By Rakesh Nandakumar, VP – APAC at Kissflow



For decades, banks followed a familiar technology playbook. When the business needed a new capability, the bank bought software, implemented it, and handed it to IT to run.

That playbook is under pressure. Banks must innovate faster while managing legacy systems, regulatory requirements, cybersecurity risks, and rising customer expectations. IT teams keep the lights on and build the future at the same time, often from the same budget.

That budget is already large. Bank IT spending reached 10.6% of revenues in 2022, according to McKinsey. Yet “change the bank” spending, the money that goes to anything beyond maintenance, is often significantly less than half of the total technology budget.

The pressure is particularly relevant for Philippine banks. The Bangko Sentral ng Pilipinas (BSP) has pushed the industry hard toward digital. Digital payments accounted for 64.7% of total retail transaction volume in 2025, up from 57.4% the year before, and the central bank is targeting 60% to 70% by 2028 under the Philippine Development Plan. Meeting that pace means accelerating digital capabilities while continuing to work around legacy core systems and established processes, constraints that digital-native banks did not inherit in the same way.

This is where Banking 4.0 represents a different operating model. Rather than treating application development as an exclusively technical function, banks can treat it as a core business capability, making deliberate decisions about what to buy, what to build, and which teams do the work. For most Philippine banks, the pressing question is whether they can afford to keep innovating at the speed of traditional software development.

The problem with “buy”

Commercial off-the-shelf (COTS) software makes sense when a packaged product fits a common, stable need. Banking processes are rarely that simple.

Consider loan origination. A single loan touches customer data, credit risk, approvals, compliance and AMLC/KYC checks, documentation, and several internal systems. When a bank buys a separate application for each requirement, data fragments and workflows are split into silos. Each purchase solves one problem while making the overall process harder to change.

Every disconnected system also adds technical debt. McKinsey research shows that companies pay an additional 10% to 20% on top of project costs to deal with tech debt.

That is why the build-versus-buy debate needs a rethink. The better question is: what should the bank buy, and what should it build itself?

How to decide what to buy and what to build

A simple test helps bank leaders sort their application portfolio:

• Buy when the process is common across the industry and offers no competitive advantage, such as general ledger or payroll

• Build when the process is specific to the bank, changes often, or crosses several teams and systems

• Build when customers or employees feel the friction directly, as in onboarding, loan approvals, and exception handling

• Govern bought and built applications through one IT-owned framework for security, access, data, and integration

Enter the citizen developer

Citizen development offers a practical answer for a growing category of business applications. A citizen developer is a business employee who builds applications for their own team or process on a platform approved and governed by IT.

The people closest to a process understand its problems best. They know where approvals stall, where employees duplicate work, and where customers run into friction. Historically, turning that knowledge into a working application required a lengthy handoff to IT.

Modern application platforms shorten that handoff. Frontline teams build with visual tools and business logic rather than code, while IT maintains oversight of governance, security, and architecture. Gartner forecasts that by 2026, developers outside formal IT departments would make up at least 80% of the user base for low-code development tools, up from 60% in 2021.

Shared ownership also shows up in results. A 2024 Gartner survey found that only 48% of digital initiatives meet or exceed their business outcome targets. For the “digital vanguard,” business leaders who co-own technology delivery with their CIOs, the figure rises to 71%.

One of the largest universal banks in the Philippines shows what this looks like at scale. Its citizen development community grew from about 200 to 600 builders supporting a workforce of around 18,500 employees.

The headcount matters because of what it represents: a new development capability inside the bank, where business expertise and technology come together much earlier in the process.

AI changes the equation again

Artificial intelligence (AI) accelerates this shift. AI-assisted application development shortens the time between spotting a business problem and deploying a solution. Development cycles that once took six to nine months can now be completed in weeks. 

The value at stake is significant. McKinsey estimates that generative AI could add $200 billion to $340 billion in value to the banking industry each year, equal to 9 to 15 percent of operating profits.

Speed alone does not make an application fit for a bank. Compliance teams need to read the business logic, auditors need a record of every change, and IT needs confidence that an update will not silently break something else. AI that produces structured, human-readable business logic gives banks software they can audit, govern, and maintain for years. Raw generated code is difficult to explain to a regulator and costly to support once the original builder moves on.

As a result, the real constraint on innovation becomes how well a bank equips the people who understand its processes to build within guardrails that IT defines.

Banking 4.0 is an operating model shift

Banking 4.0 changes the way a bank approaches technology, from funding applications to deciding who builds them.

Packaged software and professional developers play a central role. The difference is that the bank makes deliberate choices about what to buy, what to build, and which teams do the work.

Banks that strike this balance stand to gain a real advantage. When AI and governed application platforms turn months of development into weeks, the competitive edge may no longer belong to the bank with the biggest technology team. It may belong to the bank that turns a business idea into a working, compliant application the fastest.

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