Published in: Intelligent Fin.tech
Hans Tesselaar, Executive Director of BIAN, explores the pivotal role of interoperability in balancing compliance and risk mitigation with openness and composability to drive innovation in financial institutions.
In September, several High Street banks announced the closure of physical stores to reflect the growing numbers of consumers heading online. This move is emblematic of changing factors driving competition between financial institutions. In a recent report entitled ‘State of European Banking 2025: consumer survey report’, the majority of customers surveyed expressed enthusiasm for tailored financial recommendations (59%) and quick customer support through in-app functions (52%), highlighting demand for improved online banking.
As well as embracing emerging technologies to attract new customers, financial institutions are fighting to keep those who already bank with them. Last year, around 1.2 million customers used the Current Account Switch Service, outlining that brand loyalty is not a given; it needs to be earnt. As consumers call for an improved digital experience, financial institutions will continue to shift towards a set-up modelled around its digital capabilities, competing with the Fintechs and neobanks whose foundation was built in a more modern age.
To align with expectations and achieve the fought-for loyalty of their customer base, financial institutions must seek to provide a user-friendly digital experience, from simple mobile apps to customer services integration and a hyper-personalised approach.
Unfortunately, 75% of organisations trying to embrace Digital Transformation still remain ‘stuck in siloed pilots and proofs of concept’. For banks still working with legacy technology, how can they expect to keep up?
The implications of legacy tech
Legacy technology is still draining the resources of financial institutions, with a survey of leading banking innovators, released in September this year, revealing that UK banks spend £3.3bn annually on maintaining legacy systems. Perhaps more concerning for the consumer is the widespread impact of outdated tech, with the majority of those surveyed having experienced related operations outages (53%), recognising that the ‘cracks are widening’ in traditional infrastructure (54%). With outages and inefficiencies frequently leading to public frustration, delaying house purchases and other large transactions, the continued reliance on these systems is incompatible with demands for a seamless customer experience.
Internally, too, frustrations are building. Research conducted by the Association of Accounting Technicians highlighted that, on top of access issues, 20% of finance employees had observed disruptions to workflows with ‘small tasks [taking longer] to complete’. As the demand for IT professionals continues to grow, and every industry faces a skills shortage considered the most severe in over 15 years, businesses are increasingly turning to outsourced experts for technological help. Add legacy systems into the mix and these experts can find their time drained by the need to provide short-term solutions to legacy issues, and lost workflow efficiency from the data siloes caused.
As highlighted by Megan Brewer, Head of Firmwide Innovation Strategy and Market Innovation at Morgan Stanley, “You cannot adopt new tools if your engineers are buried in legacy systems. Tech modernisation and innovation are two sides of the same coin.” To keep up with both neobanks and the global banks already working on modernisation, traditional banks should move beyond rhetoric and invest in long-term transformation.
Tech stack foundations
Removal of legacy technology isn’t an automatic bridge to simple innovation. It must be replaced by a strong foundation, capable of changing with market expectations and emerging solutions. In 2025, AI talent shortages and geopolitical instability have fed into an already unpredictable banking landscape. With technology not yet able to see into the future, financial institutions must focus on becoming resilient and able to change with industry tides.
This sector-wide demand for flexibility heightens the relevance of coreless banking. Six years ago, our not-for-profit standards body, the Banking Industry Architecture Network (BIAN), introduced the Coreless Banking concept. The initiative, embraced by numerous leading institutions across the globe, highlights the benefit of a compatible banking microservices infrastructure, enabling banks to work with technology vendors to create a future-facing set-up.
As Steve Van Wyk, Chairman of the Board, observed when the latest version launched, “The fact that our Coreless Banking model continues to evolve alongside the needs of the industry shows the value of the BIAN working model to solve common industry problems.
By combining the expertise of our member organisations, with the BIAN Models, BIAN APIs and BIAN Microservices, we’re able to think outside of the box, without the limitations set by working in siloes.”
Ultimately, to see long-term change in their operations, banks must accept that the change won’t come from one single investment; AI tools need to be built into workflows, embraced by employees and weaved into a forward-looking strategy. Through this method of implementation, they can produce a flexible foundation that grows to reflect ever-changing consumer needs and expectations.
The company impact
A case-study example of a financial institution whose seen success through embracing interoperability is the OTP Group, one of the fastest growing independent banking groups across the CEE region. By driving a mutual understanding across departments, using BIAN’s framework to share the same message across 11 countries and creating a community of enterprise architects, the organisation has been successful in solving communication challenges across IT and business units. According to Domonkos Kertész, Chief Architect at the OTP Group, successful innovation arises from a ‘collaborative and influence-based approach’, with tailored value propositions decided within agreed standards, enabling technology to evolve with the industry.
When new technology becomes time-consuming for workers, digital friction, where the benefits of digitalisation are dampened by the inefficiencies encountered by employees, can become a key factor in the failure of projects. Proactively countering these concerns, the OTP Group has sought to demonstrate the importance of employee buy-in. Even with a thoroughly planned strategy and financial investment, if new solutions fail to be user-friendly and efficient enough to improve workflows, the chances of success are significantly lowered. However, by embracing AI-driven accessibility and allocating workplace champions and pilots, leaders can increase the efficiency of each department, outlining necessary steps to accelerate adoption and match customer expectations.
Embracing AI
According to a January 2025 report from the World Economic Forum, “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.”
In a competitive banking landscape, the institutions that come out on top will be those leveraging AI to give themselves an advantage. Specifically, through leaning into the ways it can improve user experience, from hyper-personalisation to precision and speed, banks can increase the attraction and retention of consumers.
Say, for example, that a long-term customer is considering leaving a high-street bank for a financial institution that they believe will offer them a better deal. AI can pick up on select cues, from lessening use of the app to customer support queries and flag this to the bank, offering the customer a personalised deal to retain them. It’s this specificity that helps organisations to stand out, demonstrating a deep knowledge of their customer’s expectations.
This rush to embrace emerging technologies is already creating waves across the industry as financial institutions turn to leading software companies to improve their AI literacy. Examples range from Santander partnering with OpenAI to become ‘AI-native’ to Wells Fargo and Google Cloud’s partnership expansion seeking to drive successful agentic AI integration.
Innovation and compliance
When innovating, a concern likely to be front of mind in today’s financial climate is the threat of IT outages and cyber-attacks. In the distress caused to consumers and the spotlight shone on the weak points within tech stacks, these events can have lasting impacts on institutions.
As highlighted by the International Monetary Fund, “the financial sector is uniquely exposed to cyber risk.” Handling sensitive data and large transactions every day, the impact of criminal action cannot be underestimated. To protect banks from unprecedented disruption and reputational damage, with the media’s reporting of outages and attacks frequently considering the impact on individuals, including delayed house purchases and lack of ability to complete necessary transactions, a strong foundation is required.
To address and keep up with ever-evolving risks, we must come back to flexibility. Open-banking, based on secure APIs, enables threats to be flagged as soon as they are detected, while the ability to consistently update to the latest software reflects changing risks. By moving towards an approach that is both vendor and cloud agnostic, underpinned by an environment, operated by AI, with self-healing capabilities, banks can shield themselves from a variety of threats to resiliency.
Banks of the future
As the industry rushes to adopt emerging solutions, fearful of falling behind, innovation leaders must ensure their internal architecture is up to the task. Many banks still rely on legacy technology, making siloes more common, innovation trickier and requiring a significant portion of the budget for up-keep. To fully embrace AI’s capabilities, benefit from data-driven insights into cyber-security and handle a large portion of customer enquiries, banks must develop a more flexible foundation.
So, the next big thing? A focus on decomposed architectures, based on future-proof open standards, able to provide a ‘plug and play’ approach to adaptation and AI adoption.
