Banks Are Asking the Wrong Questions About Core Modernization

In the early 2000s, Netflix offered Blockbuster an opportunity to integrate its online DVD rental model for $50 million. 

Blockbuster, bullish on its retail dominance, dismissed the offer, scoffing at the idea that digital and mail-based rentals could compete with its physical footprint. Blockbuster became a relic, while Netflix grew into a $433 billion global company. 

25 years later, banks are falling into a similar trap by asking the wrong questions. 

The Lesson: Blockbuster asked questions about optimizing its existing model, while Netflix asked, "What will the future of entertainment look like?" If we learned anything from The Innovator’s Dilemma, those who ask questions about the future—rather than optimizing for the present—are the ones who shape it. 

This mindset is one of the biggest keys to the future of financial services. And nowhere in financial services are future-focused questions more important than in the move to a cloud native banking architecture. 

What questions should bankers be asking about core infrastructure? 

In short, you shouldn’t. Most banks are still far too focused on asking the “today” questions instead of “tomorrow” ones. 

Yes, you need an understanding of cloud architecture and what capabilities will enable you to successfully design applications, but if you’re in the weeds on hardware, databases, or networks, you are focusing on the wrong thing. 

Recently, a banker asked me “What database are you on?”  It’s really the wrong question. It’s wrong because it focuses on the siloed business applications or databases, and not the higher-level business logic and capabilities that can work across systems in an organization.

This idea is taking hold in other areas too. Banks can take a note from Microsoft CEO Satyya Nadella’s recent comments that SaaS as we know it is about to be displaced by AI agents. He explains that, as AI is able to oversee rules and apply logic across many databases and apps, SaaS will still have a role, but it will take a back seat to AI.

Banks can apply this mindset to focus on the strategy and outcomes they want to enable, allowing the tools to fade into the background.

The real questions should sound more like this, 

• “How can we use the cloud to deliver better, faster, and more accessible services to our customers?” 
• “How do we integrate more seamlessly into our customers’ lives?
• “How do we deliver more timely, relevant services?”

Just like the Blockbuster-Netflix example, most industries have moved beyond this IT-centric thinking, to transformative future-thinking results. The infrastructure should follow from these questions, not the other way around.

Core banking modernization shouldn’t be about the plumbing. It should be about water.  

In other areas, bankers are already embracing this mindset, adopting a SaaS model. They’re not asking Salesforce or their BPO provider what database they’re running, because it doesn’t matter.   

These providers are managing the software for banks, and the focus isn’t on the software itself; it’s on the experiences and outcomes they deliver. In these scenarios they’re already starting with customer outcomes and working backward, designing solutions that evolve as needs change. 

When we apply this thought process to core banking capabilities, technical details like microservices and modular architecture can be abstracted away. The user only cares about the service, and they can focus on things like the agility to quickly integrate new features, scale services, and adapt to real-time customer demands.  

What will the future of banking look like? The questions we should all be asking. 

Instead of asking about databases or other IT-centric questions, bankers can start by asking cloud-native providers how they handle customer behaviors in a 24/7, always connected payments world: scalability, peak traffic and resilience. They can move away from focusing on transactions and toward experiences and relationships. They can ask, “How can cloud providers help me become relevant and available in my customers flow?”

Questions like: “How can we embrace more ‘micro-moments’ to integrate further into customers’ lives?” also set the conversation in the right direction. Why? The more moments you capture, the more insights you gain, and the more meaningful engagement you'll get from your customer. 

Modernization isn’t about processing transactions faster. It’s about creating meaningful relationships with customers, often through these micro-moments—those small but impactful interactions where a bank can anticipate and meet a customer’s needs in real time. These moments, powered by data and technology, are where trust and loyalty are built. 

What does this look like in practice? Bankers who are shaping the future are driving toward goals like these: 

1. Proactive Engagement: Using real-time data to anticipate customer needs and provide solutions before problems arise, such as reminding a customer about an upcoming bill or suggesting a way to optimize their savings.  Analyze what the users can’t.

2. Personalization at Scale: Moving beyond generic offerings to create tailored experiences and offers for each customer. This could mean customizing financial advice, product recommendations, or even credit terms based on individual behaviors and goals. Don’t make your customers work to find the data relevant to them.

3. Life-Integrated Finance: Embedding financial services into everyday digital life, such as budgeting tools integrated into e-commerce platforms or rewards and gamification tied to financial planning, banks have an opportunity to make their services indispensable. Go where your customers are, even in the digital world - don’t force them to go to you.

4. Accessibility for All: Thinking beyond traditional banking customers. How can your bank design products that serve gig workers, small businesses, or the underbanked? Ensure you are serving the next generation of customers.

The Way Forward 

Banks don’t need just another round of incremental upgrades. They need to ask new questions to shape the future of their business and the industry. This means embracing adaptability over rigidity and focusing on customer outcomes rather than internal systems. It’s not enough to ask, “How do we modernize our infrastructure?” We need to ask, “How do we modernize the experience of banking?”