Amidst fierce competition and the growing traction of digital-only fintech firms, banks are rethinking their reliance on customisation as a path to differentiation. For years, banks have been customising their core systems, driven by a need to meet new and specific customer demands. This has long been a solution for banks’ in solidifying customer relationships and taking on the rapidly evolving developments of digital banking. Yet this process is often slow, inefficient and costly.
This approach is now being questioned. Banks are beginning to realise that years of heavy customisation are creating more problems than they solve. Our benchmark data, which has drawn insight from over 200 banks has shown nearly third (28%) of legacy applications are undocumented, hiding significant operational risk and creating unnecessary uncertainty.
This reflects a broader industry shift, with banks facing mounting pressure to innovate and advance their core technology foundations to support resilience and implement AI-enabled decisioning. Those who stall and continue to layer customisation onto legacy systems risk failure and falling behind.
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Speed and agility are no longer “nice-to-haves”, they are critical to success. With technology advancing fast and customer expectations at an all-time high, banks need a flexible system that can be updated in line with the pace of regulation and tech evolution. Banks that free up capacity to invest in the “last mile,” where value is created closest to the customer, are the ones that come out on top.
Patchwork customisation hampers innovation
Constantly adapting core software to keep digital infrastructure running is expensive, time consuming, and complex. According to McKinsey, banking invests more in IT as a percentage of revenue than any other major industries. Typically ranging from about 6% to 12% of revenue.
Yet what begins as a way to stay aligned with customer needs often turns into long-term technical debt. Every customisation adds another layer of complexity to the core, slowing integration and making change progressively harder.
Industry reports increasingly shows that banks are moving away from wholesale core replacement and instead modernising progressively: retiring customisations, simplifying integration layers, and rebuilding around standardised, cloud native services.
When engineering teams are tied up managing legacy integrations, there is less capacity to develop new digital capabilities. Innovation slows, and banks fall into a cycle of reactive maintenance rather than proactive growth.
How SaaS will power modern banks of the future
To launch and scale new solutions quickly, banks need to move away from fragmented customisation toward powerful, unified integration.
SaaS offers a faster path to value, delivering the benefits of cloud without the operational burden of managing infrastructure and upgrades. Trusted vendors take responsibility for maintaining and evolving the core, while banks can safely configure proven solutions without hardcoding changes that compromise stability.
This is the “adopt, don’t adapt” model in action. As SaaS, cloud native, composable core platforms are continuously maintained and enhanced through regular, managed updates. This delivers the resilience, scalability, and integration banks need. In contrast, some banks are still operating on core software not refreshed for a decade.
Just as importantly, standardised SaaS cores provide the clean data, consistent processes, and real-time integration required to embed generative and agentic AI directly into banking workflows. Not bolting intelligence onto fragmented legacy environments.
At the same time, financial institutions face relentless pressure to stand out, improve cost income ratios, and meet strict security, regulatory, and resilience requirements. When technology strategy and business strategy move together, banks can scale with confidence without sacrificing agility.
Putting the customer experience first
A modern SaaS core is the foundation for better digital banking experiences. When core services run in the cloud, banks can move faster, innovate more confidently, and reduce operational disruption. The payoff is long-term resilience.
With that foundation in place, banks can focus on the last mile of value creation, the moments that matter most to customers. A modern core enables digital first experiences and hyper personalised offerings.
By using behavioural data and predictive insights, enabled by modern core and data architectures, banks can anticipate customer needs and surface relevant products at the right time.
A retail customer might receive a personalised investment recommendation based on recent spending patterns or life events. With customers holding an average of 2.59 products, the opportunity to deepen relationships through smarter, more intuitive interactions is significant.
A unified platform also gives banks a single, consistent view of the customer. That clarity allows institutions to deliver more seamless experiences and compete more effectively.
A measured approach to effective customisation
The move from ‘adapting’ to ‘adopting’ does not mean banks should, or are, abandoning hard-coded customisation. The opposite is true. Customisation is important, but banks succeed with measured and disciplined decision-making, avoiding complexity and mitigating long-term negative impact.
With SaaS, the starting point is no longer to customise by default. Instead, banks must prioritise simplification by adopting solutions that are designed to be configured, extended, and continuously evolved. This enables them to focus effort where it truly matters, rather than continuing to apply layers of heavy customisation that hampers long-term agility.
Recent analysis in the Banking Technology Trends work with Bain & Company, highlights that core simplification, cloud-native SaaS adoption, and embedded intelligence are essential foundations for sustainable innovation.
By moving away from endless adaptation and toward purposeful architecture, banks can build systems that support speed, resilience, and intelligent decision-making at scale that result in a more powerful customer experience.
In this context, SaaS is not simply a deployment choice, but a clear indication for the direction of travel for banking. Institutions that embrace this model will be better positioned to compete in a market defined by constant change, higher customer expectations and rapid innovation.
Rohit Chauhan, Chief Technology Officer, Temenos
