Why Budget Season Is Make-or-Break Time for Your Core System Decision
Banks and credit unions across the country are deep into fiscal planning right now, mapping out technology investments and growth initiatives for 2026. But here's the uncomfortable truth many executives are discovering: without a modern core system, those carefully crafted growth plans may already be doomed to fail.
The conversation around core modernization has shifted. It's no longer just about upgrading outdated technology. It's about whether your institution can actually execute on the strategic initiatives you're budgeting for right now.
The Foundation Problem
Think of it this way: you can't build a skyscraper on a crumbling foundation. Yet financial institutions continue trying to layer new growth strategies onto legacy core systems that were never designed to support them. The result is predictable. Manual workarounds pile up. Integration challenges multiply. Time to market stretches from months to years. And the customer experience suffers.
When talking to both banks and credit unions, one fundamental issue keeps coming up. FIs know what they want to achieve in terms of customer experience and growth, but they just can't get their core systems to cooperate.
Legacy cores hold institutions back from delivering the digital self-service, automation, and seamless money movement that customers now expect as standard. What used to be competitive advantages are now table stakes, and many financial institutions are struggling to keep up.
The M&A Dilemma
Consider mergers and acquisitions. It's one of the most common growth strategies in community banking. But when you acquire another institution while running on a legacy core, you're bringing new customers into a house with bad plumbing and outdated wiring.
The technology integration becomes a nightmare. Converting accounts requires extensive manual intervention. New customers arrive expecting a modern digital experience and instead encounter systems that feel like stepping back in time. The very growth initiative designed to strengthen the institution instead creates friction, operational headaches, and potential customer attrition.
Now contrast that with bringing acquired customers onto a modern, cloud-native platform. Onboarding is streamlined. Digital experiences meet current expectations. The technology actually supports the growth strategy rather than undermining it.
Digital Deposit Growth Requires Digital Infrastructure
Deposit growth initiatives present similar challenges. Many institutions want to expand beyond their traditional footprint, perhaps launching a digital brand or targeting specific verticals like military families or healthcare professionals. The very definition of "community" is being rewritten – shifting from zip code-based boundaries to much larger communities of underbanked individuals united by industry affiliations and shared interests. These strategies demand capabilities that legacy systems simply cannot deliver.
A modern core enables institutions to set up what's called a sidecar core environment. This allows financial institutions to test new digital offerings and serve specific customer segments on a modern core that runs parallel to their main infrastructure, without risking their entire operation on a full-scale conversion. It's the difference between betting the whole institution on an unproven concept and thoughtfully piloting new approaches.
Some FIs are even expanding their physical footprint specifically on the strength of their modern core technology. Historically, banks and credit unions have built or bought branches to expand their influence and grow within a geographic community. This tired playbook is being replaced with one rooted in a more modern approach to efficiency and scale. Institutions can open new branches with confidence because they know their systems can support the customer experience and operational efficiency required to make them successful.
The AI Factor
Here's where timing becomes critical. Everyone is talking about the role AI will play in 2026, and institutions are earmarking budget dollars for innovation. But AI capabilities require modern infrastructure. Legacy cores weren't built with today’s AI advancements in mind and can't easily adopt these functionalities.
FIs risk investing in cutting-edge technology that their core system can't support. It's like buying the latest smartphone and trying to run it on a dial-up connection. The disconnect between aspirations and infrastructure is real.
Modern cores are now being built from the ground up with AI integration – like Model Control Platforms (MCPs) and Large Language Model (LLM) capabilities – as a foundational requirement, not a feature add-on. The gap between what legacy cores can do and what’s now possible is widening fast.
By baking AI into the core itself, financial institutions gain more than speed. They gain intelligence and foresight. These capabilities can automatically surface cross-sell insights, generate compliance documentation, detect anomalies before they become risks, and personalize customer experiences in real time. In this new era, AI integration isn’t a differentiator; it’s table stakes for every bank and credit union that wants to compete in a data-driven, digital-first market.
The Budget Season Reality Check
This brings us back to budget planning season. Right now, executives are allocating resources to growth initiatives for 2026 and beyond. The critical question is whether they're also addressing the infrastructure needed to make those initiatives successful.
If your strategic plan includes M&A activity, deposit growth campaigns, digital expansion, or technology innovation, but your budget doesn't include a modern core, you may be setting yourself up for failure. You likely won’t be able to execute on your 2026 strategies, putting your institution years behind those that prioritized their core.
The institutions that recognize their legacy core as the bottleneck and act now position themselves to achieve their growth objectives. Those that defer the decision or try to work around the problem will continue struggling with lengthy implementation timelines, integration challenges, and compromised customer experiences.
Taking Action During Planning Season
FIs need to approach their 2026 planning with clear-eyed honesty about their technology infrastructure. Ask your teams directly: do we genuinely have the right systems to support our growth roadmap? Can our current core deliver the customer experiences we're promising? Will our technology enable or obstruct our strategic initiatives?
If the answers reveal gaps between aspirations and capabilities, core modernization needs to move from someday to now. The budget cycle happening right now is the opportunity to make that shift. Waiting another year means pushing actual growth execution further into the future.
The institutions pulling ahead aren't necessarily the ones with the biggest budgets or the most aggressive expansion plans. They're the ones ensuring their technology foundation can support whatever they're trying to build on top of it. That fundamental alignment between strategy and infrastructure is what separates initiatives that succeed from those that stall.
Sustainable growth starts with intentional choices. The investments you make this budget season will shape how far – and how fast – your institution can go.
About Author:
David Barone is an executive leader who has spent two decades building iconic brands and driving growth in financial services. As EVP of Strategy & Marketing at Nymbus – a modern core banking platform for U.S. banks and credit unions – he partners with financial institutions to launch digital brands, modernize strategy, and unlock new revenue opportunities. Founded in 2015, Nymbus delivers a cloud-based, highly extensible, full-stack banking platform that supports both brick-and-mortar operations and digital-first institutions, and facilitates the launch of vertical banking strategies or subsidiary brands with a sidecar Core alternative.