Core banking modernization: from IT to executive priority

As financial institutions navigate rising regulatory pressure, evolving customer expectations, and the need for real-time operations, the modernization of core banking systems has moved from the IT department to the executive agenda.

‍Today, the question is no longer whether modernization will happen, but how institutions can execute it effectively, securely, and with minimal disruption to their operations.

To explore this transition, we conducted a strategic survey of more than 50 senior banking professionals across geographies and institution types. The findings offer a clear and honest view of where the market stands in 2025 and what it will take to lead the next phase of core transformation.

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‍Why core banking matters more than ever

Core banking systems remain the backbone of the financial industry, yet most of them were built decades ago, long before cloud computing, embedded finance, or AI-native infrastructure. Today, outdated cores are no longer just an operational constraint; they are a barrier to growth, agility, and risk management.

Modernization is a delicate task. Replacing a core system while maintaining business continuity requires strategic planning, technical precision, and internal alignment. This tension between urgency and complexity defines the current moment in banking.

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‍Five key takeaways from the study

1. Legacy systems remain prevalent
58% of banks still operate on end-to-end core platforms, with many developed and maintained in-house. Internal IT teams handle both implementation (64%) and support (69%), raising long-term concerns as retaining specialized talent becomes more challenging.

2. Cloud adoption is progressing slowly
Only 33% of banks have fully transitioned to private cloud environments, while 40% continue to operate on-premises systems. Public cloud adoption remains limited, reflecting ongoing caution due to security and regulatory considerations.

3. Migration and integration remain the top challenges
When asked about their biggest challenges, executives cited system migration and integration complexity. These issues go beyond IT and impact organizational design, vendor management, and go-to-market speed.

4. AI is emerging but unevenly deployed
While more than half of the banks surveyed do not yet apply AI in their core systems, areas like fraud detection, AML, and payments are seeing fast adoption. Real AI impact depends on having the right architecture: modular, scalable, and API-first.

5. Internal teams still lead, but external support is rising

64% of institutions handle implementation internally, and 69% own long-term maintenance. However, hybrid delivery models are gaining ground, helping banks address capability gaps and accelerate deployment timelines.

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What leaders do differently

The study highlights a growing divide between cautious upgraders and forward-leaning innovators. The latter are characterized by:

• cross-functional ownership between IT, compliance, and operations

• a modular approach to core architecture with APIs and cloud at the center

• clear migration playbooks to reduce risk and downtime

• ongoing benchmarking against peers and best-in-class vendors

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These institutions don’t treat core banking as a one-off upgrade. They treat it as a strategic capability that enables real-time product delivery, stronger controls, and better customer experiences.

Dedale’s full study includes benchmarking data, use case deep dives, and a vendor landscape analysis designed for strategic decision-making. Whether you're a CIO shaping your core roadmap, a vendor refining your go-to-market, or an investor following infrastructure trends, the platform gives you the context and insights you need.

Download the full study or reach out to our research team to learn more.