According to a study by Cornerstone Advisors in 2019, 80% of bankers and stakeholders believe that digital transformation is the capacity to leverage digital aspects of most banking areas efficiently. From functional operations to non-functional requirements, from customer lifecycle to core banking architecture, banks have to digitally transform their operations in a holistic manner to achieve maximum benefits.

Business drivers for Digital Transformation

According to a report from Everest, major issues of the traditional banks due to their legacy core architecture are:

  • Poor digital customer experience due to lack of flexibility
  • Complexities during platform integration after M&As
  • Difficulty in launching new products and competing with fintechs.
  • Risk and Compliance Management
  • High maintenance cost

The list goes on because traditional banks find it difficult to place themselves in this fast-paced digital world. Customers expect banks to recommend the right insights based on their preferences similar to a non-financial platform like Amazon. Customer retention can happen only when banks personalize their application to suit individual customer needs.

However, most stakeholders lack the right tools or platforms which can help them extract customer insights and other analytics, hence, are unable to transform their products accordingly. On top of it, the cost of operations is very high and maintaining legacy core banking architecture is a burdensome and monotonous job. Due to all these complexities, bankers are realizing the importance of digital transformation. The critical aspect is selecting the right strategy.

Why a Strategy for Digital Transformation?

Most banks that are ready for digital transformation have to select the right strategy as one wrong approach might cost a bank, millions of dollars. Selecting the right strategy is based on many factors like the requirements of the stakeholders, existing core system’s capacity, goals of the bank, etc. Understanding all the strategies and choosing the appropriate one is a key step in digital transformation.

Digital Banking Strategies

According to a report from Everest, these are some of the priorities for mid-market banks:

  • 32% expect to enhance customer experience
  • 22% expect to ensure security, resilience, and compliance
  • 29% want to modernize core systems to enable digital transformation
  • 10% wish to launch new products with reduced time-to-market
  • 7% expect to reduce TCO of IT enterprise

Based on these priorities, here are a few digital transformation strategies banks can consider:


In this strategy, all relevant systems required for the solution is built from scratch using capable technologies like modern, cloud-agnostic, non-monolithic API-based core, etc. This is best suited for new banks as it is completely re-built and doesn’t have to carry the limitations of the existing legacy systems.

Some incumbent banks can also choose this strategy to convert their siloed and legacy architecture to agile core architecture. Greenfield strategy helps to launch products faster with minor risks and challenges.

Wrap the core

In this strategy, a ‘tech’ layer is added around the existing core banking architecture, which means modernizing the non-core part of the banking solution with legacy systems untouched. This approach is suitable for those banks that aspire to bring digital capabilities as part of their customer journeys and operations without modifying their existing system’s landscape.

The technical layer added provides a modern integration layer on top of the legacy core, hence, allowing banks to prolong the lifetime and investment of their legacy architecture until the bank is ready to transform its core.

Selective Transformation

This approach is mostly applicable for those banks that need transformation in a specific area within their IT solution landscape, hence, the impact will be on a subset of a system or service in order to achieve transformational objective. Here, banks can select the ‘area’ of transformation like enhancing the overall security through Financial Crime Mitigation or digitising the loan origination system, etc., instead of whole transformation.

Banks selecting selective transformation must have specific goals as this strategy only enhances the selected area of concentration.

Big Bang

As the name indicates, this strategy replaces the target system with a new one, and it is famously named as the ‘rip-and-replace’ approach. In this strategy, all the new implementations are deployed in an ‘all-in-one’ production role out event. This strategy should involve careful considerations and proper planning of all activities including data migration from the legacy systems to the new system during cut over event.

Banks usually select this strategy over continuous renovation to achieve transformation objective in the fastest way. However, Big Bang involves high risk factors like data discrepancies, system crashes, and other unforeseen errors.

Continuous Renovation

Digital transformation is a continuous journey for banks as they have to evolve as technology evolves. Hence, most banks select ‘continuous renovation’ approach also called ‘progressive modernization’ which is less risky and yields better results. This strategy replaces the existing monolithic architecture to microservices that function independently.

Banks that aspire to stay digitally strong for the next few decades mostly opt for this strategy, as it continuously enhances the core based on the expectations. It also gradually reduces the legacy architecture and increases the modern tech. This strategy takes time to yield results and is also a bit complex.

Summary of Digital Transformation


The definition of digital transformation varies among different bankers and hence the selection of strategy as well. Be it better ROI or reduced time-to-market, analysing the objectives of the bank is imperative to select the right strategy. Digital transformation is a journey and the existing architecture of banks can be present at different levels. Understanding your bank’s existing IT systems, digital maturity, transformation objectives, etc., and selecting the strategy accordingly will yield fruitful results. Each and every strategy has certain advantages and disadvantages and selecting the right one is a daunting task. Therefore, choosing the right provider to assist in digital transformation will make the entire journey seamless to the banks.