Bankers often are stuck with a tech stack that’s hard to modernize, vendor contracts that are challenging to get out of or renegotiate, and a slow-moving organization that resists large-scale change. It’s no wonder that so many digital transformation projects come up short. There are tried-and-true blueprints for transformation, but a bank’s specific path and its success depend on its strategic priorities and the technical and organizational challenges it’s grappling with.

The stickiness of a single vendor and the limits of legacy modules create a vexing technical starting point. As we observed at an American Bankers Association (ABA) forum for mutual banks, bankers often find their core systems and relationships with vendors frustrating. But at the same time, they lean on their core provider for technology strategy, and according to the ABA’s data, will most likely stay with their core vendor when their contract comes up for renewal. Banks that aren’t built for independent thinking and innovation need to break out of their box.

Transformation comes on a spectrum. Technical options range from tinkering around the edges to a full core migration. What a bank chooses depends on its present capabilities, commitment to change, and the lengths it’s willing or able to go to break from its core vendor’s solutions. As we’ve written, a best-of-breed strategy is ideal in the long term. But when it’s not practical to leave a core provider’s ecosystem, banks need to understand their core provider’s modernization plans and take advantage of core-agnostic solutions, for middleware or specific applications.

The devil is in the details. A bank needs to grasp the intricacies of its tech stack and the staff, policies, and processes that surround it. We’ve noted that banks need a comprehensive plan to ensure continuity between the bank’s business plan, current technology, scalability, and the resources needed to support it. Key steps include mapping IT assets, performing a gap analysis, building a decision-making framework, setting a technology roadmap, and developing a robust governance model.

No matter the state of its tech stack, a bank’s technology strategy starts first with its business strategy. As we discussed in our report, “Successes in Transformation: Lessons From the Field,” a bank should start with board-executive alignment and vision and infusing a culture of innovation across the organization. A hard look at the technical issues that could get in the way of transformation or innovation may demand a tech debt cleanup operation before jumping ahead to upgrades.

Banks contemplating modernization may worry about what their budget can handle — especially smaller institutions with core technology that dates back decades. Part of managing that constraint is the technology assessment and planning process — key themes are reducing complexity and cutting technology debt. But the money banks spend on modernization can also be part of the ordinary course of business, like investing in a cultural shift.