Lewis Ide, Vice-President at 10x Banking, sat down with Benjamin Ensor, Director of Research and Strategy at 11:FS to discuss all things core banking. Below we've summarized Lewis' core banking transformation predictions for 2025.
From a core banking perspective, we are about to hit this next wave of transformation. I think that's undeniable. The interactions that we've had with clients over this year has probably tripled, quadrupled in terms of the number of engagements that we're in involved in. So, we're about to see this wave of core transformation happen and that's driven by a lot of factors:
Competition and end of life legacy systems
Competition from the Neo’s and the FinTechs, and we're starting to see a number of the legacy systems become end of life. So, they're not supported, which introduces a huge amount of risk. And as we start to see the application of AI and new technologies, it's very difficult to leverage those with some of those mainframe architectures that are running. So, core banking is certainly going to be one of the hot topics of 2025 and into 2026.
AI and migration
AI is going to have a big impact in 2025, I don't necessarily see it as a complete renovation and AI is everywhere situation, instead, there will be certain pockets of business value that we're going to see emerge and here we need to talk about migrations. For me that's a key factor, enabling a cost-efficient migration to allow clients to adopt a core banking platform that is unifying the data. This ultimately allows banks to then leverage AI in the future from a customer facing standpoint.
Cost-to-income ratio
And the last point which is more holistic on a macro perspective: all the institutions we're talking to have a big focus on cost-to-income ratios, how they're managing costs, but still applying growth. We're seeing a big difference now in terms of the digital side. Although not necessarily a fixed cost in terms of the money you're paying out, it is predictable. And what we're starting to see is that predictability allows banks to forecast their growth and reduce some of the costs but enable them to scale as well. So, there's going to be a big focus on cost rationalization and what we may start to see, as we've seen this in Europe, is consolidation. For example, in the UK this happened with Coventry Building Society and the Co-operative Bank. We'll start to see that more holistically as well, which is a big opportunity for financial institutions to then take on that transformation journey.
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