ChatGPT said: Next-Gen Banking: Evolving on Proven Foundations to Shape the Future

As digital transformation becomes a top priority for financial institutions, banks are steadily modernizing their IT landscapes and embracing next-generation (next-gen) banking to meet the evolving expectations of customers and markets.

In simple terms, next-gen banking refers to the continuous evolution of banking services to align with digital-first consumer behaviors. In Australia, for example, digital banking now dominates the landscape—99.1% of transactions occur digitally, while cash usage has plunged from 70% in 2007 to just 13% in 2024.

At the strategic level, next-gen banking encompasses digital scalability, embedded finance partnerships, ecosystem platforms, ESG integration, AI adoption, cost efficiency, and robust data governance. These priorities are not limited to fintech challengers or new market entrants. In fact, while many neobanks attempt to redefine finance, it is often the established institutions that are scaling digital capabilities most effectively.

The Australian neobank market is expected to reach US$35 billion by the end of 2025, and to grow to US$52 billion by 2030—underscoring the growing relevance of digitally native banking services. But this growth doesn't invalidate the role of traditional banks; rather, it calls for a thoughtful blending of innovation with reliability.

Foundations First: What Banks Really Need

The term “next-gen core” has become a popular marketing buzzword, often framed in opposition to legacy or proven systems. But this binary framing is misleading. Successful digital transformation doesn’t require choosing between modernity and maturity—it demands both.

Banks should look for core banking solutions that combine cutting-edge architecture with tested resilience. An effective next-gen core is:

• Cloud-native and cloud-neutral, allowing deployment across public, private, or hybrid clouds
• Scalable, to handle growing transaction volumes driven by digital and M&A activity
• API-driven and event-based, enabling ecosystem integrations and real-time services
• Component-based, supporting phased modernization
• Configurable, to accelerate product rollout and personalization
• AI-ready, through modern data architecture
• Secure by design, across every layer of the stack
• Multicapable, supporting multiple geographies, currencies, time zones, and languages

Beyond Technology: A Holistic Evaluation

Choosing a new core system isn’t only about technical features. A well-rounded decision requires looking at eight broader criteria:

1. Functional Breadth – Can it support your customer segments and future products?
2. Transformation Experience – Has the provider managed successful migrations in similar environments?
3. Long-Term Stability – Is the partner financially sound and positioned for the long haul?
4. Peer References – What do similar institutions say about their experience?
5. Performance Under Pressure – Can the system handle peak demand reliably?
6. Ecosystem Integration – Does the platform support collaboration with fintechs and third-party services?
7. Total Cost of Ownership – Are there options for optimizing costs through open-source tools and efficient maintenance?
8. Strategic Alignment – Does the roadmap support your growth and innovation goals?

A Balanced Path Forward

There is no silver bullet or universal solution for modern core banking. Each institution must define its own path—evaluating technology, risk appetite, and customer needs to select the right platform. The ideal next-gen core is one that blends modern capabilities with the stability and functionality needed to support a bank’s mission.

According to industry forecasts, the Australian digital banking sector is projected to generate US$29 billion in net interest income by 2025. Even amid slight declines anticipated over the next few years, the market remains significant—and ripe for innovation grounded in strong foundations.

In the end, next-gen banking is not about chasing trends or adopting shiny new systems. It’s about reimagining banking services to deliver value at scale, built on a platform that’s both modern and proven.

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