Published by Jessica Weisman-Pitts
Posted on November 29, 2022
6 min readLast updated: February 3, 2026
By Ove Kreison, CTO at Estonian core banking provider Tuum.
Digital transformation has dominated industry discussion for years in banking, but while many can talk the talk, few have shown they can walk the walk. Despite the shiny appearance of modern banking apps and access to our finances more quickly and conveniently than ever before, banks have barely even started when it comes to meaningful digital transformation. The majority have merely ‘put lipstick on the pig.’
Most industries are transforming their infrastructures and starting to use data on a far grander scale, but there isn’t a single established bank that has fully arrived in this digital age yet. This is partly because they are only digitising a relatively small part of their infrastructure that is customer facing. So while customers are seeing and benefitting from new services on the outside, the infrastructure inside holding it up remains dated, fragile and a barrier to true digital transformation.
The reality is that the architecture that underpins all banking apps and services has hardly changed in decades. Despite advances in open banking, APIs and cloud computing and new trends emerging such as embedded finance or the rise of cryptocurrencies, true innovation in banking is still being held back by the inhibitors of the past; legacy banking technology.
To truly transform, banks need to take an inside-out approach, starting with the core.
Transformation missteps – why has progress been so slow?
Of course, banks have tried to undergo complete and large-scale transformations in the past, but with little success. Here are some common reasons:
1. Digital transformation is seen as a pure tech project, not a business one
Far too many banks ultimately failed because they viewed digital transformation as a standalone ‘IT project’. While technology is obviously a huge element of digital transformation, treating it in isolation without considering the business change needed is prohibitive to real success.
Digital transformation requires a complete rethink of how the business is run across the organisation and close collaboration between business and technology decision makers. Traditionally, a bank’s IT functions have been viewed separately from core business strategies and CIOs aren’t usually included in strategic decision making. But this is holding banks back – technologists need to be at the table and have a say on how this digital change will transform the bank holistically.
2. Banks are taking the body-builder approach
Another key flaw in banks’ digital transformation programmes has been their approach from the outset. Like body-builders, banks have focused on the change that looks most impressive from the outside, but that doesn’t necessarily correlate to their health on the inside.
Digitising though ‘superficial’ apps and online services without fundamentally changing your core tech stack or remodelling the business to reflect digital strategies means banks may look tough, but they won’t stand up as well in a fight. Superficial change might look good but won’t correlate to great service – i.e you may have a new app feature that makes applying for a loan super simple, but if the backend is still dated, customers may still be waiting days to hear back. Conversely, upgrading their core banking technology arms banks with the inner strength banks need to adapt and flex now and in the future. When times are tough and customer demand soars for a new service, it’s core strength will allow banks to quickly roll those services out or change tact – not a nice looking banking app!
3. Rip and replace’ has been seen as the only option
This point neatly leads us to thinking again about the strategy behind transformation projects and how banks go about updating that core technology stack. While it may seem logical to totally replace a legacy system with an entirely new platform, it’s extremely time-consuming, complex and expensive. The German bank Apobank, for example, invested a three-digit million sum in the switch and it took four years to even get to a failed launch of the new system. Aside from the expense, banks remain at a technological standstill while transformation takes place; innovations are impossible until the changeover is complete, and this can lead to banks compromising themselves and losing market share.
A gradual approach removes the risk of downtime in banking systems and by migrating operations over to the new platform one service at a time, banks gain confidence in using the new system and are motivated to continue migrating all other services and operations over.
Historically, banks have struggled to do this simply because the technology that would enable a step-by-step approach simply wasn’t available. Today, however, there’s no excuse. Modular core banking platforms are widely available, meaning banks have more options to digitise their systems and can better manage their risk levels.
4. Transformation is a process, not a project
Finally, I want to stress the importance of mindset. Digital transformation is not a one-off project that banks can ever say is ‘done’. Upgrading to a modern core banking platform is vital to give banks the flexibility and agility to add and evolve services as needed, meaning their systems never have to turn into ‘legacy systems’ again. But to truly reap the benefits of this, it’s important they keep the spirit of digital transformation in mind always. Service needs will change, new products will get quicker and shinier – banks need to stay on their toes to win at digital transformation.
Functional fitness – the exercises banks need to start practising
Much like applying lipstick to a pig, banks are looking prettier these days, but underneath they have a long way to go.
Banks need to get back to basics. Focusing on reworking their core technologies will give them the functional fitness needed to both look good aesthetically and have the stamina to keep going when times are tough. Only by making this fundamental infrastructure change will banks ever hope to realise true digital transformation, innovating how they operate, innovate, and serve their customers.
Ove Kreison
As Chief Technology Officer and co-founder of Tuum, Ove Kreison ensures that Tuum’s products and services lead the market in flexibility and technology. Previously, he led R&D at financial technology service provider Icefire, which was acquired by Checkout.com in 2021. At Icefire, he played a key role in developing forward-looking services for several Nordic banks and financial institutions. In 2018, Ove Kreison was awarded the Fintech Futures Banking Technology Award for “Best Use of IT in Corporate Banking” for a project with OP Bank in Finland.
Digital transformation refers to the integration of digital technology into all areas of a business, fundamentally changing how it operates and delivers value to customers.
Legacy banking technology refers to outdated systems and software that banks use, which can hinder innovation and digital transformation efforts.
APIs, or Application Programming Interfaces, allow different software applications to communicate with each other, enabling banks to offer more integrated and innovative services.
Modular core banking refers to a flexible banking system architecture that allows banks to upgrade or replace specific components without overhauling the entire system.
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