Back in the 90s and 2000s, banking was different. Customers queued up at local branches with passbooks, cheques, or cash, waiting to interact with a teller. Transactions were slow and the limitations of physical branches affected the quality of service.
But today, customers expect to handle everything through their devices, from mobile banking to cryptocurrency to digital payments to credit monitoring - with just a few clicks. This seismic shift in customer behavior forces BFSIs to modernize rapidly. The challenges are clear: upgrade legacy systems, adopt a digital-first approach, and meet evolving customer expectations. Despite all that, it is a transformation they cannot afford to ignore as speed-to-market becomes a clear differentiator in this fiercely competitive space
The key question is whether BFSIs should build in-house, buy off-the-shelf (COTS), or adopt a fit-for-purpose approach.
To quote Akshay Lal, SVP and Industry Business Group Head – ASEAN : “Core modernization isn’t just about cutting costs or mitigating risks, it’s about laying the necessary groundwork for new revenue streams, growth opportunities, and improved customer retention“. This is where strategic partners like Tech Mahindra play a crucial role, offering a structured roadmap and the implementation expertise needed to drive a seamless transformation.
Mulling Over the Options
Three key drivers influence the decision:
- Catching Up with Competition - Falling behind means losing customers. Buying pre-built solutions speeds up the adoption of modern features like mobile banking, digital payments, and AI-driven chatbots. The right COTS solutions enhance customer experience and bridge competitive gaps.
- Compliance Requirements - Meeting regulatory standards like AML, GDPR, or PCI DSS demands robust, adaptable solutions. While buying software can simplify compliance management, building in-house ensures full control over security and data governance. The choice depends on the level of customization required.
- Transformation and Future-Proofing - BFSIs looking for a comprehensive overhaul of their digital infrastructure require a hybrid, fit-for-purpose approach. A mix of COTS solutions and custom-built elements ensures flexibility, scalability, and innovation.
To address these challenges, financial institutions must leverage key enablers driving rapid modernization.
Tailwinds Driving Fast Modernization
BFSI modernization is accelerating fast, driven by advancements in cloud technologies, APIs, and modular architectures. The following innovations are making it easier and more cost-effective for financial institutions to upgrade their systems:
- Cloud-native and Modular Architectures: BFSIs now invest in scalable, pay-as-you-go models, integrating fintech solutions through APIs while reducing infrastructure costs.
- Industry Standards Driving Modularity: Frameworks like BIAN (banking) and ACORD (insurance) provide structured guidelines for modular and interoperable solutions, making modernization smoother.
- Mature Vendor Ecosystem: Fintechs and SaaS/BPaaS providers eliminate heavy upfront investments, making modernization faster, leaner, and more cost-effective.
- Domain-Specific Solutions: Specialized vendors address well-known BFSI challenges with focused, high-impact solutions.
- API Integrations: Seamlessly connect legacy systems with modern platforms, enabling faster updates with minimal disruption.
- Mainframe Emulators: Enable legacy systems to coexist with modern technologies, extending their lifespan without requiring a complete overhaul.
- System Visibility Tools: Identify upgradeable legacy components, streamlining the modernization process.
- Hollow The Core Model: Decouples legacy components, enabling gradual modernization without the risk of full system replacements.
So, how would you assess your options now?
Key Considerations:
- Build – Requires strong internal resources, involves higher risks but provides full control.
- Buy – Enables faster implementation and reduces upfront costs, but may lack flexibility.
- Fit-for-Purpose – Merges both approaches. Build unique differentiators (e.g., loan origination systems), buy standardized, scalable components (e.g., CRM), and configure/customize as needed.
It is like using prefabricated homes, combining ready-made sections with personalized design choices to create your own space without the long wait or high costs of building brick-by-brick.
Why Tech Mahindra Wins Here
Tech Mahindra is a trusted partner enabling BFSI clients to address the build vs. buy dilemma with a balanced approach:
- Hybrid Solutions – Integrating proprietary IPs, COTS products, and custom builds for flexibility and efficiency.
- Modular Architecture Expertise – Developing fit-for-purpose solutions aligned with industry standards like BIAN and ACORD.
- Cloud and SaaS Enablement – Driving digital transformation while optimizing costs and minimizing risks.
- Legacy Modernization – Enabling phased, low-risk updates through the hollow-core model, leveraging APIs and emulators for seamless integration.
Tech Mahindra’s “Hollow the Core” approach advocates an iterative path to modernization.
Conclusion
Every BFSI has unique goals, constraints, and market positioning. A well-planned strategic approach that balances innovation, cost, and operational agility is key to long-term success in this space.
With the scale to handle complex transformations and the agility to deploy specialized talent quickly, Tech Mahindra delivers modernization initiatives on time and with impact, no matter the scope. Partnering with an experienced advisor like Tech Mahindra ensures not just modernization, but a future-ready transformation that drives sustained growth and competitive advantage.
