Financial institutions must modernise their outdated core banking systems to automate processes, reliably meet regulatory requirements, minimise risks, and bring new products to market faster. However, around 80 percent of all migration projects fail – usually due to incomplete or inaccurate data.
The core banking system is the heart of a bank – it controls all processes from account management and payment transactions to lending and reporting. While many institutions have already modernised their customer interfaces, the core systems often still run on outdated platforms. To become more efficient and meet regulatory requirements such as DORA and BCBS 239, banks must migrate their core systems to modern, modular platforms. However, they encounter a multitude of challenges in doing so: complex legacy systems, historical data in different formats and qualities, and a lack of internal capacity. This makes migration a risky process. It is no wonder, then, that around 80 percent of all migration projects fail.
The biggest hurdle is not the budget or the technology – but data quality. Faulty migrations can quickly lead to double-digit million-dollar losses for large institutions. At the same time, small and medium-sized banks are also under pressure. These financial institutions face the challenge of implementing extensive migration projects despite tight budgets and limited IT capacities. Those who focus on data quality, comprehensive testing, and a modular approach early on can keep projects within budget and minimise risks. Objectway has developed a migration framework specifically tailored to the needs of medium-sized institutions. It combines structured data review, agile project management, and a step-by-step migration across clearly defined functional areas such as payment transactions or customer data management. The expert explains the key differences in core banking migration between smaller and larger institutions – and how banks can overcome these challenges using dual run, MVP, and modular migration frameworks.
These strategies make data ready for projects
A large proportion of core banking migration failures can be traced back to incorrect, incomplete, or inconsistent data. Large banks must harmonise historically evolved IT landscapes across national borders. Smaller institutions may have fewer systems, but they often lack the time and personnel for thorough data cleansing. Successful projects therefore treat data migration as a separate subproject – with clear responsibilities, sufficient budget, and early planning. Automated testing routines, repeated test migrations, and consistent data formats are essential for this. Depending on the size of the company, the following advice is recommended: While large banks benefit from centralised data governance and automation, Objectway recommends a so-called MVP approach for smaller institutions, in which the core functionalities are implemented first to achieve rapid initial results and reduce complexity.
Delays can lead to millions in losses
Along with data quality, time is the most critical success factor. For large banks, delays can mean blocked resources, delayed product launches, and weakened competitiveness – with subsequent costs in the mid-double-digit million range. A proven tool for these institutions is the "dual run," in which the old and new systems are operated in parallel to minimise risks and ensure a controlled transition. 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. To reduce migration effort in the long term and further minimise risks, the expert points out that banks can also rely on SaaS and BPaaS models. These are cloud-based software and business process solutions that outsource IT operations and infrastructure. This allows banks to increase scalability and resilience while simultaneously implementing flexible cost structures.
Regulatory pressure and market fragmentation complicate migration in Germany
Constantly changing regulatory requirements such as DORA, BCBS 239, and the GDPR are also exacerbating the situation. Incorrect migrations not only jeopardise business operations but also result in regulatory consequences. The highly fragmented German banking landscape further exacerbates the situation. Many smaller institutions still operate with core banking systems that are neither modular nor scalable. Objectway addresses this with a modular migration framework: First, selected core functions such as payment transactions or customer master data are migrated; additional modules follow as soon as the initial ones are stable. Pre-integrated modules for regulatory requirements and automated tests ensure secure, cost-effective implementation – often with budgets in the single-digit million range.
Migration is not an IT project – but a management task
Successful migrations largely depend on the corporate culture. Often, clear responsibilities and coordination between business departments and IT are lacking, resulting in a project that is not strategically anchored. 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. 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.
"Depending on the size of the company, we recommend: while large banks benefit from centralised data governance and automation, Objectway recommends a so-called MVP approach for smaller institutions, in which the core functionalities are implemented first to achieve rapid initial results and reduce complexity," — Karl im Brahms, CEO DACH Region of Objectway.
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