AI as an Add-on, Not the Core

The financial services industry is in the midst of a profound transformation, driven by technological innovation and evolving customer expectations. At the heart of this evolution lies the core banking system (CBS), the foundational technology managing a bank's critical operations. As artificial intelligence (AI) matures and demonstrates its transformative power, its role within CBS is becoming increasingly central. While established CBS vendors and cloud-native players are integrating AI into their offerings, I believe a new wave of CBS providers will emerge with AI as their foundational strategy, disrupting the market by leveraging AI not only within the CBS itself but also in the crucial and complex process of migration.

The Flaw in "Embedded" Thinking

Existing CBS vendors, such as Temenos, Oracle FSS, and Infosys Finacle, have adopted an "embedded AI" approach. This typically involves augmenting their existing, often monolithic, systems with AI capabilities for specific functions like fraud detection, personalized recommendations, or operational efficiency. However, this strategy carries a significant limitation, akin to the early days of "embedded Internet" or "embedded mobile banking" features in non-native applications. Simply bolting on AI to legacy architectures  leads to inefficiencies, data silos, and a failure to fully leverage AI's potential. The true power of the internet was realized not through embedding it into existing applications, but through the creation of entirely new, internet-native applications and paradigms. Similarly, the revolutionary impact of mobile banking came not from simply shrinking existing web pages onto phone screens, but from designing mobile-native apps that leveraged device capabilities and offered intuitive, on-the-go experiences. Fully realizing the potential of AI in core banking may necessitate a ground-up rethinking of the CBS, moving beyond mere augmentation.

The Rise of AI-Native Vendors

This is precisely where new CBS vendors can carve out substantial market share. These emerging players will build their core banking systems with AI as a fundamental architectural principle, not an afterthought. This means designing the entire CBS from the ground up to be AI-native, enabling real-time data processing, predictive analytics, and autonomous operations across all banking functions. Furthermore, a critical differentiator for these new entrants will be their use of AI for the notoriously challenging and costly CBS migration process. AI-powered migration tools can automate data mapping, identify and resolve inconsistencies, and significantly reduce the time, risk, and expense associated with moving from legacy systems. This dual AI strategy – AI in the core product and AI in the migration – will be a powerful competitive advantage.

The Promise of a Truly Intelligent Core

Banks contemplating a CBS transformation are increasingly aware of the complexities and potential pitfalls. The promise of an AI-native CBS, coupled with an AI-driven migration pathway, offers a compelling value proposition. They may choose to wait for such sophisticated vendors to emerge, or even consider building their own AI-first CBS, recognizing that the long-term benefits of a truly intelligent core could far outweigh the upfront investment. The agility, hyper-personalization, and operational efficiency promised by an AI-native CBS are no longer mere aspirations but increasingly essential for survival and growth in a competitive financial landscape.

The Dawn of AI-First Core Banking

While incumbent CBS vendors are integrating AI into their existing frameworks, the analogies of "embedded Internet" and "embedded mobile banking" suggest that this approach may not unlock AI's full transformative potential. The future of core banking lies with vendors and banks who design and build CBS with AI at their core, extending its application to the often-daunting migration process. This holistic AI strategy will allow them to successfully compete with established players and cloud CBS vendors, attracting banks eager for a truly intelligent, efficient, and future-proof core banking solution.

#Megatrends #42megatrends  #CoreBanking #AI #BankingTransformation #AINative #Fintech #CoreBankingMigration

Throughout history, the flicker and warmth of a fireplace served as humanity's original gathering place. As dusk descended, families and communities gravitated towards its comforting glow, drawn by the promise of shared stories, camaraderie, and a brief respite from the day's toil. It was a space for connection, where oral traditions thrived, wisdom was passed down, and the bonds of kinship were strengthened. The crackle of burning wood and the dancing flames were the backdrop for countless evenings of socializing, planning, and simply being together in a shared, intimate space. The fireplace was not just a source of heat; it was the heart of the home, a symbol of community and collective life.

Fast forward to the digital era, and the communal focal point has undergone a curious transformation. The ambient glow of a fire has been replaced by the urgent, digital luminescence of screens. No longer do we huddle for warmth or a good yarn; instead, the magnetic pull now emanates from the ubiquitous charging hub. In cafes, airports, and even our own homes, the scramble for an available outlet is a familiar scene. When our smartphones, tablets, and laptops declare their dwindling energy, we instinctively gravitate towards these charging hubs, a new kind of gathering around a shared necessity. The "charging hub" has become the contemporary hearth, not for storytelling, but for the silent, individual pursuit of reconnection to the digital world. Our conversations are often punctuated by the frantic search for a charging cable, and the shared experience is less about direct interaction and more about the collective, unspoken anxiety of a dying battery. This shift from the communal warmth of the fireplace to the solitary glow of a charging device marks a profound change in how we connect, or perhaps, how we increasingly disconnect in our digital world.

Yet, even in this digitally tethered existence, a new form of connection emerges. Once fully charged, and if we're lucky, the charging hub can foster a fresh sense of community. Instead of retreating into individual digital cocoons, we sometimes find ourselves sharing screens and experiences, often through shared games. Whether it's a quick round of Finto or another collaborative mobile game, the act of playing together brings people back into a shared space, albeit a virtual one. Laughter, strategizing, and friendly competition once again become the glue that binds us, even if the "fire" around which we gather is now the glow of our devices, powered by the very hubs we just clustered around.

#digitaltransformation 

#SundayThoughts 

FrankSchwab.de

That day in Faro, Portugal, back in 2004, remains vivid. My first professional presentation. Standing before an audience at the European Banking Forum, tasked with unraveling the "Future of Retail Banking," I was a potent cocktail of exhilaration and sheer terror. The memory of the final slide clicking into place, followed by polite applause, remains a small but significant victory etched in my mind. It was the opening note of a symphony I couldn't yet imagine.

Now, two decades and over two hundred presentations later, the echo of those early nerves has long since faded, replaced by a quiet confidence born of experience. My journey through more than twenty countries across five continents, sharing insights and ideas, has yielded a harvest richer than I could have possibly foreseen. The stages I've stood upon have become unexpected classrooms, the audiences, diverse and discerning teachers.

Beyond the immediate act of presenting, a remarkable tapestry of connections has been woven. I've had the privilege of forging business friendships with some of the most respected voices in the banking world, individuals whose mastery of their craft continues to inspire me. Encounters with politicians, prominent business figures, and leading academics have broadened my understanding of the world in profound ways, each conversation a unique lesson etched into my perspective.

Perhaps the most surprising and significant outcome of this journey has been the unexpected doors that have swung open. Simply being present, actively engaging in the discourse of these conferences, has led to opportunities I never actively sought. Among these, eight years serving on a risk advisory board in Amsterdam, strategic consultancy roles in Oslo, and even a CEO position in Munich stand out as examples to the power of connection and the credibility built through consistent engagement. These weren't roles I applied for in the traditional sense; they emerged organically from the relationships cultivated and the expertise shared on those very stages.

Looking back, that nervous young professional in Faro could never have envisioned the trajectory that single presentation would set in motion. It wasn't just about conveying information; it was about building bridges, fostering understanding, and ultimately, creating opportunities. The achievements and benefits accumulated over these many years are more than just professional milestones; they are a powerful demonstration of the enduring impact of communication and the unforeseen rewards of sharing your perspective.

#speaker #speaking #frankschwab #Megatrends #banking #innovation 

#SundayThoughts

FrankSchwab.de

It's getting wild how many people jump in with "amazing" crypto or investment advice these days. But honestly, it often feels like a house of cards. When I try to dig deeper, to understand the why behind their recommendations, the foundation just isn't solid. It makes me even more convinced that you absolutely have to practice what you preach.

For me, it's a gut feeling that comes from basic logic. You wouldn't let someone build your home if they'd never picked up a tool, would you? Or trust a teacher who's just skimming the textbook themselves? The same goes for something as crucial as my financial future. If someone wants to guide me on navigating the complexities of investments or the banking world, I need to see that they've successfully navigated it themselves. Show me you've actually grown your own money, made smart choices, and learned from the ups and downs. That's the kind of lived experience that earns my trust and makes advice truly valuable. Otherwise, it just feels like empty talk.

#investments #money #advice 

#SundayThoughts