Leading global research firm Everest Group has released its first in-depth “Leading” reports, one of which being its Leading 50 Core Banking Technology Providers 2024 report, which is now available at Everest Group Leading 50 – Everest Group

Core banking systems have long been the operational backbone of financial institutions, ensuring the smooth execution of banking activities. However, the traditional systems are reaching their limits, as customers now demand hyper-personalized, real-time banking experiences.

Imagine legacy core banking systems as aging engines in classic cars! While reliable for years, these engines struggle to meet the performance expectations of modern highways – where speed, efficiency, and adaptability are non-negotiable. To navigate this digital expressway, banks must replace or overhaul these engines with cloud-native, API-driven platforms designed for agility and scale.

Drivers of core banking modernization

The modernization of core banking systems is a strategic imperative now, and there are several forces driving this transformation:

• Customer centricity: Modern platforms enable a 360-degree view of customers, facilitating real-time and hyper-personalized experiences
• Operational agility: Cloud-native architectures support faster product launches and integrations with FinTech ecosystems
• Cost optimization: By reducing reliance on capital-intensive legacy systems, banks can pivot to more flexible operational expenditure models
• Regulatory compliance: Advanced systems provide built-in compliance features and enhanced security, mitigating risk in an increasingly complex regulatory environment

Legacy systems, though dependable, come with significant limitations: high costs, inflexibility, and an inability to deliver the seamless digital experiences customers expect. Modernization allows banks to respond to the rising volume of transactions, leverage open banking ecosystems to drive innovation, and enable real-time processing to meet modern consumer demands.

Everest Group Leading 50 Core Banking Technology Providers 2024

The Leading 50 Core Banking Technology Providers 2024 Report serves as a comprehensive guide for banks embarking on their modernization journey. This global ranking evaluates providers across multiple dimensions such as revenue and customer base, innovation and investment, client geography mix, and module coverage.

The report also includes recognitions for providers serving credit unions and regional leaders, while offering insights into the role of system integrators, hyperscalers, SaaS based delivery models, and collaborative ecosystems in driving modernization.

Ronak Doshi, partner at Everest Group, said: 

“The core banking technology market is undergoing significant transformation as banks face mounting pressure to modernize their legacy systems and cater to changing demand themes. Rising customer expectations for real-time experiences, intensifying regulatory scrutiny, and the need for operational agility are also all compelling financial institutions to accelerate their modernization initiatives at unprecedented speed and scale. 

“In response, technology providers are ramping up investments in SaaS-based delivery models, enhancing their platforms with artificial intelligence (AI) and advanced analytics capabilities, as well as strengthening their ecosystem play through strategic partnerships with hyperscalers and system integrators. As modernization initiatives continue to gain momentum, this research serves as an essential resource for banks undertaking modernization initiatives and technology providers seeking to benchmark their market position therefore.” 

Driving core banking modernization: Synergy of hyperscalers, SaaS, AI, and System Integrators (SIs)

The modernization of core banking systems is driven by the combined impact of hyperscalers, SaaS, AI, and System Integrators (SIs), each playing a pivotal role in transforming the financial services landscape.

Hyperscalers enable banks to leverage robust cloud infrastructure for scalability, resilience, and cost efficiency, forming the backbone of agile operations. SaaS platforms complement this by offering flexible delivery models that reduce upfront costs and accelerate the deployment of innovative solutions.

AI and advanced analytics embed intelligence into core systems, enhancing fraud detection, automating compliance, and enabling hyper-personalized experiences for customers.

Meanwhile, SIs act as orchestrators of this transformation, seamlessly integrating modular platforms, APIs, and ecosystem partnerships while managing complexities such as data migration and regulatory compliance. Together, these forces create a cohesive framework that empowers banks to modernize at speed, innovate continually, and remain competitive in an increasingly digital economy.

Implications for technology providers

The expectations from technology providers are shifting dramatically, with banks no longer seeking providers, but instead strategic partners who are capable of driving end-to-end transformation.

Providers must now prioritize delivering cloud-native, API-enabled solutions that facilitate real-time adaptability and scalability. These platforms allow for rapid product development and easy integration with the broader ecosystem of FinTech’s and third-party applications, ensuring that banks can innovate at speed. Providers who can offer modular solutions will stand out in this competitive landscape.

At the same time, embedding AI and automation into their core offerings is imperative. AI must be woven into the fabric of core systems, enabling automation for operational efficiencies and delivering insights from data analytics. Additionally, regional nuances and regulatory requirements demand tailored solutions, making providers’ ability to address local market needs a critical differentiator.

The road ahead: A collaborative future 

The journey to next-generation core banking is one of partnership and innovation. SaaS models enable agility, AI powers intelligence, and SIs bring the ecosystem together seamlessly. For technology providers, the path forward involves moving from transactional engagements to strategic partnerships, aligning deeply with banks’ modernization goals.

By embedding next-gen technologies and fostering collaboration, providers can redefine banking for the digital age—transforming challenges into opportunities and enabling financial institutions to thrive in a rapidly evolving market. The future of core banking is here, and it’s powered by innovation and strategic alignment.

To learn more about core banking, contact Ronak Doshi, Ronak.Doshi@everestgrp.com, Pranati Dave, Pranati.Dave@everestgrp.com, Kriti Gupta, Kriti.Gupta@everestgrp.com, and Laqshay Gupta, Laqshay.Gupta@everestgrp.com. 

As the global services landscape continues to evolve, 2024 has brought unique challenges. While the cost of delivering global services continued to increase, pricing came to a standstill for many services and even declined for some. The growing adoption of the Global Capability Center (GCC) model has further transformed the economics of outsourcing, prompting both buyers and service providers to reevaluate key elements of their agreements.

Watch this on-demand webinar as our panel of pricing experts analyzed the significant trends of 2024 and offer a forward-looking view on IT and BPO services pricing for 2025. This session will provide valuable insights into the pricing strategies and key levers that can help both parties achieve win-win outcomes in an increasingly complex environment.

What questions did the webinar answer?

• How has the cost of delivering IT and BPO services and pricing changed in 2024?
• What levers are buyers and providers pulling, and is a win-win arrangement possible
• What is the outlook for pricing and costs?

Who should attend?

• CIOs, CTOs, CDOs
• IT executives, IT strategy leaders
• BPO department leaders
• GBS leaders managing IT and BPO outsourcing contracts
• Pricing leaders
• Solutioning leaders
• Pre-sales leaders
• Large pursuits leaders
• Finance Leaders

Related Content:

• The Evolution and Growth of Global Capability Centers (GCCs) and the Critical Role of Providers | Blog
• Five Key Steps Buyers Should Take to Optimize Services Contracts | | Blog
• Unlocking Revenue Potential: Service Provider Strategies for Tools/Accelerator Monetization  | Blog

Following the conclusion of Everest Group’s inaugural Engage 2024, an event in which attendees left feeling energized and equipped with practical insights and actionable strategies, there is now more to come! 

The event, which offered a deep dive into the evolving world of outsourcing and service delivery, brought together industry veterans, thought leaders, and Everest Group   advisors, all of whom explored the past, present, and future of global services.  

What was the goal of this you may ask? Put simply, it was to arm leaders with pragmatic solutions that drive business impact, in the “do more with less” and generative AI (gen AI) eras. 

At its core, Everest Group Engage revolves around “The Pragmatic Edge”—a philosophy that blends practical and actionable strategies, with forward-thinking insights. 

This approach enables organizations to build sustainable advantages in service delivery, combining innovative thinking with real-world applicability.  

The event highlighted how businesses can leverage this mindset to remain competitive, all while embracing the next phase of transformation: the Business Value Mosaic. This new model emphasizes the need to understand and capture business value holistically—redefining how services create impact across industries. 

Everest Group Engage 2024 explored the megatrends shaping the industry today. Sessions delved into topics ranging from pricing models and gen AI adoption, to shifts in global delivery models. Attendees were challenged to think beyond traditional service paradigms and embrace new frontiers—like the growing relevance of Africa as a key player in global delivery with its emerging talent pool. 

The event also sparked critical conversations about the future of work. Experts emphasized the need for frictionless service models—delivering seamless experiences—and the importance of developing a “prime” model, with built-in flexibility to adapt in an ever-evolving ecosystem. Whether discussing artificial intelligence (AI) , automation, or evolving workforce strategies, the message was clear: success in this era requires agility, collaboration, and bold leadership. 

Everest Group Engage is more than a conference. It’s a call to action for leaders to expand their toolsets, shift their mindsets, and embrace the future of service delivery with confidence. Whether you are new to the industry or a seasoned professional, this event provides the knowledge, connections, and strategies needed to thrive amid constant change. 

Announcing Everest Group Engage 2025 — London 

We are delighted to announce the next chapter of Everest Group Engage will be coming to London, from March 31 – April 1, 2025. Building on the momentum of the 2024 event, Everest Group Engage 2025 — London will delve deeper into The Pragmatic Edge: Global Impact—exploring how practical strategies can drive sustainable growth in a complex, interconnected world. 

This 1.5-day event will connect executives from GBS , sourcing, vendor management, IT services, global locations, and next-gen technology, with top experts and thought leaders on hand to co-create solutions for future challenges.  

With hands-on workshops, solution-focused discussions, and immersive networking, attendees will leave prepared to make confident, data-driven decisions and transform their organizations. 

Mark your calendars now! London awaits—offering you the opportunity to sharpen your pragmatic edge and achieve global impact. Learn more about Everest Engage 2025 in London! 

Operations outsourcing is evolving across major industries as rapid technological advancements and changing customer expectations reshape traditional models. What once focused on cost arbitrage is now transformation-centric, driving agility, enhanced efficiency, and improved customer experience. A 2024 key issues survey by Everest Group highlighted that beyond cost optimization, the top three key areas where enterprises seek direction include technology integration, advanced analytics, and process engineering. The BFS industry is at the forefront of this shift toward transforming operations.

Cost-arbitrage led transformations are now becoming a thing of the past, whereas enterprises are now increasingly focusing on process efficiency through reengineering, technology-driven operations, and analytics integration. Future-looking enterprises are already taking this a step further, viewing these advancements as enablers of additional business value and enhanced customer experience, rather than just cost savings.

In this blog, we explore this growing trend toward operational transformation and how financial institutions with varied enterprise maturity levels are all striving to align with this shift.

What is the operational transformation approach and why are enterprises adopting it?

While a few banks were ahead of the curve in making operations more integrated with technology, the number of banks accelerating the efforts has surged in the past three years following the COVID pandemic and amid the slowdown. Some of the factors contributing to this include:

• Increasing requirement for automating business processes through remote delivery models across organizations
• Heightened market regulations driving the transition to shorter settlement cycles
• Accelerated demand from end customers to shift to digital models
• Need to scale up quickly to match capabilities with new players in the market, such as FinTechs and non-banks
• Need for low-cost IT infrastructure and data accessibility
• Enhanced data privacy and security

Unlike pure-play operations outsourcing, which primarily targets cost reduction, an operational transformation strategy focuses on optimizing workflows to foster organization-wide synergy and achieve long-term, stable gains. While every organization takes a unique approach to operational transformation, these efforts can be crystallized into three key approaches:

• Operations-IT alignment: Synchronization of IT investments in line with organizations’ wider business goals
• Data & Intelligence (D&I) integrated workflows: Leverage of automation, AI-, and analytics-led solutions to make operations faster and intelligent
• Platform-led operations: Deployment of domain-centric platforms for automated processing of large volumes of transactions

Through these dimensions, enterprises are seeking to transition their current state of operations into a more sustainable, integrated state of operations in the coming future. Exhibit 1 highlights the current and aspirational state of financial institutions.

Table 1: Pros and cons of the siloed and integrated states

Even though integrated operations warrant higher initial investment, enterprises are gradually adopting this model as their focus shifts from short-sighted goals of immediate cost takeout to long-term return on investments. This focus shift is explained by three key questions that enterprises are increasingly seeking to address:

1. How to drive the velocity of change?

Financial institutions are striving to accelerate change velocity to address evolving macro, consumer, competitive, and regulatory trends. However, in the current state, this change becomes slow due to siloed teams that are focused on individual outcomes and key results (OKRs). In contrast, integrated, technology-infused operations promote shared, forward-looking goals, facilitating faster change. As organizations recognize this, more data and intelligence-centric outsourcing deals now involve business unit heads alongside CIOs as decision makers, ensuring greater domain and process synergy.

2. How to bring in additional value while reducing the Total Cost of Ownership (TCO)?

As an organization’s wider goal is to reduce the overall cost, enterprise stakeholders are gradually moving away from the thought process of bringing down the cost of individual operations, IT, and technology teams to optimizing the total cost of ownership. For instance, while standalone operations outsourcing was the traditional answer to quick ROI, banks are now following a two-pronged approach of automating transaction-intensive functions and outsourcing judgment-intensive functions to gain to a stable, long-term ROI.

Along with reducing TCO, an integrated approach unlocks business value by using data, analytics, and AI to enhance decision-making, uncover customer insights, and drive new revenue streams via personalized service offerings.

3. How to make business operations more resilient?

Following the pandemic, resilience has become one of the top priorities for BFS firms. Institutions are aiming to safeguard against macroeconomic and regulatory changes and build operations that are agile, scalable, and secure. Thus, banks are looking to switch to a model where technology adapts to external fluctuations and helps minimize operational disruptions.

Is the time right to prioritize transformation? Case in point: 

The case of traditional UK banks provides a compelling answer to why operational transformation is imperative in today’s scenario. Compared to fintechs, traditional banks in the UK were laggard in adopting digital operations, particularly within CX-centric functions, in the past decade. As customers became more digitally savvy, fintechs were quick to offer seamless, online banking experiences. As a result, many customers shifted to these digital-first alternatives. By the first half of 2023, neobanks such as Revolut and Monzo were nearly at par with established banks in terms of customer base. The past two years witnessed over 300 physical branch closures of traditional banks due to customer shifts to digital services. In response to the significant shift in customer expectations, traditional banks have been forced to rethink their approach, accelerating digital adoption to stay competitive.

How to set the wheels of progress in motion? An operational transformation toolkit for BFS enterprises:

The following section entails a self-assessment framework for enterprises (in Exhibit 2) to evaluate their current operational transformation maturity and select a sourcing approach accordingly.

Enterprises need to optimize prioritization of initiatives based on their readiness stage to ensure the most impactful transformation outcomes. This is highlighted in Exhibit 3 below.

Based on the stage of operational and infrastructure maturity, an organization can prioritize the degree of transformation feasible. For instance, Fundamental-state enterprises can begin by introducing business intelligence and RPA tools for select processes, while mature-state enterprises can start leveraging technologies such as advanced analytics and end-to-end automation platforms.

How leading banks are navigating their transformation journey:

Based on their operational maturity and infrastructure compatibility, banks are selecting from three main approaches: Data and Intelligence (D&I)-integrated operations, the deployment of technology platforms, and aligning operations with IT.

Examples of such initiatives in the past three years are mentioned below:

A leading UK bank:

With an aim to optimize cost and enhance process efficiency, a UK-based retail bank roped in a third-party provider to leverage its services for IT and support functions along with digitally transforming its business. As part of the engagement, the bank will leverage the provider’s automation and AI capabilities to accelerate transaction processing and enhance customer experience.

A leading Europe-based global bank

To streamline customer-facing workflows and enhance the lending experience, the bank partnered with a BPO provider to identify and automate processes across multiple functions and leverage AI for quicker loan processing. Consequently, the bank achieved a 25% increase in productivity and reduced account closure times by approximately 30%.

A top 5 mortgage-backed securities dealer

Faced with an outdated proprietary technology platform that couldn’t support T+2 settlement cycles, the firm turned to a third-party provider for both technology and services. The provider took over post-trade operations while facilitating the firm’s transition to a modern equities platform. This partnership enabled the firm to scale its operations effectively and meet regulatory requirements.

Conclusion:

The decision to transition to an integrated operations approach depends on whether an organization prioritizes short-term cost-cutting or long-term efficiency. While both approaches offer distinct advantages, adopting a strategy focused on sustainable growth equips enterprises to withstand external disruptions and maintain their relevance in an evolving market. Given the significant investments required, although justified by the strong ROI and the complexity of internal execution, partnering with a third party offers access to production-ready and proven solutions, a skilled talent pool with domain and technical expertise, and cost-effectiveness to help enterprises achieve their goals. For questions or to explore this topic further, reach out to us.

Authors:

Suman Upardrasta

Sahil Chaudhary

Ritwik Rudra

Sakshi Maurya

Catch Everest Group Partner Ronak Doshi as he joins an expert panel to explore how to navigate the complexities of AI integration and governance in the banking and financial services sector to ensure ethical, efficient, and effective deployment.

The panel will discuss current applications of AI in the banking and financial services industry, showcasing how these technologies are not just futuristic concepts but present-day tools driving operational efficiency and customer satisfaction. Additionally, the session will cover strategic approaches to overcome challenges and optimize AI investments, setting the stage for a future where AI is a cornerstone of industry innovation and growth.

Register

What you will learn:

• Understanding AI’s Financial Impact: Gain insights into how Generative AI can significantly enhance productivity and profitability in the banking sector, potentially adding $200 billion to $340 billion annually
• AI Governance: Learn about the frameworks and strategies necessary for robust AI governance to ensure ethical, efficient, and effective AI deployment within financial institutions
• Real Use Cases of Generative AI: Explore real-world applications of Generative AI in banking and financial services, demonstrating how these technologies are currently enhancing operational efficiency and customer satisfaction
• Executive Priorities: Discuss the critical priorities for executives to focus on to maximize the return on investment from AI technologies, including strategic implementation and overcoming common challenges
• Navigating AI Integration Complexities: Delve into the complexities of integrating AI technologies in banking environments, from technical challenges to regulatory compliance and beyond
• Future Trends in AI and Banking: Look ahead at how Generative AI is expected to evolve and continue transforming the banking industry, potentially leading to new business models and further innovations in customer service and operational efficiency

Register

Ronak Doshi
Partner, Everest Group
Jason Gandy
SVP, Financial Services & Insurance, NTT DATA
Tom Mazzaferro
Chief Data & Analytics Officer, Truist
Mike Sisk
Contributing Editor, American Banker

In a rapidly shifting global economic environment, private equity (PE) firms are confronting a myriad of challenges precipitated by heightened interest rates, macroeconomic uncertainties, and constrained liquidity in entry and exit channels.

At the same time, the industry is sitting on a record level of dry powder, highlighting the stark contrast between available capital and viable investment opportunities. In this blog, we delve into the current state of the private equity market, identify the strategic priorities reshaping PE firms’ approaches, and explore the transformative role of technology and service providers in this sector.

The last 18 months presented a significant period of recalibration for the private equity market. Elevated interest rates sharply reduced the availability of inexpensive debt, and fundamentally altered the dynamics of leveraged buyouts.

Simultaneously, mounting recessionary fears dampened overall market optimism, resulting in subdued deal activity and challenging exit strategies. Despite these headwinds, the industry’s unprecedented levels of dry powder present both a challenge and an opportunity – compelling PE firms to deploy capital with greater precision, whilst meticulously selecting investments poised for higher returns.

Looking ahead, the next 12 months offers a cautiously optimistic outlook, with early signs of growth anticipated to materialize in the latter half of the year.

Current macroeconomic conditions, an evolving regulatory landscape, advancements in technology, and a focus on diversification and Environmental, Social and Governance (ESG) are some of the major factors influencing the private equity industry.

• The macroeconomic effect on the PE industry– Current economic conditions and fears of a recession have slowed growth in the private equity industry. Consequently, there has been a decrease in deal activities and a shift in focus toward tightening the bottom line and managing risks. Investors are also actively monitoring changes in inflationary trends, interest rates, and asset allocation levels as they navigate economic uncertainty.
• A substantial accumulation of dry powder– Having significant dry powder means that PE firms are ready to act quickly when opportunities arise. This can be particularly advantageous in the current period of economic downturns, where the ability to swiftly execute transactions can differentiate a PE firm from its competitors.
• Regulatory compliance – With stricter regulations, the due diligence required before making investments has become more complex and thorough. Regulatory requirements can also influence the structure of deals. For instance, regulations around financial disclosures, anti-money laundering (AML) standards, or cross-border capital flows can dictate the terms and conditions of investments, affecting everything from the valuation of assets to the exit strategies.
• Diversification in investment areas – Many PE firms are looking beyond their traditional markets to invest in emerging markets, where higher growth rates can potentially yield higher returns. They are also diversifying their investments across various sectors to capitalize on new technologies and evolving consumer preferences. Sectors such as technology, healthcare, renewable energy, and consumer goods are particularly attractive due to their growth potential and resilience to economic downturns.
• Technology and digital transformation – Technological advancements are reshaping the PE industry. Data analytics, artificial intelligence (AI), and machine learning are enhancing deal sourcing, portfolio management, and risk assessment. Digital transformation is enabling PE firms to improve operational efficiency, enhance decision-making, and drive value creation.
• The rise of thematic investing – Thematic investing has gained prominence as investors look to capitalize on long-term trends. Strategies focused on ESG, impact investing, and technology are propelling the industry forward, with ESG integration becoming a competitive advantage. Impact investing, which aims to generate both financial and social returns, is increasingly popular as investors seek to align their portfolios with their values.

Strategic priorities for PE firms

To address these multi-faceted challenges and capitalize on new opportunities, private equity firms are now prioritizing several key strategies. These include optimizing working capital management to enhance financial stability, focusing on targeted value creation through strategic transactions like carve-outs, integrating advanced technologies for operational efficiency, and developing robust leadership within portfolio firms to drive sustainable growth.

These priorities are critical in helping firms manage risk and maximize returns in a fluctuating economic environment, in order to navigate the evolving private equity landscape.

Technology as a strategic lever in private equity

In the dynamic and competitive private equity landscape, amidst shifting strategic priorities, technology is not merely a facilitator, but a transformative tool that can reshape investment landscapes and significantly drive value creation:

Strategic integration of technology

• Due diligence: Advanced analytics and AI technologies can redefine due diligence by providing deeper, actionable insights much faster than traditional methods. These tools can enable PE firms to perform predictive risk assessments and scenario modeling, offering a detailed understanding of potential investments and market conditions.
• Operational agility: The integration of Internet of Trusted Things (IoT) and cloud technologies across operational frameworks can allow PE firms to enhance agility and responsiveness. This capability is crucial for adapting to market changes and operationalizing data-driven strategies swiftly and effectively.

Driving value creation with technology

• Enhanced portfolio performance: Digital tools like AI-driven predictive maintenance and personalized customer relationship management (CRM) systems through machine learning, can transform portfolio companies from operational and customer engagement perspectives. This approach can lead to cost savings, open new revenue streams, and enhance customer retention.

• Innovative market positioning: Technology can enable portfolio companies to pioneer new market spaces and innovate existing ones. For instance, deploying blockchain technology to create transparent supply chains can appeal to a growing market segment concerned with sustainability and ethical sourcing. 

Optimization and scalability

• Scalable solutions for growth: Technologies such as scalable cloud infrastructure and automated business processes can enable portfolio companies to grow without proportional increases in operational costs. This scalability is vital for PE firms looking to expand their market footprint without diluting managerial focus or financial resources.
• Sustainable operations and ESG compliance: Technology can play a pivotal role in monitoring and managing environmental impact and governance frameworks. Digital platforms can track and analyze carbon footprints and automate compliance reports, making it easier for companies to adhere to evolving ESG standards and regulatory requirements.

Preparation for exits 

• Digital transformation as a value multiplier: Before exiting an investment, PE firms can increasingly focus on digital transformation initiatives to boost the underlying value. This might involve implementing state-of-the-art enterprise resource planning (ERP) systems or digital marketing strategies that solidify the company’s competitive edge and market position.
• By harnessing these technological strategies, private equity firms can navigate the complexities of today’s investment environment more effectively, ensuring robust returns and sustainable growth.

Role of service providers in the evolving private equity landscape

The evolving needs and strategic shifts of PE firms present substantial opportunities for service providers. Service providers are essential in enabling PE firms to navigate the complexities of the current economic landscape through strategic advisory, technological deployment, and operational support.

Service providers are poised to deliver comprehensive solutions that encompass risk management, compliance adherence, and the integration of cutting-edge technologies such as AI and cloud computing. These collaborations are crucial, enabling PE firms to enhance their operational agility, drive innovation, and ultimately, realize superior investment returns.

Key benefits for PE Firms

The collaboration with service providers offers PE firms significant benefits:

• Enhanced competitive advantage: Leveraging service providers’ expertise and technology to stay ahead in the market
• Improved financial stability: Through cost optimization and effective financial management strategies
• Increased operational efficiency: Streamlining operations leads to more efficient and effective management
• Sustainable value growth: Ensuring long-term growth and value creation through strategic and operational enhancements

The road ahead

Looking ahead, the role of service providers will become increasingly pivotal. As private equity firms continue to navigate the intricacies of the evolving economic and private equity landscape. As well as this, the strategic integration of technology and expert advisory will be critical.

Service providers will not only need to offer innovative solutions that address immediate operational efficiencies, but also support long-term strategic goals, fostering both stability and growth.

The successful navigation through these challenging times will likely define the new paradigms of excellence in the private equity industry, emphasizing resilience, adaptability, and proactive growth strategies.

To discuss more on this topic, please reach out to Ronak Doshi, Kriti Gupta and Akshay Rajput.

While generative AI has taken center stage in the enterprise transformation journey, many organizations are still struggling to harness its full potential. However, banking, financial services, and insurance (BFSI) GBS could be the catalyst to help solve this challenge.

During this virtual roundtable, our expert analysts and BFSI industry thought leaders, had an engaging discussion into the generative AI promise, its use cases, the key challenges, and the main risks impeding its real-time adoption.

Participants came away with attainable and realistic use cases for BFSI organizations to drive significant business outcomes, including:

• Guiding principles for setting up a generative AI ecosystem in GBS
• Oversight on the overall role generative AI applications can play in the end-to-end service value chain
• Requisite change management practices for scaled implementation
• Top skills GBS organizations must be geared for
• Insights into the outlook for generative AI

Who attended?

• GBS leaders
• GBS strategy leaders
• GBS site leaders
• GBS AI/ML or data analytics leaders
• GBS technology/transformation/IT leaders
• GBS business units/operations leaders

In the dynamic landscape of banking, financial services, and insurance (BFSI), risk and compliance (R&C) functions have become critical. Read on to explore the growing trend of outsourcing R&C processes, including the strategic advantages, regulatory considerations, and the role of specialized service providers in bolstering operational efficiency and compliance resilience amid evolving industry dynamics. Reach out to us to discuss further.

Risk and compliance (R&C) functions may not directly generate revenue, but they are crucial for the effective execution of business strategies and ongoing operations of banking, financial services, and insurance (BFSI) enterprises. Conventionally, R&C only receive attention when something goes wrong, like regulatory enforcement. It’s time to adopt a proactive and strategic approach.

Recently, there have been rising volumes for processes related to R&C, putting significant pressure on in-house compliance teams of BFSI enterprises, as the cost of failing to meet R&C mandates is extremely high. For example, Binance faced a US$4.3 billion penalty in 2023 due to lapses in anti-money laundering program. Similarly, in 2024 HSBC has been fined £57.4 million for customer deposit protection failings.

So, what’s the solution? While some BFSI enterprises, due to regulatory requirements or other sensitivities, must keep all compliance activities in-house, for others, outsourcing part or all of their compliance functions is a viable alternative. This shift not only addresses immediate pressures but also positions BFSI enterprises for future resilience and competitiveness.

The catch? Regulatory guidance emphasizes that even when compliance activities are outsourced, the company retains accountability for meeting its regulatory obligations. Hence, the need to have a thorough decisioning strategy when it comes to risk and compliance outsourcing.

Traditionally, R&C outsourcing in the BFSI sector has been limited to areas like KYC, AML, credit risk, operational, and third-party risk management, with some audit support services. However, the industry has recently become more open to outsourcing critical processes such as market and liquidity risk, fraud management and chargeback, enterprise risk management, internal audit support, risk consulting, and ESG services.

Exhibit 1: Risk and compliance value chain as defined by Everest Group

The rising propensity to outsource R&C processes is driven by a multitude of factors, including:

Current macroeconomic headwinds: The ongoing recessionary pressures are putting cost constraints on BFSI enterprises as they navigate a high-interest environment. Outsourcing R&C promises much-needed cost-effectiveness when compared to maintaining an in-house compliance team.

Rising volumes of R&C requirements: Current geopolitical scenarios, such as the Israel-Palestine and Russia-Ukraine conflicts, along with major global elections, have heightened the need for processes like sanction screening and Politically Exposed People (PEP) monitoring. Additionally, the macroeconomic environment, where many are living paycheck-to-paycheck, has led to an increase in fraud and chargeback instances. Outsourcing to specialist firms can help increase efficiencies due to economies of scale and a clear operational focus.

The increasing complexity of R&C processes: Fraudsters have become tech-savvy, and the global regulations keep on evolving. Outsourcing can provide quicker access to advanced systems, such as compliance analytics and AI-based risk models, that might be costly or time-consuming to develop in-house. By outsourcing compliance tasks, BFSI enterprises can focus on their core capabilities and strategic goals, thereby increasing productivity and competitiveness.

Access to specialized talent: As BFSI enterprises expand their compliance efforts and integrate them within core business operations, the demand for skilled compliance talent has risen. Effective compliance management now requires not only financial, legal, and analytical skills but also strong operational experience, a combination that is in short supply and can be complemented by an R&C specialist outsourcing partner.

Evolving enterprise priorities within risk and compliance

The COVID-19 pandemic forced BFSI enterprises to rapidly adapt their operations. As the pandemic evolved into an economic crisis, it triggered unemployment and social unrest, presenting challenges like business disruption, remote work, data security, cyber threats, and increased risk and compliance monitoring.

Failures of major banks such as Silicon Valley Bank, Credit Suisse, Silvergate Bank, and First Republic Bank highlighted the urgent need for continuous investment in legal, risk, audit, and compliance functions amid rising inflation and asset/liability mismatches.

Enhanced regulatory scrutiny is another key factor, as highlighted below:

• AI and external data use control: The EU Artificial Intelligence Act, the first comprehensive legal framework for AI, was adopted on March 13, 2024. The new Colorado Division of Insurance regulations require insurers to test AI/data systems for bias
• Cybersecurity and data safety: The Consumer Financial Protection Bureau (CFPB) proposed rules on consumer-authorized financial data-sharing, and New York’s expanded cybersecurity rule mandates annual reviews of written policies by a governance committee
• Capital and solvency oversight: The Financial Stability Oversight Council (FSOC) finalized a framework for assessing risks to US financial stability, including non-bank financial companies and payment systems. The CFPB proposed supervision of digital wallet and payment apps, while the National Association of Insurance Commissioners (NAIC) seeks to protect consumers by ensuring the solvency of life insurers through revised risk-based capital requirements

This more stringent supervisory environment pressures banking organizations to accelerate remediation efforts and operate with less room for error.

The road ahead

Outsourcing broader R&C is similar to the early days of IT outsourcing, where companies gradually outsourced processes one or two at a time. BFSI enterprises should strategically decide which compliance activities to outsource, ensuring these processes are already stable and effective in-house, as outsourcing alone won’t fix existing issues.

As the R&C landscape evolves, financial institutions must proactively adapt by assigning clear compliance responsibilities, integrating technology (AI, analytics, automation), and establishing robust risk management frameworks. Service providers will be essential in supporting these compliance efforts.

For more on R&C outsourcing trends and achieving regulatory compliance, contact Dheeraj Maken (dheeraj.maken@everestgrp.com), Kriti Gupta (kriti.gupta@everestgrp.com) and Ritwik Rudra (ritwik.rudra@everestgrp.com), or download our report, “High Tide of Transformation – Financial Crime and Compliance (FCC) State of the Market 2024.”

Don’t miss our webinar, What’s Next in Financial Services? Driving Transformation Through Sourcing, Technology, and Operations, to learn how BFSI firms are driving business transformation in response to the macroeconomic environment, evolving customer needs, the tightening regulatory landscape, and the rapid adoption of AI and cloud technologies.

For years, core banking systems have been the backbone of financial institutions. But the landscape is shifting, and customers have high expectations. Nimble FinTech startups with cloud-based solutions are challenging traditional banks. In this dynamic environment, core banking systems are under more scrutiny than ever before. Reach out to discuss with us.

Legacy core systems, while reliable, are monolithic and struggle to meet today’s needs for hyper-personalization and real-time experiences. They’re expensive to maintain, slow to adapt, and can’t deliver the seamless, personalized experiences customers now expect. As the volume of transactions increases, the rise of open banking accelerates, and the need for real-time processing picks up, these limitations become clear.

The winds of change: M&A, strategic partnerships, and modernization

The core banking landscape is shifting. Mergers, acquisitions, and partnerships between technology providers and financial institutions are on the rise. This consolidation sends a clear message: modernization is no longer optional, it’s essential for survival. For instance, Visa’s acquisition of Pismo, a cloud-native core banking platform provider. This move strengthens Visa’s ability to offer banks next-generation solutions, while Pismo gains access to Visa’s vast network and expertise.

Banks across various markets are recognizing the need for modernization and are actively partnering with service providers to upgrade their core systems. These collaborations highlight the growing understanding that modernization is key to staying competitive and meeting evolving customer demands.

Progressive banks are adopting next-generation core banking platforms offered by leading technology providers that are:

• Cloud-native: Built for scalability and agility in the cloud, enabling banks to adapt quickly
• API-driven: Open APIs make it easy to integrate with fintech solutions, fostering a more personalized banking experience
• Microservices-based: This modular design allows for faster innovation because components can be swapped out and updated independently

Demystifying modernization: A roadmap for success

Banks are understandably cautious about core modernization due to its critical role in daily operations. Several approaches are available, each with its own pros and cons:

• Journey-led progressive modernization: This step-by-step approach prioritizes flexibility by building a digital layer around the core. APIs are exposed for better integration, while legacy parts are gradually replaced with modern microservices. Based on our conversations, this is the most preferred choice (5 out of 10 banks) as it minimizes disruption and allows for incremental changes
• Big bang replacement: A complete switchover to a new platform, a faster but riskier approach that requires careful planning and execution. Smaller banks with less complex systems often choose this route (2 out of 10 banks)
• Other approaches: Re-platforming, re-factoring, and leveraging a new tech stack for greenfield banking are other options, each suited to specific needs and risk tolerances

However, these approaches are not without their challenges. Change management and the need to decommission legacy systems can be challenging, while progressive change can result in higher costs and the need to adapt to constant technological shifts. Data migration, the availability of a scalable talent pool, vendor lock-in, and cost overruns are additional hurdles that banks must navigate.

Implications and opportunities for service providers

The core banking transformation journey presents a significant opportunity for SPs. Banks will need increased consulting and implementation support as they navigate this complex transition.

The journey-led progressive modernization approach, the most preferred by banks, is a long process that requires extensive guidance. Banks will seek expertise in areas such as modernization and decommissioning strategy, change management, data migration, talent acquisition, and system integration. This translates into a higher demand for consulting services, where providers can leverage their industry knowledge and technical expertise to guide banks through the transformation journey.

The road ahead: A collaborative future

The future of core banking is a collaborative one. Banks and SPs will need to work together to unlock the full potential of next-generation core banking solutions. By embracing innovation and forging strategic partnerships, banks can stay competitive and deliver the exceptional experiences that customers demand. This transformation goes beyond just a modernized core; it paves the way for a future of hyper-personalized financial experiences.

Currently, technology providers can participate in our Core Banking Technology Top 50 Report assessment. We will rank technology providers based on their scale of core banking business, client geography mix, and significance within the core banking platforms market (retail and commercial). Submit a request to participate.

To learn more about core banking, contact Ronak Doshi, Ronak.Doshi@everestgrp.com, Pranati Dave, Pranati.Dave@everestgrp.com, Kriti Gupta, Kriti.Gupta@everestgrp.com, and Laqshay Gupta, Laqshay.Gupta@everestgrp.com.

Sourcing BFSI leaders can also request to join the exclusive virtual roundtable, Banking, Financial Services, and Insurance Leaders Discuss: 2024’s Top Trends in Tech and Ops Sourcing, to learn about the latest trending issues shaping tech and ops sourcing within the BFSI sector.

How will the EU AI Act impact the financial services sector, and how should enterprises and service providers structure their compliance activities? Read on to learn about what this new legislation means for financial services firms looking to implement AI tools, or get in touch to understand the direct impact on your specific business.

In recent years, the rapid advancements in artificial intelligence — in particular, generative AI — have revolutionized various sectors, including financial services. Technology giants such as Microsoft, Google, Amazon, and Meta have heavily invested in developing AI models and tools. However, this unprecedented growth has also raised concerns about the potential risks associated with the unchecked use of AI, prompting the need for regulations to ensure the responsible development and deployment of these powerful technologies.

Recognizing the urgency of the situation, the European Union has taken a proactive step by introducing the AI Act, a pioneering piece of legislation that aims to establish a comprehensive framework for the development and use of trustworthy AI systems. The Act adopts a risk-based approach, categorizing AI systems into four distinct levels:

• Unacceptable risk – Systems deemed a serious threat, such as predictive policing, real-time biometric identification systems, and social scoring and ranking are banned
• High-risk – Systems with potential to harm people or fundamental rights, such as AI-powered credit assessments, require strict adherence to new rules regarding risk management, data training, transparency, cybersecurity, and testing. These systems need to register with a central EU database before distribution
• Limited risk – Systems posing minimal risk, such as chatbots, need to comply with “limited transparency obligations,” such as labeling AI-generated content
• Low or minimal risk – While not mandated, the Act encourages providers to follow a code of conduct similar to high-risk systems for market conformity

The AI Act and financial services

The financial services industry heavily relies on AI, from personalized banking experiences to fraud detection. The high-risk applications especially require financial institutions to prioritize the following:

• Continuous risk management – Focus on health, safety, and rights throughout the AI lifecycle, including regular updates, documentation, and stakeholder engagement
• Comprehensible documentation – Maintain clear, up-to-date technical documentation for high-risk systems, including characteristics, algorithms, data processes, risk management plans, and automatic event logging
• Human oversight and transparency – Maintain human oversight throughout the AI lifecycle and ensure clear and understandable explanations of AI decisions
• Rigorous governance – Implement robust governance practices to prevent discrimination and ensure compliance with data protection laws
• Fundamental rights impact assessment – Conduct thorough assessments to identify and mitigate potential risks to fundamental rights
• Data quality and bias detection – Ensure training and testing datasets are representative, accurate, and free of bias to prevent adverse impacts
• System performance and security – Ensure consistent performance, accuracy, robustness, and cybersecurity throughout the lifecycle of high-risk AI systems

To align with the EU AI Act, enterprises must take a structured approach. First, they should develop a comprehensive compliance framework to manage AI risks, ensure adherence to the Act, and implement risk mitigation strategies. Next, they need to take inventory of existing AI assets like models, tools, and systems, classifying each into the four risk categories outlined by the Act. Crucially, a cross-functional team should be formed to oversee AI risk management, drive compliance efforts, and execute mitigation plans across the organization. By taking these steps, enterprises can future-proof their AI initiatives while upholding the standards set forth by the landmark regulation.

Opportunities for service providers

• AI governance expertise – Service providers can offer expertise in building and implementing AI governance frameworks that comply with the EU AI Act. This includes developing policies, procedures, and tools for responsible AI development and deployment
• Data management solutions – Service providers can assist financial institutions in managing their data effectively for AI purposes. This includes data cleaning, labeling, and ensuring data quality and compliance
• Large Language Model operations (LLMops) – As financial institutions explore the use of Large Language Models (LLMs), service providers can provide expertise in LLMOps, which encompasses the processes for deploying, managing, and monitoring LLMs
• Use case classification & risk management – Service providers can help financial institutions classify their AI use cases according to the EU AI Act’s risk framework, and develop appropriate risk management strategies
• Quality Management System (QMS) – Implement a robust QMS to ensure the AI systems consistently meet the Act’s requirements and other emerging regulatory standards

The road ahead

As the AI Act progresses through the legislative process, financial institutions and service providers must proactively prepare for the upcoming changes. This includes conducting AI asset inventories, classifying AI systems based on risk levels, assigning responsibility for compliance, and establishing robust frameworks for AI risk management. Service providers will play a crucial role in supporting financial institutions in their compliance efforts.

To learn more about the EU AI Act and how to achieve compliance with the regulations, contact Ronak Doshi, Ronak.Doshi@everestgrp.com, Kriti Seth, Kriti.Seth@everestgrp.com and Laqshay Gupta, Laqshay.Gupta@everestgrp.com. Understand how we can assist in managing AI implementation and compliance, or download our report on revolutionizing BFSI workflows using Gen AI.