The (R)Evolution of Core Banking Systems: Transformation Strategies of Providers in Switzerland
This article summarises the paper ‘(R)Evolution of core banking systems: Transformation strategies of providers in Switzerland’ by Tunçer, Popp, Eckert and Zerndt (2025) as part of the Core Banking Radar by Swisscom and the Business Engineering Institute St. Gallen (BEI). The full original article is available here.
The development of banking platforms
Banking platforms in Switzerland are undergoing a transformation process in response to changing customer needs, regulatory requirements and technological innovations. Core banking system providers are initiating transformation programmes to respond to digitalisation, competitive pressure and new developments such as artificial intelligence (AI) and embedded banking services. Historically, core banking systems began as monolithic solutions with end-of-day batch processing. With the next generation, real-time processing was introduced; service-oriented architectures and N-tier models paved the way for online banking and digital processes across all banking functions – accompanied by increasing integration complexity.
Today, core banking system providers cover all banking functions; the offering has evolved from a pure core banking system to an end-to-end banking platform. Established platforms in Switzerland include Avaloq, Finnova, Finstar, Olympic Banking Systems by ERI, TCS BaNCS and Temenos. At the same time, neo-core banking providers are entering the market with cloud-native architecture and a modern technology stack. Their range of functions is currently still limited (primarily account management, payments and cards), but is growing steadily. Overall, the market is showing increasing modularisation and openness of systems.
Reasons and motivation behind the transformation
Three key drivers of the transformation can be identified from the interviews with ERI (Olympic Banking Systems), Finnova, Finstar and TCS BaNCS.
Changes in customer interaction
Customers expect event-driven actions, on-demand services and seamless data availability. Whilst traditional platforms focused primarily on payment transactions, lending and investment advice, demand is growing for context-based and embedded banking services (e.g. CO₂ trackers, digital certificates, automated financial planning). At the same time, the boundaries between the financial and non-financial sectors are blurring; core banking system providers must therefore increasingly rely on open interfaces (APIs) and modular architectures.
Data as a strategic success factor
Banks face the challenge of intelligently analysing customer data to provide personalised and context-aware services. Generative AI, in particular, is setting new standards in data management, for example through Conversational SQL.
Technological change as a driver of transformation
New database and cloud technologies, as well as AI, open up opportunities for comprehensive re-engineering. AI is used in process automation, personalised recommendations and fraud prevention. Modern approaches such as API-first, agile working methods, DevSecOps and microservices increase scalability and flexibility – across front-office, back-office and support processes.
Current transformation strategies
Transformation strategies are heavily influenced by the providers’ history and customer base; nevertheless, four main strategies can be identified.
(1) Progressive, iterative transformation
ERI and Finstar are pursuing this path. Both have deliberately opted against a microservices-based architecture, as they believe the additional overhead outweighs the potential benefits. For new financial products, the systems provide a flexible set of rules that enables banks to configure them independently. ERI develops incrementally based on customer requirements and adopts a modular approach: Customers licence specific modules as required; the core remains monolithic, whilst the architecture is service-oriented. Finstar is driving forward the increasing modularisation of its platform (currently in operation for 15 customers) and combines technological functionality with Banking-as-a-Service offerings. This approach allows organisations to learn from international market developments, but can lead to a slower time-to-market.
(2) Modernisation through the redevelopment of individual components
Finnova has launched the finnova.neo programme for this purpose – with the aim of preparing banks for future challenges through modularity, simplified integration and cost efficiency, and of tapping into new business opportunities (data streaming for AI tools, embedded banking). By 2030, cloud-native, microservice-based modules are to be deployed on public and private clouds. Alpha creates a modular, role-based banking staff workstation for end-to-end processing of accounts, cards, payments, investments, pensions and financing. Initial higher costs are expected to be offset by long-term efficiency gains.
(3) Complete redevelopment or refactoring
Refactoring refers to the restructuring of source code without loss of functionality. The cost of a complete transformation is estimated at between 500 million and one billion Swiss francs – this strategy is primarily suited to internationally active providers such as TCS. TCS redesigns existing components for microservice architecture and cloud-native deployment; a model-driven architecture generates the code for CI/CD and enables updates without downtime. TCS BaNCS introduces an Angular-based web GUI with RESTful APIs, expands the extensibility framework with low-code toolkits, fully localises the banking software (particularly the mortgage module and securities settlement) and simultaneously switches to event-driven processing.
(4) Cooperation with a neo-core banking system
Another option is cooperation with neo-core banking systems such as 10x Banking, TUUM, Thought Machine or Mambu. They offer basic banking services such as account management, cards and loans based on modern technologies, but are still limited in areas such as securities transactions, position management and corporate actions – and cannot currently be used on their own for the full range of operations of a medium-sized or larger universal bank.
Six theses on the transformation of core banking systems
Drawing on the building blocks for the IT architecture of the future, the insights from the interviews lead to the following six theses.
Thesis 1: The banking platform remains ‘headless’
User interfaces and front-ends can be flexibly adapted to different use cases or replaced by custom front-ends – with different views for end customers and service staff. ERI and Finstar are focusing on expanding the functionality of existing products. Finnova and TCS are focusing on redesigning the bank advisor’s workspace with a modular, cloud-native approach: Finnova will launch Alpha in 2025; TCS BaNCS is developing a decoupled, Angular-based web GUI with a low-code toolkit and integrating agent-based systems to reduce manual service effort.
Thesis 2: Service orchestration via automation
ERI, Finnova and Finstar are concentrating on workflow management and process optimisation; direct RPA interfaces are generally not planned, with RPA optimisation carried out via external partners. TCS BaNCS goes further and relies on hyperautomation – a combination of rule-based automation and AI/ML, for example in transaction verification: consistency checks, AI-supported pattern recognition (e.g. fraud), automatic correction of incorrect details and escalation of complex cases to human support.
Thesis 3: Data access is gaining in importance
Core banking system providers are experimenting with NoSQL, data streaming and big data systems, and are investing in open interfaces for internal banking services and embedded banking. ERI separates data storage and services and combines relational with NoSQL databases. Finnova is developing cloud-native services such as the event bus and BORD (Business Object Read Database) for near-time and on-demand data replication. Finstar relies on relational databases plus data warehousing and is opening up to FinTechs. TCS BaNCS decouples components and data for microservice operation via refactoring.
Thesis 4: The monolith will remain in place in the medium term
Whilst some providers are sticking with the monolith, others are aiming to replace it. ERI is sticking with the monolith due to stability, control and customer demand, and is extending it on an SOA basis. Finstar is continuously reducing complexity in the ‘Solution Splitting’ project. Finnova is supplementing the modernised monolith with new, complementary microservices. TCS BaNCS has already adapted the majority of its components to microservices via refactoring; banks can choose between microservice operations (OpenShift, native K8s) and application servers (WLS, WebSphere, JBoss).
Thesis 5: The core as the foundation of compliance
For all core banking system providers, cyber security, data protection and secure access to customer, securities and product master data are paramount. FINMA Circular 2023/1 emphasises cyber security and data access management; EU regulations such as the Digital Operational -Resilience Act (DORA) introduce additional requirements. The core system continues to ensure tax-relevant customer reporting and legal reporting.
Thesis 6: IT infrastructure between private, public and hybrid cloud
ERI offers flexible operating models ranging from on-premise to private cloud and public cloud (AWS, Azure, IBM Cloud). Finnova relies on partnerships with cloud providers such as AWS and considers the transition from hybrid to multi-cloud to be important. Finstar operates its platform on-premises and in its own private cloud. TCS pursues an open multi-cloud strategy across multiple hyperscalers. Despite differing approaches, flexibility remains important for all providers to enable customers to integrate their preferred providers.
Conclusion
The transformation of core banking systems is essential. Whilst monolithic systems offer stability and a comprehensive feature set, technological progress, changing customer needs and regulatory requirements demand a shift towards more flexible, scalable and open solutions. The strategies examined – gradual modernisation, the introduction of individual new components or a complete rebuild – demonstrate that there is no single, one-size-fits-all approach. Core banking system providers choose individual paths in line with their objectives, market requirements and budgets. Modularity, open interfaces, the use of AI and sustainability form the basis of future-oriented banking platforms. The transformation is not merely a technical task, but a strategic necessity; a clear vision, targeted investments and collaborative partnerships will significantly influence success.
Source
Tunçer, T., Popp, C., Eckert, C., & Zerndt, T. (2025). (R)Evolution of Core Banking Systems: Transformation Strategies of Providers in Switzerland – Core Banking Radar 2025. Swisscom & Business Engineering Institute St. Gallen. https://www.swisscom.ch/de/business/enterprise/themen/banking/core-banking-radar-2025.html
Alt, R., & Puschmann, T. (2016). Digitalisation of the financial industry. Springer Gabler https://doi.org/10.1007/978-3-662-50542-7 Business Engineering Institute St. Gallen. (2025). Co
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