Here’s how Meta platforms are shaping the future of banking innovation

By Puja Sharma

The banking industry stands at a critical juncture where the pace of technological advancement is rapidly altering the landscape. The traditional balancing act between innovation and risk management has never been more pronounced. In a world where customer expectations are evolving swiftly, banks must innovate or risk falling behind. Yet, the transformation to more modern, agile systems presents significant challenges, particularly when it comes to core banking systems, which are the backbone of daily banking operations.

According to the latest report, “Core Banking Without Compromise” from 10x Banking, a staggering 93% of banking leaders agree that the future success of their institutions hinges on choosing the right core banking solution. With the rapid rise of AI and real-time cloud-native technologies, banks now face the necessity to upgrade their legacy core systems. However, the challenges associated with these transformations are immense—ranging from financial risks to potential reputational damage. While AI holds promise in revolutionising the banking sector, the key lies in adopting the right technology to leverage this innovation securely and efficiently.

 The Challenges of Legacy Systems

Historically, core banking systems have been the backbone of financial institutions. However, many banks are operating on outdated infrastructure, colloquially known as “legacy cores.” These systems are often inflexible, expensive to maintain, and slow to adapt to the changing demands of customers and regulators. Banks that continue to rely on legacy cores are finding themselves hamstrung in their efforts to innovate.

The report highlights a critical issue: 39% of banks plan to upgrade their core technology within the next 12 months, while another 29% aim to do so within 2 to 5 years. Despite this urgency, banks are confronted by a double threat. On the one hand, their day-to-day operations are constrained by the limitations of their current core systems, and on the other, they face considerable risks in attempting to transform these systems.

The rise of neo-core platforms a decade ago was supposed to address these issues. Neo-cores, which were designed to replace legacy mainframes, initially sparked innovation in the banking sector. Yet, many banks are discovering that neo-core solutions come with their own set of challenges, particularly around customisation, scalability, and the high costs of maintenance. The report suggests that many financial institutions now face what it calls a “neo legacy”—a new set of limitations that bear a striking resemblance to the constraints of legacy mainframe cores.

The Rise of the Meta Core

In response to these challenges, 10x Banking has introduced the concept of a “meta core” platform. This innovation seeks to combine the best aspects of both legacy and neo-core solutions, offering a scalable, cloud-native solution that promises to revolutionise the way banks approach core banking transformations.

The meta core is presented as a solution that offers both speed-to-market and full customisation of products. It allows developers to build new products using pre-built templates while maintaining control over the core systems themselves. The platform’s polyglot coding environment means that banks are no longer tied to a single programming language or development framework. This flexibility is key to addressing one of the most significant barriers to transformation: the lack of specialised development resources.

AI Integration and Cloud-Native Transformation

The report underscores the importance of AI in shaping the future of banking. AI-driven solutions have the potential to streamline operations, enhance customer experiences, and reduce costs. However, only 39% of banks have integrated AI into their core systems, with 27% planning to do so within the next year. The reluctance to fully embrace AI is often tied to concerns over the compatibility of existing core systems with new AI technologies.

At the same time, there is a clear shift towards cloud-native cores, which enable real-time operations and greater scalability. 72% of banks have migrated some core functions to the cloud, while 46% plan to migrate to third-party cloud-native platforms within the next 12 months**. The move to cloud-native solutions is seen as critical for banks looking to reduce costs, scale efficiently, and meet the growing expectations of customers.

Compromises of the Neo Core

One of the most interesting insights from the report is the acknowledgment that while neo-core platforms solved some of the problems associated with legacy cores, they have created their own set of compromises. Banks that adopted configuration neo-cores found that while these solutions allowed for a quick time-to-market, they were limited in terms of scalability and customisation. On the other hand, framework neo-cores, which offer greater customisation, come with higher maintenance costs and risks associated with upgrades.

This dilemma has left many banks at a crossroads. Should they continue to invest in neo-core systems, knowing that they will face challenges down the line, or should they embrace a new category of core banking technology that promises to eliminate these compromises?

Moving Beyond Compromise

The meta core solution offered by 10x Banking provides a pathway forward. It aims to address the shortcomings of both legacy and neo-core systems by offering a fully customisable, scalable, and cloud-native platform. Banks that adopt this solution can expect reduced migration risks, lower costs, and faster time to market for new products and services.

Moreover, the meta core platform integrates seamlessly with AI technologies, enabling banks to harness the full potential of artificial intelligence. The polyglot coding environment further ensures that banks are not limited by the constraints of a single development framework, making it easier to adopt new innovations as they emerge.