Steve Van Wyk, Chairman of the Board, BIAN
The banking industry is undergoing a major transformation, driven by a strong shift towards digitisation. Emerging technologies are enabling banks to overhaul their operations in ways that seemed unimaginable only a few years ago.
However, in 2024, consumers used the Current Account Switch Service over 1 million times, enabling them to switch financial providers and suggesting that the fight to maintain customer loyalty remains a key challenge for financial organisations. In response, banks should now consider how AI can deliver a competitive advantage. AI is able to deliver ever-improving precision, speed, and unique hyper personalisation, enhancing user experiences and improving customer satisfaction.
Unfortunately, the shift to becoming an AI-fluent organisation cannot be made with a single project. It involves a long-term commitment to building AI solutions into workflows, customer communication, and long-term strategy.
Planning for the future
Research indicates that only 6% of retail banks have a strategy prepared to facilitate company-wide AI-powered transformation. With successful change reliant on adequate risk controls, the cross-industry lack of adoption roadmaps suggests a widespread unpreparedness for value-driven AI integration.
It’s essential the entire business has a thorough understanding of the need for an IT architecture that lays the foundation for AI adoption; a pivotal step for a future-proof institution. The future is unpredictable, making this especially crucial. But what key factors should organisations consider when crafting this kind of strategy?
Evolving with the times
As technological advancements continue to accelerate, the integration of emerging innovations such as AI, small language models, and quantum computing will drive both growth and uncertainty. The industry is rushing to adopt and experiment with various use cases, driven by the fear of falling behind.
The data-rich nature of banking has uniquely positioned the industry to capitalise on the developments of AI. Research shows us that in 2023, financial service firms spent $35 billion on AI, with projected investments across the industry expected to reach $97 billion by 2027. Despite this increasing investment, there is still work to be done to be ensure that the full value of AI is recognised throughout the industry. In a competitive banking landscape, embracing capabilities like hyper-personalisation can help to increase consumer loyalty in the long-term.
The World Economic Forum recommends that “as AI becomes central to technology strategies, executives must continually evaluate technology ecosystems to capture emerging opportunities, ensuring that AI investments are thoughtfully integrated into broader initiatives.” With increasing embedded finance, where financial services are integrated directly into consumer journeys, banks must work harder to get in front of their target customers, making each opportunity for engagement more important than ever.
AI is just one of the technologies poised to disrupt our industry in the coming years with, for example, cloud-based solutions and embedded finance platforms rising in popularity. While this may seem like a challenging prospect for architects, it is crucial for them to consider how these emerging technologies will affect their business or the demands on its architecture. By developing a strategy that can adapt to these advancements and the arrival of new technologies, banks will be well-positioned to benefit from these changes, pushing through customer-focused innovation to improve loyalty and ROI for future-proof organisations.
Putting this into action
In 2019, the Banking Industry Architecture Network (BIAN), a non-profit standards organisation, introduced its Coreless Banking concept. This concept outlined how banks could move away from traditional monolithic legacy code-based systems to those with more specialised components that could be easily replaced or integrated. By embracing open standards and API-driven ecosystems, banks could create more flexible infrastructures.
Since then, BIAN has developed a concept, introduced in 2024, which combines AI and machine learning to reduce customer churn and enable seamless operability. The proof of concept demonstrated that a coreless model, enhanced by AI, could detect competitive pressure, identify and refine customer targets, and deliver personalised offers. Its design reflects the pivotal role of agility in future-proof banking, enabling multiple components to come together with plug-and-play type integration.
An outdated approach
Failing to set the right foundation will mean banks will lose out to those who can prioritise flexibility. Research shows that half of IT leaders encounter constraints with their current outdated core systems, hindering their progress towards business objectives. In addition to this, 44% of banks cite the speed that they’re able to bring new services to market as the biggest obstacle caused by their core banking solution.
Not only does this approach incur additional costs and time, but it makes organisations far less competitive, unable to keep up with technological development and the needs of customers. For banking organisations considering next steps, they must focus on how they can shift their reliance on core systems to a more agile approach, setting them up for success both today and in the future.
A future ready strategy
As digital transformation accelerates, the need for future-ready IT architecture becomes critical for banks looking to stay competitive and meet customer demands. The shift towards AI, open standards, and modular, coreless banking systems represents the future of flexibility, scalability, and innovation. To be successful in this AI shift, organizations need to measure the “AI-Readiness” of their different building blocks. BIAN can help because they identified the building blocks that are crucial for a successful AI journey.
