EXCLUSIVE: "Pluggıng The Great Bankıng Expectatıon Gap" - Will Moroney, Temenos in 'The Paytech Magazine'

A new Celent report with Temenos shows just how wide the chasm is between what customers want from their bank and how fast old-generation architecture can deliver it – if at all. Is there another way?

For years, core modernisation has occupied a peculiar position on the banking agenda. Its importance isn’t disputed, yet much of the industry remains dependent on legacy technology.

There are good reasons for that.

Replacing technology responsible for deposits, lending, payments and other mission-critical processes is fundamentally different from refreshing a customer-facing application. Banks operate within demanding regulatory environments, carry sensitive data and are expected to provide services continuously and reliably. System migration is high risk. But standing  still carries risks of its own. And new research by Celent on behalf of Temenos illustrates just how significant they’ve become.

The Banking Expectation Gap report looks at the chasm that’s opened between the experience consumers look to their bank to provide and the technology foundations that financial institutions have in place to deliver it. The dissatisfaction has been there for a while. What’s changed is customers’ willingness to do something about it. The report revealed that nearly three-quarters of customers who are still with their banks are open to moving if a competitor better meets their needs.

Importantly, the battle for this large ‘switchable middle’ isn’t just being fought on rates, fees and pricing. Customers also want personalisation, relevant products and services, speed, convenience and security. Temenos says addressing all this simply isn’t possible on legacy infrastructure that wasn’t built for the challenge. Rip and replace, increasingly, is not the answer, either. Instead, many banks are now choosing progressive modernisation: a composable approach that allows institutions to tackle particular areas of friction first and introduce capabilities incrementally.

“Progressive modernisation reduces risk by allowing banks to modernise in stages, preserving operational stability while introducing new capabilities,” says Will Moroney, Chief Revenue Officer at Temenos. “They can move at their own pace, maintain control, and realise value sooner.” It changes the business case for transformation.

Rather than waiting years for the benefits of a vast infrastructure programme, Temenos says institutions taking this route are seeing rapid payback in priority areas, giving them confidence to address the remainder of their IT estates.

“Our priority is helping them modernise with confidence,” says Moroney. “Banks need to balance innovation with resilience and regulatory compliance.” 

Importantly, those customer boxes get ticked quicker, closing the Banking Expectation Gap. Given the diminishing levels of loyalty among customers, the fact that a quarter of banks told researchers that enhancements to CX were not a priority for them is somewhat surprising. But behind that was a wide variation of investment strategies across regions and types of banks. Banks in APAC gave CX investment the highest priority, while medium-sized banks struggled to move it up the agenda. In Europe, only 29 per cent of medium-sized banks placed product innovation in their top three technology investment priorities, compared to 63 per cent of larger banks and 50 per cent of the smallest.

 “Clearly, mid-sized banks are challenged to prioritise many of the features customers say are factors in choosing a primary bank,” the report said. 

But one thing they were all agreed on. Across the piece, banks cited legacy platforms as a big constraint on their ability to enhance CX quickly and cost effectively. There was an imperative, the report said, for ‘legacy modernisation and platform replacement’. Cloud infrastructure could help rebalance the equation between what customers want, what banks can deliver and what they can afford. But the report identified AI and its ability to offer banks capabilities ranging from operational automation to personalised financial guidance and conversational customer experiences as the most powerful force.

Temenos believes, however, that AI has also exposed a fundamental constraint.

“AI is helping move the legacy conversation forward because it highlights the growing gap between what banks want to deliver and what their technology foundations can support,” says Moroney. It’s straightforward, says Moroney: “You cannot deliver next-generation customer experiences on last-generation banking infrastructure.”

AI raises the stakes

Banks haven’t suddenly rediscovered the customer, but there is an argument to say they’ve been overlooked as regulatory change, operational resilience, cyber security and legacy modernisation all compete for capital and executive attention. Temenos believes that’s the wrong approach.

“The banks that succeed will be those that view modernisation not as a technology project, but as the foundation for delivering the personalised, intelligent experiences customers increasingly expect,” says Moroney.

Bank executives understandably want evidence that AI investment can reduce costs, improve productivity, generate revenue or materially improve customer outcomes.

And preferably all four.

The best way to validate that is to narrow the problem rather than expand the ambition, says Moroney: “The biggest benefits are coming from identifying very specific pain points and use cases and then building agentic AI capabilities to solve these.”

He points to Temenos Financial Crime Mitigation AI Agent, developed with a Tier 1 European banking client and designed to reduce false positives during sanctions screening. Every unnecessary alert can require human investigation. Reducing false positives allows compliance professionals to spend less time clearing routine alerts and more time investigating higher-risk cases. It also illustrates a broader principle: automation does not necessarily mean removing humans from the process. 

Consumers also appear reluctant to embrace an exclusively AI-driven financial future. So, as AI assumes more tasks, where should people remain in control? Temenos sees the dividing line in terms of risk, complexity and judgement.

“AI works best for clear, repeatable tasks where the rules are well understood, access is controlled, and there is a clear route to escalate when needed,” says Moroney.

Higher-risk decisions are another matter.

“People still need to make the call on higher- risk decisions, exceptions, customer-impacting actions and anything with regulatory, financial or reputational implications,” he adds. 

That potentially reshapes rather than shrinks the banking workforce. By delegating repetitive processes to AI, employees can devote more attention to judgement, advice and relationships – areas where human trust remains particularly important. It also places governance at the centre of agentic banking. Giving an AI agent the ability to act is fundamentally different from asking a chatbot to generate text. As systems gain agency, permissions, escalation, auditability and accountability become increasingly important.

For Temenos, successful AI adoption therefore requires modern core platforms and Cloud infrastructure alongside strong governance and organisational readiness. Speed cannot come at the expense of trust or resilience. 

Cloud – without surrendering control 

The same tension is seen in Cloud adoption.

Banks increasingly depend on external technology and Cloud providers while regulators scrutinise cyber resilience, third-party risk and concentration across critical technology services. Temenos continues to offer on-premise, software-as-a-service (SaaS) and hybrid solutions. Working across AWS and Microsoft Azure, it allows institutions to select infrastructure according to their strategic and regulatory requirements. Choice is an important part of the proposition.

“And not just offering choice but helping banks use that choice to modernise with confidence,” says Moroney. “Banks want the foundation and freedom to evolve and scale on their terms.”

Composable banking theoretically makes it easier for institutions to replace individual technology components rather than commit to monolithic platforms for decades. For established core providers, that creates an intriguing challenge: the architecture giving customers greater flexibility also makes changing suppliers a feature rather than a threat to be engineered away.

For Temenos, the best providers going forward will compete on outcomes rather than client lock-in. It points to its combination of mission-critical technology, open architecture and expertise spanning core banking, digital, payments and wealth as key differentiators.

“Banks ultimately want technology that helps them grow, serve customers better, launch faster, reduce cost-to-serve and strengthen resilience,” says Moroney. “By consistently delivering those outcomes, we sustain the relationship.”

We could be looking at a very different kind of financial institution over the next three to five years, with the distinction between banks bolting on AI and those using it to drive a different technology approach becoming increasingly important. Adding a copilot to an existing workflow is relatively straightforward, after all. Embedding intelligence throughout an organisation – while ensuring decisions remain governed, explainable and auditable – is a much larger undertaking.

AI is already fundamentally changing how customers interact with banks and how employees execute processes, but these intelligent experiences still need reliable systems underneath.

That is the new architecture that Temenos is building and the one it’s confident will close the Banking Expectation Gap.

https://www.temenos.com/resource/the-banking-expectation-gap-global-edition/