Banks in Switzerland and Liechtenstein are pushing digital transformation by linking external software to existing core computer systems rather than replacing them entirely. The strategy aims to secure new functions such as mobile banking and AI while avoiding huge replacement costs and the risk of service disruptions.

Fintech News Switzerland reported on Nov. 11 that a survey by the Institute of Financial Services Zug (IFZ) at the Lucerne University of Applied Sciences and Arts found 65 percent of 63 banks surveyed in May and June expected to still be using their current core banking systems in 10 years. Some 20 percent suggested they could replace them within 7 to 10 years, while only 15 percent expected replacement within 7 years.

Core banking is a bank's central IT framework that processes account ledgers and transactions. While 95 percent of the surveyed banks cited the stability and reliability of existing systems as strengths, they expressed dissatisfaction with ease of use, at 64 percent, and the speed of innovation, at 61 percent.

Banks are supplementing missing functions with external systems. Some 72 percent ran customer-experience areas such as mobile apps mainly through external software, while 66 percent did so for data analysis and business intelligence, and 56 percent for software linking AI applications. By contrast, 67 percent processed payment operations in core systems.

Use of external systems is expected to increase further. The share of customer relationship management handled by core systems is expected to fall to 13 percent in 2029 from 41 percent in 2026, while risk management and regulatory compliance is seen declining to 10 percent from 34 percent. Payments are also expected to drop to 52 percent from 67 percent.

The risks of full replacement have also been confirmed in real cases. Britain's TSB Bank suffered a large-scale service disruption after an IT migration in 2018, and British regulators imposed total fines of 48.65 million pounds, or about 86.2 billion won, in 2022, citing poor operational risk management among other reasons.

Core banking system vendors for surveyed banks were concentrated in Finnova, at 63 percent, and Avaloq, at 22 percent. The assessment is that IT innovation in the banking sector is moving toward strengthening connections with external services rather than replacing core systems.