By John Wilson, Head of Solutions Engineering
Banking leaders know that their legacy core platforms weren’t designed for a real-time world. But replacing the core is costly, risky, and time-consuming, especially for regional and community banks. The good news? There’s a smarter way forward that doesn’t require a full rip-and-replace. It starts by hollowing out the core.
What Does It Mean to “Hollow Out the Core”?
Instead of replacing a bank’s core system, “hollowing out” refers to decoupling critical transaction services from the core and running them in a modern, cloud-native environment. This includes one of the most vital functions: transaction authorization and balance management for demand deposit accounts (DDAs).
At most banks today, this function still lives entirely within the DDA core. It authorizes transactions, updates balances, processes intra- and inter-bank transfers, and performs disposition checks. The issue is, these platforms, often decades old, were built for batch processing and overnight updates. They weren’t architected for the 24x7x365 demands of instant payments.
Why Transaction Authorization Needs to Move First
Transaction authorization is the real-time heartbeat of banking. It determines whether funds are available and whether a payment should go through. But when the core goes offline for batch processing, nightly maintenance, or unexpected outages, that heartbeat stops.
This creates a hard limit for banks trying to participate in real-time networks like FedNow and RTP. Instant payments don’t take nights off. And yet, the legacy core does.
Digital Twin solves this.
By abstracting transaction authorization and balance updates from the core, Digital Twin operates in the cloud - always on, always accurate, always fast. It handles both batch and real-time transactions with high throughput and low latency. It enables banks to participate in instant payment systems without requiring a core upgrade or replacement.
From Centralized Bottlenecks to Distributed Resilience
The traditional DDA core was designed as an all-in-one monolith, a centralized system managing every function, from account opening to interest calculations. But that centralization has become a liability. It creates a single point of failure, performance bottlenecks, and limited scalability.
When authorization and balance management are moved to Digital Twin:
- Uptime improves. Core outages or slowdowns no longer affect authorization.
- Customer experience stabilizes. Payments can be approved 24x7, even during maintenance windows.
- Risk is reduced. Core upgrades and migrations can happen independently of transaction processing.
- Scalability increases. Cloud-native infrastructure handles volume spikes effortlessly.
This “hollowing out” not only improves technical performance but also unlocks business agility. Banks can launch new digital services faster, like embedded finance, BaaS, or off-balance-sheet products because they’re no longer constrained by legacy architecture.
Cost Savings and Cloud Efficiency
Digital Twin is designed for cost efficiency. By moving this function to a high-performance cloud ledger, banks reduce mainframe MIPS usage and minimize the number of expensive API calls to the core. It frees up resources and lowers infrastructure spend while improving system performance.
Coexistence, Not Replacement
The idea behind hollowing out the core isn’t to throw away what works. It’s to augment it strategically.
The core still plays a valuable role in account servicing, regulatory reporting, customer profiles, and historical statements. But by decoupling real-time transaction processing, banks can modernize step-by-step, reducing risk while delivering immediate results.
Digital Twin is built to interoperate with existing core systems, giving banks the flexibility to modernize at their own pace. Some institutions will start with authorization. Others may expand to support real-time sub-accounting, interest accruals, or support for new business models.
For CIOs and CTOs: This Is Your Strategic Off-Ramp
Core replacement is expensive, risky, and often unnecessary. Hollowing out the core offers a smarter path, letting you run critical functions in the cloud without sacrificing stability or compliance.
You gain:
- A real-time authorization engine that runs 24x7
- The ability to participate in instant payment networks
- Isolation of innovation from core system risk
- Flexibility to scale and adapt faster than ever
Most importantly, you get breathing room, and the freedom to evolve your tech stack on your terms, not on your core vendor’s timeline.
A Better Way Forward
Modern banking demands modern infrastructure. But replacing the core isn't the only option, and often, it’s not the best one.
By “hollowing out” the core and running transaction authorization and balance management in the cloud with Digital Twin, banks can:
- Meet 24x7 demands for instant payments
- Reduce dependency on legacy systems
- Improve resilience, speed, and scalability
- Lower costs while increasing performance
For CIOs and CTOs looking for a real modernization strategy that works within existing systems and builds for the future — this is it.