, traditional institutions can’t afford to stand still.

2. Building solutions in the cloud is like using Lego bricks. Building a cloud-native, modular banking solution with tech like Engine’s is like putting together Lego bricks. Banks can design and scale their architecture by selecting specific and the right building blocks (modules in this simple premise), allowing them to create flexible, incremental solutions tailored to their specific needs.

3. Modernisation doesn’t have to mean a complete overhaul. A common misconception with core modernisation is that you must do it all in one go. A benefit of cloud-native infrastructures is that banks can choose to transition strategically, choosing which elements to update first. By taking an incremental approach, banks can more easily manage risk, ensure compliance, and maintain platform stability while undergoing innovation.

4. Fintechs can serve customers for under $1 per year. With cloud-native infrastructures, digital platforms, and no physical branches, fintechs are able to operate at a fraction of the cost of traditional banking models. This gives fintechs a real competitive edge while being able to pass on these savings to their customers, presenting major challenges to incumbent banks pre-modernisation where a significant portion of their costs are tied up in cash handling infrastructure and legacy technology.

5. Legacy systems are like an old, sprawling hotel. A decrepit construction with ever-growing imperfections that are constantly being hidden with new paint or building shiny, new extensions. Much like a hotel that has expanded over time, a bank’s core architecture can become so intricate with decades-old mainframes that have been patched and extended so many times with complex bolt-ons and ‘upgrades’ that even those running it struggle to map out all its components.

6. Regulation doesn’t have to be a blocker to modernisation; it’s a key design principle. Compliance should be embedded into modernisation strategies from the start, not seen as an afterthought or roadblock. Embedding robust regulatory and compliance frameworks is an essential element of solution localisation.

7. Core modernisation isn’t a simple A to B journey. Many banks assume the modernisation process involves hollowing out their core and replacing it piece by piece. However, this approach can actually increase complexity. Alternative approaches, such as sidecar architectures and progressive modernisation/phased migrations, allow banks to innovate without disrupting core services and BAU operations.

8. Innovation isn’t just for customers. Modernisation transforms employee experiences too – digital-first, core banking can improve internal operations, reducing friction for employees and making it easier to launch useful products quickly. Happy employees lead to happy customers, which nurtures a cycle of reliably better service and engagement.

9. Truly modern, digital-first banks can still provide a human touch. Placing second in the latest Institute of Customer Service UK Customer Service Index, Starling Bank provides customer service journeys without IVRs, chatbots or endless call centre loops; the Starling model puts people first, championing customer-centric service, backed by modern cloud technology supporting seamless customer and employee journeys.

10. Engine-led modernisation means a faster return on investment. A pre-built, pre-integrated processing model means banks no longer have to start from scratch. Instead, as demonstrated by our recent implementations for Salt Bank and AMP Bank, our clients can launch in 12 months, iterate continuously, and toggle features on and off like Lego blocks as and when needed, leaving more time to strategise next steps and innovate. Engine allows you to focus on what really matters: providing the best experience possible for customers.

Core banking is undergoing reinvention. The question is no longer whether banks should modernise - it’s how they should undertake modernisation, and how soon they can wait before they are left behind by future-focused competition; the longer the wait, the bigger the risk of falling behind and losing out to challengers offering fully-featured, digital-first banking solutions.