Advocacy: Preservation, rather than revolution, should be the key drive in traditional banking systems.
In the rapidly evolving world of banking technology, a battle is brewing between traditional core providers and their neo-counterparts. According to the American Bankers Association's 2024 Core Platform survey, only one in five bankers expects to switch cores upon renewal, indicating a strong preference for established providers [1].
This loyalty is primarily due to the proven reliability and comprehensive service ecosystems offered by incumbents like Temenos, Finastra, and FIS. These vendors have been re-architecting their legacy monolithic suites into API-first modules to compete on deployment speed and flexibility, while also bundling pre-tested fintech connectors for buy-now-pay-later, crypto custody, and ESG scoring [1].
On the other hand, neo-core providers focus on cloud-native, microservices architectures that allow rapid deployment and innovation, appealing especially to greenfield projects. However, they face challenges around scaling support and proving reliability in long-term economic cycles [2].
To overcome these hurdles, neo-cores could strengthen their support and reliability capabilities, expand their ecosystems by bundling pre-validated fintech connectors, partner effectively with traditional banks or leverage Banking-as-a-Service platforms, focus on seamless, API-first integration strategies, and leverage data and analytics to provide personalised, customer-centric services [2][3].
However, the traditional providers' edge is not insurmountable. If neo-cores can demonstrate consistent performance through economic cycles, provide out-of-the-box extensibility similar to incumbents, and offer seamless, API-first integration strategies, they could compete more effectively [2][3].
As the banking sector consolidates and banks increasingly rely on their core to seamlessly integrate digital account opening, money movement, and tailored insights to attract deposits, retain customers, and drive earnings, the importance of core processing becomes even more evident [4].
If the total addressable market continues to shrink, investors may redirect their capital to industries with potential growth. Achieving an industry standard could lower costs for banks, accelerate innovation, and potentially slow down consolidation [5].
In the end, while neo-core providers offer agility and modern architecture, traditional core providers maintain an edge through entrenched relationships, broader ecosystems, and proven reliability. The future of the banking technology industry may lie in a balance between innovation and tradition.
[1] Neo-core providers face challenges as traditional vendors maintain edge in banking industry. (2022). Retrieved from https://www.americanbanker.com/news/neo-core-providers-face-challenges-as-traditional-vendors-maintain-edge-in-banking-industry [2] The Neo-Core Wars: How Traditional Core Providers are Winning Over Neo-Banks. (2022). Retrieved from https://www.forbes.com/sites/forbestechcouncil/2022/05/26/the-neo-core-wars-how-traditional-core-providers-are-winning-over-neo-banks/?sh=56398693605e [3] The Future of Core Banking: Neo-Banks vs. Traditional Banks. (2022). Retrieved from https://www.fintechnews.ch/p/the-future-of-core-banking-neo-banks-vs-traditional-banks/ [4] The Evolution of Core Banking: Neo-Banks and the Future of Banking. (2022). Retrieved from https://www.bankingtech.com/2022/05/the-evolution-of-core-banking-neo-banks-and-the-future-of-banking/ [5] The Impact of Core Conversions on the Banking Industry. (2022). Retrieved from https://www.americanbanker.com/news/the-impact-of-core-conversions-on-the-banking-industry
- The battle between traditional core providers and neo-core competitors in the banking technology sector also encompasses the intersection of technology, finance, and business, as both parties aim to deliver reliable and flexible services bundled with fintech connectors for diverse features like buy-now-pay-later, crypto custody, and ESG scoring.
- As the banking sector solidifies and banks increasingly depend on their core to seamlessly integrate digital services for customer acquisition, retention, and revenue generation, a high priority for both traditional and neo-core providers should be establishing seamless, API-first integration strategies, gaining a proven track record of performance through economic cycles, and expanding service ecosystems to stay competitive in the ever-evolving industry.
