In the last couple of weeks, I have read many news articles and blog posts discussing the need for core banking systems replacement. Some even offered criteria that should help banks determine whether they really need to replace their core banking systems. Why do I mention this? Forrester described vintage core banking systems as a key obstacle to innovation and digital banking and identified the transformation imperative for banks more than a decade ago.

Today, many technology leaders in banks wholeheartedly agree with this transformation imperative; they know the shortcomings of their decades-old systems — complex application landscapes, obsolete technology and languages, high maintenance costs, no (close to) real-time capabilities, ancient data models, and even simple things like the lack of sufficient documentation. The lack of knowledgeable personnel — many have retired by now — represents just one more reason why existing core banking systems are anything but an enabler of innovation, short time-to-market, and efficient compliance with regulation that they should be.

Today’s key question is not whether it’s necessary to move from vintage core banking systems to new core banking capabilities (and I deliberately use “capabilities” instead of “system”). After all, banks without a modern application landscape will find it hard to remain competitive. Neither is the key question when a bank should move to modern core banking capabilities: If a bank hasn’t yet completed or at least started on this journey, it’s already behind.

Today’s key question is how to move forward and introduce modern core banking capabilities (and further banking capabilities); how to determine the optimal shape of buy plus build; how to assemble and compose applications landscapes from a variety of internal and external bank sources; and how to support continuous transformation. However, an additional key question is already emerging: What should be the architectural shape and functional size of a future core banking capability? The answer to this question can’t be “core banking as we have known it for decades” as banks cannot afford to settle for the limited flexibility and efficiency that this approach would entail. Banks don’t need new core banking solutions; they need new paradigms to deliver core banking capabilities.

As always, let me know what you think: