The walled-garden model of bank technology has been on its way out with the unbundling of the legacy core, and now next-generation core systems are making way for a built-in best of breed approach. Next-generation cores take a leap beyond legacy systems, as we described in our recent report, with cloud-native, real-time systems, containerized applications, and system elasticity. The key to the next-generation model is streamlined, standardized integration via modern APIs across an ecosystem of third-party tools.

The ecosystem approach adds a dimension of choice and complexity that few bankers will be used to. The path won’t always be clear cut, especially when they’re starting with a blank slate. As our report notes, the newest core systems often act only as a record keeper, giving bankers the luxury and anxiety of picking best-of-breed solutions across the spectrum of ancillary services — for bank operations, payments, lending, digital experience, and CRM, among others.

This generally requires bank execs to recalibrate their approach to technology planning. First, a product-driven approach can’t account for the complexity. Second, a vendor-driven approach won’t help — a next-generation core provider is incentivized to maximize the value of the ecosystem, rather than steer customers to certain products. Third, bankers’ freedom to choose integrations requires a framework for decision-making that avoids analysis paralysis. As such, it takes a certain mentality and the right risk tolerance to set the groundwork for this kind of migration — which few institutions have today.

In particular, executives must be prepared to assess the organization’s business needs, evaluate products from the ecosystem that meet those needs, and understand how integrations would complement other solutions. To do this, they need a deep knowledge of enterprise applications and the fintech market, a nuanced vision for the bank’s technology stack, a detailed plan for the integrations they plan to add, and the right processes in place to evaluate options and onboard their choices.

The biggest challenge bankers face is the inertia of old systems and processes. That makes modernization slow. Additionally, many institutions are afraid to jump to new technology that is still largely unproven and outwardly not services oriented. But in the long run, banks are in store for significant changes to their organization because of how core technology is changing. While there is still time, eventually, the default will be “choose your own adventure,” and executives need to be prepared for that level of choice.