Banks and credit unions are under increasing pressure to modernize their core systems and digital infrastructure. Customers expect faster experiences, fintech partnerships are multiplying, and regulators are pushing institutions to improve data quality and operational resilience. Yet core modernization efforts often fall short of expectations. Cornerstone Advisors recently explored why this happens and identified the Critical 5 capabilities that determine whether a modernization strategy will succeed. In this article, we examine those insights, explore how integration and data shape modernization outcomes, and share a practical path for building the institutional capability needed to modernize with speed and confidence.
The underlying truth is becoming clear. The core still matters, but it is no longer the center of gravity. The ecosystem around the core now determines whether an institution can innovate at the pace customers expect.
Shifting vendor economics and what they mean for core modernization
Recent analysis from Cornerstone Advisors highlights a shift that is reshaping the modernization conversation. Core processing now represents a much smaller share of revenue for major providers such as Fiserv and Jack Henry. Payments, merchant services, and other adjacent businesses account for most of their growth. As the relative importance of core revenue declines, institutions are experiencing fewer knowledgeable resources, slower integration support, and longer waits for configuration or custom development.
This shift does not mean that core systems are less important. It means financial institutions must take greater ownership of integration, data readiness, and architectural agility to maintain momentum in their modernization programs.
The Critical 5: A practical test for successful modernization
Cornerstone identifies five essential capabilities that determine whether modernization efforts can succeed. These are the Critical 5.
- System integration across third parties and internal applications
- Vendor accountability and communication
- Robust, reasonably priced APIs
- Cloud native development capability
- Effective data management across the stack
This list matters because it anchors modernization in operational reality. Leaders recognize these friction points every day. Integrations move slowly. APIs are inconsistent. Data becomes scattered. Multi-vendor projects drift.
The Critical 5 offers a straightforward way to evaluate modernization with focus and discipline.
Why we see the same integration and data gaps across the industry
In our work with banks and credit unions, we observe the same challenges highlighted by the Critical 5. Institutions want to modernize, yet the foundational capabilities required for modernization are uneven or incomplete:
- Integrations stretch for months.
- Vendor backlogs stall product delivery.
- Data remains siloed across channels and systems.
- APIs are limited, costly, or difficult to operationalize.
The result is a modernization strategy that struggles to convert ambition into action.
We view this as an architectural gap. Without strong integration and data capabilities, even the most modern core strategy cannot deliver the outcomes leadership teams expect.
Modernization begins with the ability to change
Modernization is not defined by selecting a new core. It is defined by an institution’s ability to change reliably and repeatedly.
Institutions that build this capability can:
- Implement fintech partnerships in weeks.
- Launch new products without depending on vendor timelines.
- Create a unified Customer360 view of their data.
- Manage multi-vendor programs with greater transparency and accountability.
This is modernization in practice. It is measurable and sustainable. It reduces dependency on vendor delivery cycles and increases institutional control.
Integration and data determine whether modernization succeeds
Each element of the Critical 5 intersects with integration and data.
- Integration determines execution speed.
- Accountability requires orchestration across systems.
- APIs depend on a unified, governed approach.
- Cloud native development requires connectivity between legacy and modern platforms.
- Data management relies on consistent architecture and governance.
These capabilities form the engine behind any modernization effort. When they are strong, institutions accelerate. When they are weak, transformation efforts stall.
How institutions build a modernization capability
Modernization succeeds when institutions build durable capabilities. The Critical 5 outlined by Cornerstone becomes achievable when banks establish a unified architecture that supports integration, governed data, and orchestration across the technology stack.
A modern integration platform, like Integration Manager, standardizes connectivity across core systems, digital channels, and fintech partners. This approach reduces point-to-point complexity and allows institutions to reuse integration patterns as they modernize.
A governed data layer, such as Data Manager, provides consistent, real-time data flows across the enterprise. By normalizing and governing data at the architectural level, institutions gain a reliable foundation for Customer360, analytics, and AI-driven decisioning.
A centralized payments layer, like Payment Manager, supports the modernization of payment operations by abstracting rail complexity and enabling consistent workflows across ACH, wires, RTP, and FedNow.
An agentic AI layer, such as PiXi AI, builds on this foundation to automate workflows, orchestrate activity across systems, and surface real-time insights. Because it operates on unified integration and governed data, AI becomes practical and trustworthy rather than experimental.
Together, these architectural capabilities form a future-ready foundation that supports current initiatives while remaining adaptable to future strategies. Institutions gain greater control over their modernization path and, more importantly, strengthen their ongoing ability to change.
A better way to evaluate modernization promises
Cornerstone recommends a straightforward question. Has this modernization strategy been proven in practice? It’s a valuable filter for separating vision from execution.
We encourage leadership teams to consider a second question: If a vendor cannot deliver at the pace required, who will help your institution build the capability anyway?
This mindset shifts modernization from vendor dependency to institutional self-reliance.
The banks and credit unions that will lead the next decade will not be defined by the core they choose. They will be determined by the integration strength, data readiness, and architectural freedom they build now.
We are committed to helping financial institutions create this foundation. If your team is evaluating core strategies or working to accelerate integration and data modernization, start a conversation with our team today.
