Europe: Embracing symbiosis to accelerate digital transformation in banking

In Europe’s dynamic banking landscape, retail banks face the dual challenge of modernizing legacy systems while meeting rising customer expectations for seamless, digital-first experiences. The rapid growth of fintech disruptors and evolving regulatory frameworks such as PSD2 have reshaped the competitive environment, compelling banks to rethink their technology strategies. Against this backdrop, the concept of symbiosis—integrating next-generation core systems alongside existing infrastructure—offers a pragmatic, strategic and rapid pathway to modernization that balances innovation with operational stability.

The European context: Digital transformation imperatives

Europe’s digital banking market is expanding rapidly, projected to grow from USD 10.14 billion in 2025 to USD 35.36 billion by 2033 at a CAGR of 16.9%. This growth is fueled by high internet penetration, smartphone adoption, and a tech-savvy population, with over 200 million digital banking users in 2023. European consumers increasingly prefer digital channels for everyday banking, with nearly 70% using them for routine transactions. Digital is table stakes, yet many incumbent banks still grapple with legacy systems that inhibit agility and innovation.

Regulatory initiatives have been instrumental in fostering open banking, driving competition, and enabling personalized customer experiences. However, these regulations also add complexity to banks’ modernization efforts, requiring systems that can securely share data while maintaining compliance. European banks invest about one-fifth of their IT budgets in digitalization, but challenges remain in KPI development and measuring transformation impact.

Symbiosis: A balanced approach to modernization

Complete core banking replacements are often risky, costly, and prone to delays. Symbiosis offers an alternative approach by deploying next-gen systems alongside legacy platforms, targeting specific business segments such as lending or payments. This approach reduces disruption, mitigates data migration challenges, and accelerates time-to-market for innovative services.

Key considerations for European banks adopting symbiosis include:

• Customer experience: Ensuring seamless integration so customers experience frictionless service, such as avoiding multiple logins or inconsistent service quality across channels.
• Innovation and competition: Customer expectations for innovative, personalized products and services continue to expand. Barriers to entry are falling resulting in an increasingly competitive environment.
• Change management: Securing buy-in from executives, IT teams, and frontline staff through clear communication and training programs to manage the transition smoothly.
• Regulatory compliance: Aligning new systems with evolving European regulations, particularly data privacy and open banking mandates, while maintaining legacy compliance.
• Cost and risk management: Balancing the costs of running dual systems with the benefits of reduced risk and faster innovation cycles.

From an IT perspective, simplifying integration, ensuring operational continuity, and future-proofing infrastructure are paramount. European banks must also leverage cloud technologies and APIs to maintain scalability and flexibility, critical in a market where customer expectations and technology evolve rapidly.

Strategic benefits for European retail banks

Symbiosis enables banks to leverage their established brand, customer base, and regulatory expertise while adopting agile, modern technology stacks. This hybrid model supports rapid innovation, allowing banks to pilot new products, improve customer journeys, and respond swiftly to fintech competition without the risks often associated with wholesale system replacement.

Moreover, by embracing symbiosis, European banks can better harness sophisticated technology advances such as data analytics and AI-driven personalization, key drivers of customer engagement and revenue growth in the region. The approach also facilitates compliance with stringent data protection laws, enhancing customer trust.

Conclusion

For European retail banks, symbiosis represents a pragmatic modernization strategy that aligns with the region’s regulatory environment and customer expectations. It balances innovation with stability, reduces transformation risks, and accelerates digital capabilities critical for competing in a rapidly evolving market. By adopting symbiosis, European banks can reimagine banking for the digital age—delivering superior customer experiences, operational efficiency, and sustainable growth.

References:

¹European Central Bank, Banks’ digital transformation: where do we stand?
²Market Data Forecast, Europe Digital Banking Market Size, Share, Trends, & Growth Forecast Report By Component (Solution and Services), Deployment Type, Type, Banking Mode, Country (UK, France, Spain, Germany, Italy, Russia, Sweden, Denmark, Switzerland, Netherlands, Turkey, Czech Republic & Rest of Europe), Industry Analysis From 2024 to 2033