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    Why core banking still runs on batch—and what it will take to change that

    AUG. 6, 2025
    5 Min Read
    by
    Lumenalta
    Most U.S. banks still depend on overnight batch processing on decades-old core systems. This holdover from the last century quietly limits customer experience and operational agility. Yet the persistence of batch processing isn’t due to a lack of real-time technology. It’s rooted in systemic inertia and risk aversion. Banks have grown comfortable with legacy platforms that “work,” and any change seems to carry unacceptable uncertainty. Executives worry that replacing these entrenched cores might destabilize everything, so the nightly batch cycle remains in place even as digital innovation accelerates around it.

    Key takeaways
    • 1. Batch processing remains common in U.S. banking due to operational inertia, not because of technical limitations.
    • 2. Core banking replacements are seen as risky and costly, which slows progress despite demand for real-time features.
    • 3. Incremental modernization offers a safe, cost-effective way to adopt real-time capabilities without major disruption.
    • 4. Real-time workflows enhance fraud detection, customer experience, and internal transparency while reducing technical debt.
    • 5. Lumenalta helps banks modernize strategically by upgrading targeted workflows and preserving core system integrity.
    Even as real-time payment networks emerge, core banking in the U.S. remains stuck in time. Many institutions are running core platforms that are up to 40 years old on mainframe hardware, underscoring how inertia has outweighed technical progress. Meanwhile, new systems like the Federal Reserve’s FedNow are proving that instant transaction processing is possible at scale. The good news is that banks can move forward without ripping out everything at once. They can modernize core workflows step by step, adding real-time capabilities gradually and safely – preserving the stability of legacy infrastructure while delivering the speed customers now expect.

    “Mainframes have served banks well for decades, so bank leaders naturally ask: why mess with a system that isn’t broken?”

    Legacy core systems remain batch due to inertia, not technology limits

    Decades-old core banking systems aren’t real-time by design, but technology isn’t the true barrier to change. Today’s mainframe-based cores are incredibly powerful. They process massive transaction volumes with high reliability. Yet, they still operate in batch mode largely because that’s how they were set up in an earlier era. For generations, U.S. banks built their processes around daily cycles. Paper check clearing and ACH transfers historically settled overnight, so the industry fell into an overnight batch rhythm. Even though online banking and digital payments have exploded, many core ledgers still only finalize updates once a day. This is more a matter of habit and caution than technical capability: the hardware and software could handle continuous processing, but making that fundamental change is a leap many institutions haven’t been willing to take.
    Other markets prove that real-time banking is feasible when there is a will to pursue it. For example, Brazil’s Pix platform handles over two billion instant payments per month, dwarfing the 76 million U.S. real-time transactions in an entire quarter of 2024. Clearly, the technology exists to process transactions immediately at scale. The reason American banks lag isn’t a lack of computing power. It’s the weight of legacy systems and a conservative culture. Mainframes have served banks well for decades (indeed, they still handle the bulk of global financial transactions), so bank leaders naturally ask: Why mess with a system that isn’t broken? This entrenched mindset, combined with the complexity of changing something so core to operations, has kept many institutions on the same old batch track long past the point when real-time alternatives became available.

    Cost and risk fears keep banks locked into overnight processing

    For many banks, maintaining the status quo seems safer than a risky core overhaul. They see big red flags in a full transformation: enormous cost, the chance of outages, and uncertain return on investment if they attempt a radical change. After years of mergers and quick fixes, core systems are also so intertwined with surrounding processes that one wrong move could break something mission-critical. With no regulatory mandate for real-time (and even some profit made off the overnight “float” on funds), there’s little outside pressure to justify the upheaval.
    • Complex, fragile architecture: Decades of patchwork integration have left core banking systems deeply entangled with countless upstream and downstream processes. Any major change carries a high risk of unintended breakage, since a legacy core is tightly interwoven with everything from payment processing to reporting.
    • Vendor lock-in: Many banks depend on long-time core software providers (e.g., FIS, Fiserv, Jack Henry) to maintain and update their systems. These vendors’ roadmaps often dictate the bank’s pace of innovation. Switching to a new real-time core means leaving a familiar vendor ecosystem, a move that leadership finds daunting.
    • High replacement costs: Replacing a core system outright is a multi-year endeavor that can cost hundreds of millions of dollars in development, migration, and testing. It’s a huge upfront investment, and the benefits may not be realized for years, making the project hard to justify to boards and shareholders.
    • Downtime and failure risk: A failed core migration is a bank’s worst nightmare. It could result in days-long outages, corrupted data, or regulatory penalties. The fear of a catastrophic cutover (and the reputational damage it would bring) looms large, so many banks keep delaying any drastic change to avoid putting the bank’s stability on the line.
    • Lack of urgency: Unlike some countries, U.S. regulators haven’t forced banks to adopt real-time settlement, and major networks like ACH still operate on daily settlement cycles. In the absence of regulatory or industry pressure, banks feel they won’t fall behind by continuing with overnight batch processing a while longer.
    • Incentive to delay: The current batch model even provides subtle financial perks. Banks earn interest on funds during the one- or two-day lag before a transaction settles (the “float”), adding a bit of revenue. And since most customers aren’t loudly demanding instant everything (many have come to expect that a deposited check clears the next day), executives see little immediate upside to offset the significant risks of a core overhaul.
    These factors explain why so many institutions remain shackled to overnight processing decades after real-time technology became available. However, doing nothing has costs of its own. Legacy core systems carry growing operational expenses and hinder a bank’s ability to innovate. Using outdated technology cost banks over $36 billion in 2022. And with digital-native fintechs introducing new services rapidly, standing still is not a sustainable strategy. Bank leaders are increasingly recognizing that they must modernize their core systems in some fashion. The question is how to do it without “betting the bank” on a risky one-shot project.

    Incremental modernization adds real-time capabilities without betting the bank

    Taking a phased path allows a bank to introduce new capabilities piece by piece, greatly reducing the risk of major failures. Instead of an all-or-nothing cutover, the legacy core and new real-time components can run in parallel until each upgrade is fully proven.
    Banks need not replace everything at once. They can evolve their core banking gradually. By modernizing in increments, an institution can target specific high-impact workflows and upgrade them to real-time processing, while leaving the rest of the system undisturbed for the time being. For example, a bank might start by implementing an instant payments module or real-time account ledger as a parallel system “wrapping” around the legacy core. This new component handles a slice of the transactions in real time and then feeds the results back into the main core. The approach allows experimentation and learning on a small scale before committing to a full transformation.
    “Each small modernization project also serves as a proof of concept that can win over stakeholders.”
    Crucially, an incremental strategy limits the blast radius of any one change. Each step is scoped to a particular function, say, real-time transaction alerts or mobile deposits, and can be thoroughly tested in isolation. If something goes wrong, it’s contained to that module and does not bring down the entire bank. This approach also delivers value faster. Rather than waiting years for a “big bang” core replacement, the bank can roll out new features to customers continuously. It’s no surprise that over half of mid-sized banks now favor a gradual, progressive core transformation instead of a one-shot overhaul. They can achieve quick wins (for instance, launching 24/7 instant payments for a niche product line) and then build on that success. Over time, these incremental enhancements add up to a modernized core architecture – accomplished with a fraction of the risk and without interrupting day-to-day operations.
    Each small modernization project also serves as a proof of concept that can win over stakeholders. When a bank enables a new real-time capability and it boosts customer satisfaction or reduces fraud losses, that creates internal momentum for the next upgrade. In this way, the institution gradually sheds its dependence on batch processing and archaic infrastructure. The end state is a core banking system that can handle both legacy requirements and modern real-time services achieved through evolution, not revolution.

    Real-time banking improves customer experience and builds long-term resilience

    Better customer experience

    Customers today expect banking to be as immediate as everything else in their digital lives. According to Federal Reserve surveys, 86% of businesses and 74% of consumers in the U.S. used faster or instant payment methods in 2023, which shows how mainstream instant transactions have become. Moving to real-time processing lets banks meet these expectations with up-to-the-second service. Account balances update immediately after a transaction, eliminating the confusion of “pending” payments. Funds sent via an instant payment network arrive in seconds, giving customers quick access instead of making them wait overnight. This not only reduces customer anxiety (no more waiting to see if a paycheck cleared) but also serves as a market differentiator. Banks that offer truly real-time experiences, like instant peer payments, real-time loan disbursements, or cards that update balances immediately after each purchase, stand out from competitors. In a world where fintech apps and neobanks are touting speed, a traditional bank can retain and attract customers by delivering that same level of immediacy and convenience.

    Stronger oversight and fraud detection

    Shifting to real-time processing isn’t just about customer convenience; it also strengthens a bank’s control over its operations. When transactions post immediately, risk and compliance teams gain instant visibility into the bank’s financial position throughout the day. They no longer have to wait for an overnight batch cycle to identify suspicious patterns or errors. This enables earlier fraud detection – for example, unusual activity in an account can trigger an alert and intervention within minutes, rather than being discovered hours or days later during batch reconciliation. Real-time data also means fewer end-of-day surprises. Finance departments can see intraday liquidity and cash positions, improving decision-making and reducing the reliance on rough estimates. In addition, operational errors can be caught and corrected on the fly. If an issue arises with a transaction, it’s apparent immediately and can often be fixed before it cascades into a larger problem. Overall, moving away from batch cycles increases transparency. Continuous processing closes the gaps where errors or fraudulent transactions might slip through unnoticed, thereby enhancing the bank’s security and stability.

    Foundation for innovation and resilience

    Finally, adopting real-time core workflows lays a strong foundation for a bank’s future innovation and long-term resilience. Modernizing step by step tends to reduce the technical debt that has built up from years of patching legacy systems. Each batch routine that gets replaced with an always-on service simplifies the architecture and lowers maintenance overhead. Over the long run, a leaner, real-time-oriented core is easier to scale and adapt. It becomes simpler to integrate with fintech partners and new digital products because data can flow via APIs in real time, rather than being locked in end-of-day reports. This agility means IT teams can bring new offerings to market faster – from advanced analytics tools to personalized financial services, without being bottlenecked by overnight processing constraints. Moreover, a core system that operates continuously is naturally aligned with a 24/7 digital economy. There is less need for planned downtime windows, since the bank isn’t batch-processing millions of records after hours. The result is a more resilient infrastructure that can support customers around the clock and weather surges in demand. In short, real-time banking capabilities don’t just improve today’s operations; they prepare the institution for tomorrow’s challenges. Banks that gradually convert their cores to real-time are positioning themselves to be more competitive, more integrated with the digital ecosystem, and more confident in their ability to handle whatever comes next.

    Lumenalta’s approach to risk-aware core modernization

    As banks strive to reap these real-time benefits while safeguarding stability, Lumenalta’s approach is to modernize core systems in a pragmatic, risk-aware manner. We work as an extension of the bank’s technology team, identifying high-impact workflows that can be upgraded in isolation and then rapidly delivering those solutions in iterative phases. Instead of undertaking a massive multi-year project, we focus on quick, tangible wins, for example, enabling 24/7 instant payments for a specific product line or introducing real-time balance updates for a pilot group of customers. Each incremental success demonstrates value to stakeholders and builds confidence for the next step, all while the legacy system continues to run reliably in the background.
    This phased co-creation model allows CIOs and CTOs to accelerate their time to value without exposing the organization to undue risk. Modernizing gradually means new customer features and improvements roll out continuously, costs are kept under control, and each investment can be tied to a clear business outcome. Our team collaborates closely across IT and business units to ensure that every modernization step aligns with strategic goals and regulatory requirements. The result is a transformation that feels evolutionary, not disruptive. Banks gain real-time capabilities and new agility on their own terms, preserving the trusted core systems that keep daily operations stable, even as they boldly move into the future of banking.
    Table of contents

    Common questions about core banking


    Why does my bank still use batch processing for transactions?

    How can I reduce the risk of core banking modernization?

    What are the business benefits of real-time core banking systems?

    How do I handle vendor lock-in during a core banking upgrade?

    Is ACH modernization required before moving to real-time payments?

    Modernize without the meltdown. Move beyond overnight batch cycles—add real-time banking capabilities step by step, without betting the bank.

    Explore how incremental modernization helps banks deliver instant customer experiences, strengthen oversight, and build resilient core systems for the future.