ASEAN’s banking sector is undergoing a seismic shift. As digital-first challengers gain ground and regulators push for innovation, incumbent banks across Southeast Asia are being forced to confront the limitations of their legacy infrastructure. The pace of change is accelerating and those who fail to modernize risk falling behind.
Today, most banks in the region still run on aging technology, with 90–95% relying on on-premises, mainframe-based cores. Only a small minority operate fully cloud-native cores, mainly among digital-only entrants. These legacy platforms are expensive to maintain and difficult to adapt, making modernization not just a priority, but a strategic necessity.
Banks know they need to evolve and are ramping up investment in core upgrades and cloud infrastructure. APAC bank tech spending grew from approximately $63B in 2022 to $68B in 2023, with increasing allocations to cloud and AI/ML. Over 70% have deployed cloud-based digital applications, and around 40% are considering core replacement within the next three years. Digital usage has surged: in Singapore, adoption has plateaued around 90%, while in Malaysia, Indonesia, the Philippines, and Vietnam, usage rose from about 55% in 2017 to around 88% in 2021.
With Amazon Web Services (AWS), banks can access IT infrastructure that’s more advanced than what most could build themselves. And with core banking platforms like 10x Banking, banks can focus on product innovation and serving their customers, leaving the rest to secure, agile, and reliable software that works seamlessly.
In 2024, the Bank of Thailand granted three virtual bank licenses, with launches expected between 2025 and 2026. The licenses were awarded to consortia led by SCBX Group, Kasikornbank Group, and Ascend Money.
These players will launch with cloud-native, API-first foundations, setting new benchmarks for speed, personalization, and cost efficiency. Their entry is expected to intensify competition, drive innovation, and expand financial inclusion, particularly among underbanked and digital-first customers.
Incumbents are responding by accelerating core modernization efforts to defend market share and reduce time-to-market. SCB (via SCB TechX), in collaboration with Publicis Sapient, illustrates progressive modernization – adopting modular rebuilds, microservices, and parallel-run migrations to minimize cutover risk. Other major banks, such as Kasikornbank and Krungthai, are enhancing their digital cores, adopting cloud technologies, and embedding analytics and AI. A national cloud framework is also under development to accelerate adoption.
Regulators are balancing innovation with safety. The Bank of Thailand has increased capital requirements from THB 5 billion to THB 10 billion and introduced phased operating periods for new banks. Supervisory priorities include 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, with planned investments estimated to contribute $10b to Thailand's gross domestic product (GDP). This moves addresses data residency and latency concerns, enabling banks to migrate critical workloads locally.
Back in 2020, the Monetary Authority of Singapore (MAS) issued four digital bank licenses, with launches occurring between 2022 and 2023, raising expectations for enhanced user experiences and real-time services. Trust Bank quickly surpassed 600,000 customers in its first year, highlighting strong consumer demand for digital-first propositions. However, while digital front ends are highly advanced, back-end core systems continue to limit agility.
DBS, OCBC, and UOB have made significant investments in cloud infrastructure, APIs, agile development, and Site Reliability Engineering (SRE) practices. At the same time, legacy systems remain a reality for many, leading banks to adopt hybrid approaches like API façades and microservices refactoring. System outages in 2023 led MAS to impose capital surcharges and introduce stricter resiliency requirements.
The regulator supports the use of public cloud but enforces strict risk controls and third-party management guidelines. Supervisory priorities include operational resilience, incident management, and business continuity. Increasingly, banks are adopting coexistence strategies, deploying new product engines on modern cores while retaining stable legacy modules for settlement functions.
Vietnam’s Decision 810/QD-NHNN sets ambitious digital banking targets for 2025 and 2030. Account ownership now exceeds 87%, and many banks already process more than 95% of transactions digitally.
HD Bank has emerged as an active participant in the digitalization drive, focusing on retail and SME clients. It is expanding mobile-first offerings, experimenting with embedded finance, and forming partnerships with fintech players. Meanwhile, Techcombank (TCB) continues to lead large-scale digital transformation efforts, investing heavily in data platforms, customer analytics, and cloud-based infrastructure. Its partnership with AWS has enabled new levels of resilience and scalability. Cloud adoption is accelerating, with AWS and Microsoft supporting hybrid migration strategies.
The State Bank of Vietnam has expanded fintech sandboxes, eKYC frameworks, interoperability standards, and open banking initiatives. Regulatory priorities include promoting cashless payments, ensuring consumer protection, and strengthening cybersecurity.
In Malaysia, five digital bank licenses were awarded in 2022, with a survey from PwC indicating that approximately 95% of banks will be cloud-ready by 2025. Maybank, CIMB, and RHB are engaged in multi-year core upgrades and data platform modernization efforts.
The Philippines has issued six digital bank licenses, with institutions like Tonik, Maya Bank, and GoTyme leading the charge. Strong mobile adoption and government support for digital innovation are driving banks toward cloud-native cores and faster payment capabilities.
Indonesia, with over 212 million internet users, is experiencing rapid digital adoption. Digital banks such as Jago, Jenius, and SeaBank are scaling quickly. Regulatory reforms by OJK, including POJK 21/2023, are strengthening IT governance, risk management, and consumer protection to support digital-only banking. Meanwhile, incumbent banks are modernizing, though many still rely on legacy systems, with only 3–5% cloud-ready, highlighting a digital transformation gap
For banks in the region, standing still is not an option. Many incumbents are investing in sleek digital front ends, believing this alone will elevate customer experience. But without addressing the limitations of their back-end systems, these efforts risk falling short. Legacy cores weren’t built for the scale, speed, or intelligence today’s banking environment demands. To truly transform, banks need future-proof core platforms, like the 10x Banking Platform, designed to operate as real-time, event-driven ledgers. These modern cores don’t just support today’s innovations; they lay the foundation for AI-driven technologies of tomorrow.
Core modernization is no longer a strategic side project, it’s the foundation for growth, resilience, and innovation across ASEAN. Banks that embrace progressive core replacement will benefit from faster product launches, embedded partnerships, and lower operating costs. Those that delay face rising operational risks, escalating costs, and increasing customer attrition. By 2040, the region’s leading banks will be running on cloud-native, modular cores built for scale, agility, and long-term competitiveness.