Are you weighing a few different proposals from several core banking system providers? Do some of them feature traditional pricing models, while others include subscription-based models?
If so, you may be wondering why on earth you’d go for the subscription model when the traditional model includes one upfront cost and then a nominal amount for the next five to ten years. Well, as we’ll unearth in the following article, that nominal amount does not tell the full story.
With traditional core banking pricing models, many of the costs are large surprise fees that inevitably eat into your future budget, often surpassing the total annual cost of the subscription-based models. That means you’re not only getting a system that’s cloudwashed and can’t keep up with modern release cycles, you’re also, in the end, paying more for it.
Here’s why and how the subscription pricing model beats out the non-subscription model every time.
Legacy vs subscription pricing model: what’s the difference
Traditional core banking vendors usually operate on a license-based model, as opposed to many modern core banking system providers, who use a subscription pricing model.
With a legacy pricing model, you pay a large upfront license fee, then commit to ongoing annual maintenance, infrastructure investments, and professional services costs every time you want to make a change. This can result in unpredictable costs as well as projects that run over.
A subscription model, on the other hand, pieces together all fees, including licenses, hosting, support, and services, and bundles them into one predictable annual fee. That annual fee includes everything from hosting to APIs, which means you can budget effectively without getting hit by surprise costs.
In a nutshell, legacy pricing includes a high upfront cost, followed up by hidden extras and unpredictable future spending, whereas subscription pricing includes a transparent, predictable fee you can budget for.
Not just that, but because it serves the legacy providers to extend implementation timelines and take longer to deliver changes, as they can charge for the excess work, delays are often built into their working model. The more time your project takes, the more they can charge, whether that’s through extended professional services, prolonged vendor dependencies, or inflated change request costs. With a subscription model, on the other hand, your provider is incentivised to get you live quickly and keep your system running smoothly.
Breaking down the numbers: how much does each really cost?
On the surface, traditional pricing models may appear cheaper, particularly when comparing a large one-time license fee with an annual subscription. But that comparison doesn’t hold up once you dig into what’s actually included, and what’s not.
In this section, we break down the real total cost of ownership (TCO) across both models, starting with the all-in subscription approach offered by modern providers like Oradian, and then comparing it with the traditional pricing structure used by legacy vendors.
The subscription model
Fees vary depending on providers, client needs, and the size of your institution, so we’ll use example fees to help highlight potential costs.
Under a subscription model like Oradian’s, the full cost of running your core banking system is bundled into one predictable annual fee, let’s say, as an example, $1.7 million per year. That includes everything you need to run, scale, and support your system.
Included in this all-in price is:
- Core software license
- Cloud hosting and infrastructure (see: the benefits of cloud-native infrastructure over cloud-enabled)
- Automatic updates and patches
- 24/7 local support
- Configuration and optimisation services
- Full API access from day one
- Security, compliance, and monitoring
- New product setup and launch support
Total cost for each year: $1.7M
Disclaimer: This example is based on a large financial institution scaling to millions of customers.
With this model, there are no surprise line items for maintenance, support, integrations, or infrastructure. What you see is what you pay and that predictability is key to smoother budget approvals, better cost control, and a faster path to ROI.
You also don’t need to hire internal team members to keep the system running, so your team can focus on growth-oriented projects while the provider focuses on keeping your infrastructure up.
The traditional model: year 1 costs
Here’s how things look with a typical legacy license-based vendor. You start with a perpetual license fee, followed by an annual maintenance fee that is approximately 20% of the license fee. Typical year 1 costs with a traditional vendor feature:
- License fee: $2M
- Annual maintenance: $400K (20% of license)
- Infrastructure setup: $500K–$800K (servers, OS, DBs, app servers)
- Hosting and data centre: $150K–$200K
- Professional services: $300K–$500K (for implementation and basic configuration)
- Dedicated IT team: $200K–$300K
- Inflation uplift built into support contracts: 5–8% per year
Total cost for the first year: approximately $3.5–$4.2M+
And that’s just to get you started.
Note: Bear in mind, many of these costs are not included in the original scope you will receive from the traditional vendor. Vendors often only include the license fee, and possibly the annual maintenance fee. These other costs usually come in later down the line as a surprise.
The traditional model: year 2 costs and beyond
The ongoing costs don’t drop off nearly as much as they might appear to at first glance. Every year following the first, you still pay for:
- Annual maintenance: $400K (and rising with CPI)
- Professional services: $300K–$500K (every time you want to launch or change something)
- Hosting and infrastructure: $150K–$200K
- Ongoing infrastructure maintenance: $150K–$250K
- Internal IT support team: $200K–$300K
- Annual uplift on all service contracts
Total annual cost from year 2 on: approximately $2.0–$2.5M+
That’s before factoring in:
- New product launches
- Custom integrations
- Overruns on implementation projects
- Compliance-related scope changes
Over a 5-year period, the surprise costs of a legacy system can easily exceed $10M, especially as your product set grows and infrastructure ages. By contrast, a $1.7M/year subscription stays consistent, scalable, and fully supported.
Tax implications: why OpEx beats CapEx
Beyond the raw numbers, there’s another crucial factor many institutions overlook: how your core banking investment is treated from a tax perspective.
In traditional pricing models, the large upfront license fee is typically considered a capital expenditure (CapEx). That means:
- It’s booked as an asset on your balance sheet
- It can’t be deducted fully in the year it’s incurred
- Instead, it’s depreciated gradually over several years
- You get limited short-term tax relief, even though you paid the full amount upfront
In contrast, modern subscription pricing is usually treated as an operational expense (OpEx), just like any other software-as-a-service (SaaS) model. That brings major benefits:
- You can fully deduct the cost in the same year it’s incurred
- No capitalisation and no depreciation schedules
- Much easier to justify internally from a budgeting and tax planning perspective
- In some jurisdictions, OpEx spending can even reduce taxable income more efficiently
For institutions operating in markets like Indonesia, Nigeria, or the Philippines, where tax regimes often incentivise OpEx over CapEx, this distinction can directly impact your annual tax liability.
The subscription model offers predictability and cost-effectiveness
When it comes to selecting a core banking partner, price alone rarely tells the full story. What matters more is what you get for that price, how predictable it is, and how it sets you up to grow without hidden costs or delays.
The traditional model might look appealing on paper by featuring a big upfront fee, then a “manageable” maintenance cost, but as we’ve seen, that’s just the beginning. Once you factor in infrastructure, staffing, professional services, maintenance uplifts, and the real costs of change, the total cost of ownership climbs fast. And with CapEx treatment, even your accounting team loses flexibility.
A subscription model gives you a clearer path forward.
- It keeps your costs predictable
- It reduces your internal operational load
- It aligns incentives between you and your vendor
- It unlocks faster go-lives and shorter time to value
- And it frees your team to focus on delivering products, not patching systems
If you want to launch faster, scale smarter, and know exactly what your core system will cost next year (and the year after that), subscription is the model to bet on.
Ready to experience predictable growth?
If you’re weighing your options, running a side-by-side comparison, or trying to make sense of vastly different pricing models from different vendors, we get it. Choosing a new core is a big decision and you need to factor in not only cost, but also risk, flexibility, speed, and long-term scalability.
But if you’re ready to see what life might be like when you can truly budget for growth, we’re ready to take your call.
Our predictability affects more than the way we price. We work alongside our clients to help them:
- Go live faster (often in under 90 days)
- Launch and iterate without friction
- Integrate with modern fintech tools
- And scale into new markets confidently
With Oradian, what you pay is what you get, and what you get is a core banking system that helps you scale.
Book a call with our team to explore what subscription-based pricing could look like for your institution, and how much you could save by avoiding the hidden costs of legacy systems.
