Solve the legacy challenge for banks in ASEAN

Southeast Asia’s banks are at a pivotal juncture, transitioning from decades-old legacy cores to modern platforms built for the digital age. Most banks in the region still run on aging technology – 90–95% of banks rely on on-premises, mainframe-based cores averaging 20+ years old [1,2]. Only a small minority operate fully cloud-native cores, mainly among digital-only entrants [1]. These systems are expensive to run and hard to change, making modernisation a strategic necessity [1,2].

Banks are ramping up investment in core upgrades and cloud. APAC bank tech spend grew from ~$63B (2022) to ~$68B (2023), with rising allocation to cloud and AI/ML [3]. Over 70% have deployed cloud-based digital apps and around 40% are considering core replacement in the next three years [4]. Usage has gone decisively digital: Singapore adoption has plateaued around 90%; in Malaysia, Indonesia, Philippines, and Vietnam, digital usage rose from about 55% in 2017 to around 88% in 2021 [5]. Several ASEAN markets now report more than 90% of transactions occurring via digital channels [6].

Thailand — Virtual Banks and Infrastructure Acceleration

The Bank of Thailand granted three virtual bank licences in 2024, with launches expected in 2025–26 [7]. The licences were awarded to consortia led by SCBX Group, Kasikornbank Group, and Ascend Money. Ascend Money, well-known for its TrueMoney platform with more than 30 million active users, is backed by CP Group and Ant International. It raised US$195M in 2024 from MUFG and other investors to expand financial services and support its transition into a licensed virtual bank. Its focus is on financial inclusion, offering accessible services to the underbanked, gig workers, and SMEs by leveraging its strong payments ecosystem.

These players will begin operations with cloud-native and API-first foundations, setting new benchmarks for speed, personalisation, and cost efficiency. Their entry is expected to intensify competition, drive innovation, and expand financial inclusion, particularly targeting underbanked and digital-first customers.

Incumbents are responding by accelerating core modernisation budgets to defend market share and reduce time-to-market. SCB (SCB TechX) with Publicis Sapient is an example of progressive modernisation, adopting modular rebuilds, microservices, and parallel-run migrations to reduce cutover risk [8]. Other major banks such as Kasikornbank and Krungthai are enhancing digital cores, adopting cloud, and embedding analytics/AI. A national cloud framework is in development to accelerate adoption [9].

Regulators are balancing innovation with safety. The Bank of Thailand has increased capital requirements from THB 5B to THB 10B and introduced phased operating periods for new banks [10]. Supervisory emphasis includes operational resiliency, consumer protection, and oversight of third-party risks.

Infrastructure investment is also reshaping the market. In January 2025, AWS launched its Asia-Pacific (Thailand) Region with three Availability Zones, committing US$5B over 15 years [16]. This addresses data residency and latency concerns, enabling banks to migrate critical workloads locally.

Singapore — Digital Pioneer with Core Legacy Challenges

The Monetary Authority of Singapore issued four digital bank licences in 2020, with launches in 2022–23 raising expectations for user experience and real-time service [10]. Trust Bank quickly surpassed 600k customers in its first year, underlining consumer appetite for digital-first propositions. Yet, while digital front ends are highly advanced, back-end cores continue to constrain agility.

DBS, OCBC, and UOB have invested deeply in cloud, APIs, agile development, and SRE practices. Despite this, significant legacy code remains, leading banks to pursue hybrid approaches that include API façades, selective workload migration, and microservices refactoring [11]. Outages in 2023 prompted MAS to impose capital surcharges and introduce firmer resiliency expectations [12].

The regulator supports the use of public cloud but with strict risk controls and third-party management guidelines [12]. Supervisory focus is centred on resilience, incident management, and business continuity. Strategies increasingly involve coexistence, where new product engines are deployed on modern cores while stable legacy modules continue to handle settlement.

Vietnam — Rapid Digital Leap and Hybrid-Cloud Adoption

Vietnam’s Decision 810/QD-NHNN sets ambitious digital banking targets through 2025 and 2030 [13]. Account ownership now exceeds 87%, and many banks already process more than 95% of transactions digitally [6]. Banks invested about US\$620M in digital transformation initiatives up to the end of 2022 [6].

HD Bank has emerged as an active participant in the digitalisation drive, focusing on retail and SME clients. It is expanding mobile-first offerings, experimenting with embedded finance, and pursuing partnerships with fintech players. Meanwhile, Techcombank (TCB) continues to lead in large-scale digital transformation with heavy investment in data platforms, customer analytics, and cloud-based infrastructure. Techcombank’s partnership with AWS has enabled new levels of resilience and scalability.

LPBank executed a Temenos core replacement in around seven months, while other incumbents are pursuing scale and resilience improvements [14]. Cloud adoption is growing rapidly, with AWS and Microsoft supporting hybrid migrations.

The State Bank of Vietnam has expanded fintech sandboxes, eKYC, interoperability frameworks, and open-banking initiatives [15]. Regulatory priorities include driving cashless payments, ensuring consumer protection, and strengthening cybersecurity.

Cross-Market Outlook

In Malaysia, five digital bank licences were awarded in 2022, with surveys indicating that about 95% of banks will be cloud-ready by 2025 [9]. Maybank, CIMB, and RHB are engaged in multi-year core upgrades and data platform modernisation.

The Philippines has issued six digital bank licences, and strong mobile adoption is pushing banks towards cloud-native cores and instant payments. The government’s “Cloud First” policy and investment in real-time payment infrastructure are accelerating transformation [9].

Indonesia, with over 180 million internet users, is experiencing rapid digital adoption. Digital banks such as Jago, Jenius, and SeaBank are scaling quickly. Regulatory reforms by OJK are evolving to support digital-only operations, while incumbents are modernising cores progressively.

Defining a Future-Proof Core Banking Systems

A future-proof core must operate as a real-time, event-driven ledger with strong reconciliation controls. It should provide a product factory for rapid configuration of offerings, and support an API-first, open ecosystem for embedded finance and partner distribution. Resilience is achieved through cloud-native design, including multi-AZ deployment, autoscaling, and robust observability. Security and compliance must be built in from the start, with data residency and auditability features. Finally, migration should be progressive, relying on parallel runs, strangler-fig approaches, and dual-write models to mitigate execution risk.

Role of System Integrators

Global system integrators such as Accenture, Deloitte, and GFT play a critical role in large-scale core transformations, ensuring regulatory compliance and smooth delivery. Specialists like Audax and Constantinople focus on greenfield digital bank builds and operating model design. Their value lies in providing predictable migration outcomes, accelerating time-to-market, and ensuring resilience.

Conclusion — Neo-Core or Bust

Modernising the core is no longer optional. It is now foundational to growth, resilience, and innovation across ASEAN. Banks that execute core replacement progressively will unlock faster product launches, embedded partnerships, and lower unit costs. Those that delay face higher operational risks, escalating costs, and customer attrition. By 2030, the region’s leading banks will be operating on cloud-native, modular cores that support regional expansion and long-term competitiveness.