In my last article, I discussed the benefits of a pilot program. Pilot programs transform the burdensome cycle of evaluation, rip-and-replace implementation, and cleanup into a nimble, low-risk pathway for technology migrations. By offering benefits like cost savings, risk mitigation, and faster innovation, they empower banks to adapt swiftly to digital demands.

Banks are under pressure to modernize their technology stacks while minimizing risk and disruption. Pilot programs offer a strategic, low-risk approach to testing new systems before full-scale implementation. To maximize their effectiveness, banks should follow a structured approach that aligns pilots with broader business goals and operational realities:

1. Align with business strategy

Successful pilots begin with a clear connection to the bank’s overarching strategy. This means developing a technology roadmap that supports business objectives, such as improving customer experience, enhancing compliance, or reducing operational costs. By aligning pilots with strategic goals, banks ensure that early investments deliver measurable value and pave the way for scalable transformation.

2. Define scope and select applications

A focused scope is critical to a successful pilot. Rather than attempting to overhaul entire systems, banks should select a limited set of high-impact processes or applications for testing. Ideal candidates include areas like payments, customer onboarding, or specific lending products. For example, a pilot might target small business loans, certificates of deposit (CDs), or retirement accounts. It does not need to cover a complete product set.

Keeping the pilot small allows for rapid iteration and early wins that build momentum and staff enthusiasm, contrasting sharply with the risks and resistance often associated with big-bang events. Banks may also consider using challenger subsidiaries or parallel “sidecar” cores to isolate and test new capabilities. For instance, new lending products can be run on a pilot core system that interfaces with legacy accounts, enabling real-world validation without disrupting existing operations.

3. Incorporate throwaway interfaces for flexibility

To preserve agility and minimize risk during technology pilots, banks should implement temporary, discardable interfaces between new systems and legacy infrastructure. These lightweight integrations, such as APIs used in a loan origination pilot, allow teams to test data flows and functionality without making permanent changes to core systems. While this approach may introduce modest development costs, the benefits are substantial: reduced downtime, faster experimentation, and the ability to meet regulatory expectations.

One practical consideration is the temporary inconvenience to staff, who may need to operate across both legacy and pilot systems to complete customer transactions. However, this short-term friction is typically outweighed by the long-term institutional gains. By enabling low-risk testing and iterative learning, throwaway interfaces provide a critical bridge between innovation and operational continuity.

In parallel core pilots, these discardable interfaces can also be used to synchronize data between the new and existing systems, allowing both to operate concurrently. This setup enables validation of the new core without disrupting ongoing operations. If the pilot proves successful, the new core can be promoted to the system of record, and the temporary interfaces can be phased out as part of the broader migration strategy, ensuring a smooth, controlled transition to a new infrastructure.

4. Execute and monitor

Execution should be guided by clear success metrics, such as service level objectives (SLOs) for reliability, performance, and user satisfaction. Cross-functional collaboration is essential, with IT, operations, compliance, and business units working together to monitor progress and iterate based on real-time feedback. This ensures that the pilot remains aligned with both technical and business expectations.

5. Scale and integrate

Once validated, pilot insights should inform the broader migration strategy. This includes externalizing components, such as decoupling products from core systems and gradually scaling successful elements across the organization. A phased approach allows banks to build on proven capabilities while minimizing disruption and maintaining operational continuity.

6. Evaluate and learn

Post-pilot evaluation is crucial. Outcomes should be measured against predefined benchmarks to assess effectiveness and identify areas for improvement. This fosters a culture of continuous learning and innovation, enabling banks to refine their approaches and apply lessons learned to future initiatives.

7. Build vendor contracts around success

A final, often overlooked advantage of pilot programs is their role in shaping vendor contracts. When a pilot meets its success criteria, it can serve as the foundation for a broader agreement. Pricing, scope, and service levels can be negotiated based on real-world performance, giving banks greater leverage and confidence. In many cases, the cost of the pilot is credited toward the overall contract, reducing the total investment and incentivizing vendors to deliver strong results from the outset.

Pilot programs offer banks a smarter, more strategic alternative to traditional rip-and-replace migrations. By starting small, aligning with business goals, and embracing flexibility through temporary integrations, banks can test, learn, and scale with confidence. This approach not only reduces risk and cost but also accelerates innovation and builds internal momentum for change.

As the financial services industry continues to evolve, the ability to adapt quickly, without compromising stability will define the leaders of tomorrow. Pilot programs provide the blueprint for that agility. They turn uncertainty into opportunity, enabling banks to modernize at their own pace, with real-world validation and measurable outcomes guiding every step.

In the next installment, I will explore real-world examples of pilot-driven transformations and how institutions are using this approach to future-proof their technology ecosystems.