Karl im Brahm of Objectway explains why data quality determines triumph or disaster.

Modernising core banking systems is no longer an option for financial institutions—it is a matter of survival. While many banks have already successfully digitised their customer interfaces, critical core systems often still run on outdated platforms from the 1980s and 1990s. This digital transformation of banking systems is being further accelerated by regulatory requirements such as DORA and BCBS 239.

The problem: a core bank migration is a highly risky undertaking. Karl im Brahm, CEO DACH at financial services provider Objectway, sums up the challenge: 

“Around 80 percent of all migration projects fail – usually due to incomplete or incorrect data.”

The consequences are dramatic, especially for large institutions, which can quickly incur double-digit million-dollar losses if delays occur.

Data quality determines success or loss of millions

The biggest stumbling block in core banking migration lies not in technology or budget, but in a seemingly trivial aspect: data quality. "Large banks have to harmonise historically evolved IT landscapes across national borders," says Karl im Brahm, explaining the complexity of the problem. "Smaller institutions may have fewer systems, but they often lack the time and personnel for thorough data cleansing."

Successful migration projects treat data migration as a separate subproject with clear responsibilities and a sufficient budget. Automated testing routines, repeated test migrations, and consistent data formats form the foundation for success.

While large banks benefit from centralised data governance and comprehensive automation, Objectway recommends a so-called MVP (Minimum Viable Product) approach for smaller institutions. This involves initially implementing only the core functionalities to achieve rapid initial results and reduce complexity.

Dual run minimises risks in core banking migration

Along with data quality, time is the most critical success factor in core banking migration. Project delays can have catastrophic consequences for large banks: blocked resources, delayed product launches, and weakened competitiveness lead to follow-up costs in the mid-double-digit million range.

A proven tool for large institutions is the so-called "dual run." This method involves operating the old and new core banking systems in parallel to minimise risks and ensure a controlled transition. This best practice for dual run strategies allows for early identification and correction of problems before the old system is shut down.

"For smaller and medium-sized banks, however, a step-by-step approach with fixed milestones and strict quality control at every stage is recommended," explains im Brahm. "Standardised migration packages and automated tests help reduce sources of error and keep budgets within limits."

Regulatory pressure exacerbates the migration situation

Constantly evolving regulatory requirements are further increasing the pressure on financial institutions to act. In particular, the Digital Operational Resilience Act (DORA) and BCBS 239 regulations are setting new standards for operational resilience and risk data collection.

Incorrect migrations not only jeopardise business operations but also result in regulatory consequences. "The highly fragmented German banking landscape further exacerbates the situation," explains im Brahm. "Many smaller institutions still operate with core banking systems that are neither modular nor scalable."

These digitalisation challenges in the banking sector require strategic solutions that go beyond mere technology updates.

Cloud-based solutions as a strategic advantage

To reduce migration costs in the long term and further minimise risks, modern banks are increasingly turning to SaaS and BPaaS models. These cloud-based software and business process solutions outsource IT operations and infrastructure, enabling banks to increase scalability and resilience and implement flexible cost structures.

Objectway addresses the challenges of core banking migration with a modular migration framework. The approach involves initially migrating selected core functions such as payment transactions or customer master data. Additional modules will follow gradually once the initial ones are running smoothly.

Pre-integrated modules for regulatory requirements and automated tests ensure secure and cost-effective implementation – often with budgets in the single-digit million range, significantly below the costs of failed large-scale projects.

Management task instead of pure IT project

A critical success factor that is often overlooked: Core bank migration is not a purely IT matter, but a strategic management task. "Often, clear responsibilities and coordination between business units and IT are lacking—the project is not strategically anchored," criticises im Brahm.

Smaller banks with lean structures, in particular, struggle with this. Objectway therefore relies on a methodological framework with clearly defined roles, agile management models, and close integration between business and IT.

A successful core banking migration depends largely on corporate culture and management commitment. Without this strategic foundation, even technically well-planned projects will fail due to organisational hurdles.

The path to a successful migration project

The statistics speak for themselves: With a success rate of only 20 percent, core banking migrations are among the riskiest IT projects of all. However, examples of successful transformations demonstrate that a professional approach drastically improves the chances of success.

The success factors are clearly identified: first-class data quality, a methodical approach with clear milestones, the right degree of parallelism between the old and new systems, and strong strategic leadership. Choosing the right partner is crucial.

"For such a comprehensive migration project, it is crucial to choose a partner who understands the specific challenges, anticipates risks, and transforms them into competitive advantages," summarises Karl im Brahm. Core bank migration may be one of the most difficult transformations in finance—but with the right strategy, it becomes the foundation for future success.

"For smaller and medium-sized banks, however, a step-by-step approach with fixed milestones and strict quality control at every stage is recommended. Standardised migration packages and automated tests help reduce sources of error and keep budgets within limits," — Karl in Brahms, CEO DACH Region, Objectway.

Read the original article here.