(R)Evolution of core banking systems: transformation strategies by providers in Switzerland
In cooperation with the Business Engineering Institute St. Gallen (BEI), Swisscom’s Core Banking Radar has been monitoring banks’ system support services since 2017 and analysing the most relevant systems for the Swiss market using a comprehensive assessment model. To this end, 15 core banking systems have already undergone thorough investigation and documentation. In this article, we take a look at the transformation programmes of ERI (Olympic Banking Systems), Finnova, Finstar and TCS BaNCS, which we compiled from interviews with the manufacturers.
19.05.25, Text Tanyel Tunçer, Christine Popp, Clemens Eckert and Thomas Zerndt 10 min.
Abstract
Banking platforms going through a transformation process that is responding to changing customer needs, regulatory requirements and technological innovations.
Originally designed as monolithic core banking systems (CBS), they have gradually been undergoing modernisation over the years – from the introduction of real-time processing and service-oriented architectures to flexible, modular and API-driven systems. This development is enabling banks to efficiently cover all banking functions while simultaneously implementing seamless interactions within one integrated service ecosystem.
Currently, CBS providers in Switzerland are pursuing different transformation strategies: while some are opting for a complete transformation with cloud-native microservices architecture, others are choosing a progressive, iterative approach or the targeted modernisation of individual components. This is complemented by collaborations with neo core providers who provide modern, lean systems. The focus is on key areas such as hyper-automation, data management, security mechanisms and flexible infrastructure models (on-premise, private and public cloud).
Overall, the further development of banking platforms aims to meet the increasing demands of a digitalised and networked market, create opportunities for new business models and simultaneously optimise the efficiency and scalability of the systems.
The development of banking platforms
Banking platforms in Switzerland are undergoing transformation. Core banking system (CBS) providers are initiating transformation programmes to respond to the increasing demands of digitisation and competitive pressure and to equip their banking platforms for the future – from the use of artificial intelligence (AI) to embedded banking services.
A look back at the past shows that CBS once started as software solutions that primarily took over basic tasks such as managing customer data, processing transactions and accounting via a central computer. These monolithic systems were only available during office hours and executed transactions at the end of the day through batch processing. While this model was efficient, it proved inflexible – especially since it lacked the real-time capability and interoperability to keep pace with growing business demands.
The next generation of CBS saw the introduction of real-time processing. This enabled faster transactions, a stronger product focus, greater transparency and improved customer service. Banks began to outsource the development of specialised systems to deliberately cover specific products or product groups. The introduction of service-oriented architectures and N-tier models promoted, amongst other things, greater flexibility in system design and paved the way for online banking and digital processes. The development covered all divisions of banking – from payment transactions, credit management and asset management to portfolio management, pension products and financing solutions. These were joined by business process support components such as regulatory reporting, customer relationship management, mortgage management and fraud detection. Despite the introduction of modular software solutions, complexity has increased, especially in terms of the integration of different systems.
As a result, the range of services on offer has grown considerably over the years – today, core banking system providers in Switzerland cover all of a bank’s banking functions. As a result, the offering by providers has expanded from what was once a CBS to an end-to-end banking platform. Established banking platforms in Switzerland include in particular Avaloq, Finnova, Finstar, Olympic Banking Systems by ERI, TCS BaNCS and Temenos. At the same time, providers are facing pressure to continuously develop their solutions further.
In parallel, as shown in Figure 1, more and more neo core banking providers are entering the market. The biggest difference in these systems lies in their openness and modularity: Neo cores are developed in a cloud-native manner, are based on modern technological standards and offer a flexible architecture. Although their range of functions is still currently limited (usually to account management, payments and cards), it is growing steadily and could pose a possible alternative to traditional CBS in the future – but there is still a long way to go. In summary, the market is showing the increasing modularisation and opening of systems.
Figure 1: Digitisation of the financial industry – the basics of the fintech evolution
Source: Own illustration, based on Alt and Puschmann (2016) p.161
Reasons and motivation for the transformation
Based on the interview conducted with manufacturers ERI (Olympic Banking Systems), Finnova, Finstar and TCS BaNCS, the following drivers and motivations for transforming the banking platforms can be deduced:
Changes in customer interaction
Customers today expect a high degree of convenience and the immediate availability of financial services: Event-driven action, on-demand services and the seamless availability of data are key requirements.
- New offerings and business models: While traditional banking platforms were primarily focused on payment transactions, lending and investment advice, demand for complementary, context-based and embedded banking services is on the rise. Examples include CO₂ trackers, digital certificates and automated financial planning.
- Ecosystem integration and interoperability: The boundaries between the financial and non-financial sectors are becoming blurred. In the future, there will be fewer industry-specific limitations and far more integrated service ecosystems. CBS providers must therefore increasingly rely on open interfaces such as APIs and modular architectures to enable seamless interaction between banks, insurance companies and other (non-)financial services providers.
Data as a strategic success factor
The role of data in service design is becoming increasingly important. Banks face the challenge of intelligently evaluating customer data in order to provide personalised and context-related services. At the same time, technological advances, in particular due to generative AI (artificial intelligence), are setting new standards in data management (e.g. Conversational SQL).
Technological change as a driver of transformation
New database technologies and technologies such as AI and cloud computing with managed services are opening up new opportunities for the comprehensive re-engineering of banking systems. AI is used to automate processes, provide personalised recommendations and prevent fraud.
Modern approaches such as API-first strategies, agile work methods, DevSecOps and microservices improve the scalability and flexibility of systems, helping banks to adapt more quickly to changing market conditions.
These technologies permeate all areas of a banking system – from the front office and back office to supporting processes.
Current transformation strategies
As part of the Core Banking Radar, we interviewed four leading core banking system providers in Switzerland to understand their approach to the transformation needs: ERI (Olympic Banking System), Finnova, Finstar and Tata Consulting Services (TCS BaNCS) (all described in brief in Annex 1). The interviews show that the providers’ transformation strategies are strongly influenced by their respective history and their customer base. Nevertheless, overarching key strategies can be identified that will have a significant impact on the future evolution of CBS and banking platforms in Switzerland.
One promising solution for most CBS providers is the (1) progressive development and with it, iterative transformation of the platform. Two CBS providers pursuing this strategy are ERI and Finstar.
- These providers are deliberately foregoing a microservice-based architecture, as the additional overhead (investments) outweighs the potential benefits.
- When it comes to the introduction of new financial products, the systems offer a flexible framework that allows banks to configure loans independently, for example. Instead of isolated, individual solutions, this framework is continuously developed and optimised to ensure a cost-efficient and sustainable transformation.
- ERI offers continuous and incremental development based on in-depth customer requirements, relying on a modular approach in the process: Customers license the required modules in a targeted manner, while the core remains monolithic. The architecture of the banking platform has a service-oriented design.
- Finstar pursues the consistent and continuous development of its platform, which is currently operated for 15 customers. This is characterised by increasing modularisation to increase the specific functional support of market requirements. The combination of the provision of technological functionality in operations and the addition of extra services (BaaS) for banks follows the recognition that technology and business services are becoming increasingly converged.
This strategy makes it possible to learn from positive and negative international market developments, while also taking into account customer requirements on the Swiss market. However, this leads to a slower time-to-market. Alternatively, the (2) modernisation of existing systems through the redevelopment of certain components may offer another strategy. Programmes such as finnova.neo show how a banking system can be transformed through targeted, comprehensive updates and the introduction of new technologies without the need to be rebuilt from the ground up.
- For this reason, Finnova has created the finnova.neo programme. It aims to prepare banks for future challenges at an early stage with modularity, simplified integration and cost efficiency, and to tap into new business opportunities through services such as data streaming for AI tools or embedded banking.
- By 2030, cloud-native, microservice-based modules are to be developed and made available in the public cloud and private cloud. Alpha will also provide a modular, role-based bank employee workplace for efficient end-to-end handling of core processes in the divisions of accounts, cards, payments, investing, pensions and financing.
- Under the scope of “finnova.neo”, Finnova offers end-to-end support that includes consulting, assistance and qualification for the implementation of finnova.neo. Due to finnova.neo’s focus on functional and technological added value (new business models by increasing integration capability and cloud operability), higher costs may arise initially, but Finnova aims to offset these with long-term efficiency gains and establish a future-oriented solution.
Another strategy is the (3) complete rebuilding or legacy modernisation through refactoring of the banking platform. Refactoring means changing the source code without losing the functionality. Due to the complexity of its implementation, this solution is a challenging one. CBS providers estimate the costs for a complete transformation at between CHF 500 m and CHF 1 bn, making this strategy primarily suited to internationally active core banking system providers such as TCS.
- TCS is using the refactoring approach to redesign existing functional components to suit the principle of microservice architecture and cloud-native provisioning. CI/CD (continuous integration/continuous delivery) is supported, which enables updates to be made on demand without any downtime. TCS manages its components in a model-driven architecture, which generates the code for CI/CD. This simplifies the refactoring to microservices and the support from different cloud providers.
- The modernisation of the banking platform from TCS BaNCS includes in particular the introduction of new GUI technologies (user interfaces) with Angular GUI framework and connection via RESTful APIs, which will gradually be integrated into functional components. The further development of the extensibility framework allows for customer-specific adjustments (GUI, data storage, process and API orchestration, business rules) using low-code toolkits. The resulting faster implementation and adaptation of user interfaces, processes and business logic as well as the integration of external services is intended to optimise both development time and costs.
- At the same time, TCS is fully ‘Swissify’ing its banking software. While large parts are already being used by Swiss banks, the existing loopholes, such as the mortgage and securities handling module, which has not yet been fully been adapted for a Swiss audience, are now being adjusted to suit Swiss market conditions, regulation and technologies.
- At the same time, a switch is being made to event-driven processing that supports decoupled components based on a microservice architecture. This should make processes more efficient and open up new business opportunities.
Figure 2: Comparison of the transformation strategies of CBS providers
Another option would be to (4) cooperate with a neo core banking system such as 10x Banking, TUUM, Thought Machine or Mambu. Neo cores offer basic banking services such as account management, cards and loans using modern technology. However, they still harbour limitations, particularly in divisions such as securities transactions, position management and corporate actions, which currently prevents them from being used solely for the full banking operations of a medium-sized or larger universal bank.
Six theses on the transformation of core banking systems
Based on the structure of the building blocks for the IT architecture of the future (see Core Banking Radar – System Support for Banks | Swisscom) the findings from the interviews with the providers result in the following hypotheses:
The banking platform is set to also remain “headless” in the coming years, so that the user interface and front end can be flexibly adapted to different application scenarios or own versions integrated.
For one thing, this enables different views for end customers and service employees, and for another, an exchangeable user interface that can be replaced or expanded as required.
- ERI and Finstar are relying on the existing products and the corresponding functional expansion as needed.
- Finnova and TCS are focusing in particular on redesigning the bank adviser workstation with an improved user experience and a modular, cloud-native approach.
- Finnova plans to bring Alpha to the market 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 through automation.
When it comes to service orchestration, CBS providers are opting to automate their platforms.
- ERI, Finnova and Finstar are focusing on optimising business processes and integrating workflow management systems. In most cases, direct interfaces for technologies such as robotic process automation (RPA) are not provided. Instead, banks can involve external partners to identify inefficiencies through data mining, for example, and optimise them in a targeted manner using RPA.
- TCS BaNCS is going one step further and focusing on hyper-automation – a combination of rule-based automation and AI/ML technologies. This enables the intelligent and efficient optimisation of complex business processes.
One typical example of hyper-automation is automated transaction verification: Incoming payments are checked for consistency, while AI models detect unusual patterns such as potential fraud. Incorrect information, such as incorrect recipient account numbers, is automatically corrected or rejected if correction is not possible. Complex cases that cannot be solved by rules or AI are escalated to human support.
Access to data is becoming increasingly important.
CBS providers are experimenting with and implementing modern database technologies such as NoSQL, data streaming and big data systems. One goal shared by all CBS providers is to offer (open) interfaces to enable banking services to access data on the one hand and to allow for embedded banking outside a bank on the other.
- ERI separates data storage from the services and uses both relational and NoSQL databases.
- Finnova is developing several new cloud-native services – including the Event Bus and BORD (Business Object Read Database), which are intended to enable data replication of the core for peripheral systems in near time and on demand.
- Finstar relies primarily on relational data bases, which are an integral part of the architecture, complemented by data warehousing services. Through the further opening and integration of fintechs, Finstar aims to support new business models such as embedded banking services.
- TCS BaNCS is taking a different approach and relying on refactoring to decouple existing components and associated data in order to operate them as microservices.
These different approaches aim to tap into new business opportunities – for example, through AI-supported services, embedded banking, a 360-degree customer view through the integration of unstructured data or faster transactions in real time.
The monolith with its close interrelationship between core and peripheral systems will continue to exist in the years to come.
While some CBS providers are sticking to the monolith, others are already aiming to replace it in the next few years.
- ERI is focusing on the expansion of services and interfaces based on SOA (service-oriented architecture) and is therefore staying with the monolith due to system stability, control and customer demand.
- Finstar is using modularisation and further development to continuously reduce the complexity of the platform. This is being implemented in the “Solution Splitting” project.
- Finnova is developing new services complementary to the core directly as microservices and in this way, will complement the modernised monolith in the future.
- TCS BaNCS is changing the existing architecture by refactoring to microservices and has thus already adapted the majority of components to operation with independent microservices. The microservices are formed depending on the bank’s business model, the volume to be processed and the availability of the specialist services. The bank can choose whether to operate TCS BaNCS as microservices (Openshift or native K8s) or on an application server (WLS, Websphere or Jboss).
The core forms the basis for the compliance-oriented management of banking transactions .
In principle, all CBS providers prioritise cybersecurity, data protection and secure access to data such as customer, security or product master data.
Stricter regulatory requirements must be taken into account. The FINMA Circular 2023/1 emphasises the importance of cybersecurity and data access management, while EU requirements such as the Digital Operational Resilience Act (DORA) come with additional requirements.
With the core, tax-relevant customer reporting and preparation for legal reporting can also continue to be ensured in the future.
A key aspect of the banking platform is the IT infrastructure, which moves between private, public and hybrid cloud.
- ERI offers flexible operator models, from on-premise and private cloud to public cloud such as AWS, Microsoft Azure or IBM Cloud.
- Finnova relies on fixed partnerships with cloud providers such as AWS, but considers a transition from a hybrid cloud to a multi-cloud strategy important.
- Finstar operates its platforms as on-premise and in its own private cloud, hosted in its own data centres.
- TCS pursues an open multi-cloud strategy and supports various hyperscalers such as AWS, Google Cloud and Microsoft Azure.
Figure 3: Comparison of the strategies of CBS providers
Despite these different approaches, flexibility remains important for all in order to enable customers to integrate their preferred providers and strategies.
Conclusion
The transformation of CBS is essential for meeting the current and future needs of the banking sector. While monolithic systems impress with their resilience and functionality, advances in technology, changing customer requirements and regulatory requirements are necessitating a realignment towards more flexible, scalable and open solutions.
The transformation strategies examined – from the step-by-step modernisation of existing systems and the introduction of individual, new components to the complete rebuilding of the platform – show that there is no one-size-fits-all approach. Instead, core banking system providers are finding individual paths that take into account their strategic objectives, market requirements and cost frameworks. Key principles such as modularity, open interfaces, the use of AI and sustainability form the basis for future-oriented banking platforms.
In conclusion, the transformation of the banking platform is not just a technical task, but a strategic necessity to make banks fit for the digital age. A clear vision, combined with targeted investments and collaborative partnerships, will have a significant influence on the success of this transformation.
Annex Presentation of core banking system providers
Finnova
Finnova is an established Swiss solution used by more than 100 retail, regional and private banks. Finnova supports a customer focus with functionalities for creating a 360-degree view of customers and segmentation based on transactional behaviour (such as frequent travellers). Alongside its core transaction processing functionalities, Finnova is characterised by various partnerships in the ecosystem (such as the SecuChat Suite from jemmic for customer communication or Loan Advisory from Inventage as fully integrated components) to cover customer-oriented functional requirements.
TCS BaNCS
TCS BaNCS is the core banking system of the Indian Tata Group. The company claims to cover all functional requirements itself. The system is highly modular, cloud-ready and offers a usage-based licence model. In addition to banks, the customers of TCS BaNCS also include insurance companies. The Payments service area was most recently mapped to microservices, with Investing and Financing currently to follow. TCS has also invested heavily in distributed ledger technology and APIs.
Finstar
Finstar is an open Swiss core banking system that can be flexibly parameterised and set up in multiple languages by the development team at Hypothekarbank Lenzburg and is now available as SaaS for other banks and financial services providers. The actual basis (excluding peripheral systems) of Finstar enables the complete banking operations for a simple small bank. Finstar focuses on providing the right building blocks to enable its customers to optimise existing business models. In addition, Finstar aims to support new business models such as embedded banking services by further opening and integrating fintechs. Through open interfaces, Finstar offers both fintechs and non-banking companies a wide range of services in the divisions of accounts, payment transactions, credit initiation processes and cards as part of BaaS.
Olympic Banking Systems
Olympic Banking Systems is a core banking system developed and sold by ERI, and serves national and international private and universal banks. Originating from the classic licensing business, OLYMPIC Banking System is now also available as a SaaS offering for international banks. The service-oriented architecture around a mature core of more than 5,600 services permits integration with other systems. For example, cryptos can be booked as assets. OLYMPIC Banking System adheres to industry standards when it comes to the development of APIs.
Source:
Alt, R., & Puschmann, T. (2016). Digitalisierung der Finanzindustrie. In Springer eBooks.
https://doi.org/10.1007/978-3-662-50542-7
Business Engineering Institute St. Gallen. (2025). Competence Center 11.1 Future Financial Services.