At the annual Temenos Community Forum 2025, a pivotal moment took shape in the world of financial services technology: Temenos and Microsoft, two industry giants with over a decade of deep partnership, reaffirmed their commitment to transforming banking innovation through advanced artificial intelligence (AI) ecosystems. This partnership—highlighted in a panel hosted by FF News with Monty Bhatia of Temenos and Sandy Gupta of Microsoft—illustrates not only the technical strides made in core banking but also the wider implications of responsible, secure, and scalable AI in the modern financial sector.
The Temenos-Microsoft partnership is uniquely positioned at the crossroads of cloud computing, AI, and regulated banking. With Temenos’ core banking solutions natively delivered on Microsoft Azure, the collaboration enables banks to embrace agility, security, and faster go-to-market strategies—a necessity in an environment where digital transformation is not a luxury, but a baseline expectation.
Monty Bhatia of Temenos outlined how their long-standing relationship extends beyond infrastructure hosting to include co-innovation on AI and automation. This relationship is directly aimed at streamlining product upgrades in banking software, reducing long and costly implementation cycles, and introducing AI-based self-diagnostic capabilities to detect, and even autonomously resolve, operational discrepancies before they escalate. These enhancements promise to reshape how banks implement, maintain, and evolve their mission-critical technology.
Sandy Gupta from Microsoft added that Azure’s robust security infrastructure and Microsoft’s industry expertise are the engines powering this transformation. Azure’s hyperscale capabilities, coupled with a growing suite of AI services, allow banks to deploy and scale solutions like AI Foundry and CoPilot with strong governance, compliance, and observability at their core.
Microsoft, for example, has invested heavily in responsible AI, establishing comprehensive governance frameworks and toolsets as part of Azure AI Foundry. This includes built-in observability and compliance dashboards, model traceability, and controls to ensure data privacy and bias monitoring—a vital capability given the sensitivity and regulatory scrutiny of financial data. CoPilot for Financial Crime is emblematic of this approach, combining large language models with governance and oversight to support fraud detection, anti-money laundering, and regulatory compliance initiatives.
Temenos, for its part, is embedding these controls in its platform with automated self-diagnostics and standardized AI-enabled upgrades, removing much of the historical friction around core banking changes. By ensuring that AI deployments are explainable and monitorable, Temenos not only satisfies regulatory demands but builds institutional trust.
Concrete examples are already emerging. For instance, Temenos is implementing autonomous agents for core maintenance and diagnostics, while Azure AI Foundry provides orchestration for deploying thousands of models, each tailored to distinct banking workflows. On the compliance side, Microsoft's Entra Agent ID allocates unique, trackable identities to AI agents, dramatically improving the traceability and management of AI-driven automation—a leading concern for risk-averse financial institutions.
Furthermore, CoPilot and other agentic assistants are being used not just for coding or back-office automation but to empower frontline employees, speed up onboarding, enhance customer service interactions, and streamline fraud detection practices.
Temenos’ move to make self-diagnostic tools standard further fortifies this trust. Combined with Microsoft’s responsible AI guardrails, the partnership sets a benchmark for how banks can safely operationalize AI at scale while maintaining robust data governance.
Temenos leverages these innovations not only for its own development but also to enable its bank customers to build, deploy, and manage tailored AI agents for everything from customer support to anti-fraud. This self-service approach, supported by AI tools like Copilot Studio and pre-built connectors, allows organizations to dramatically cut the time and cost of modernizing their IT stacks.
For other banking technology vendors and IT leaders, the partnership serves as both inspiration and a yardstick. It demonstrates why collaboration—blending infrastructure prowess, AI innovation, and domain-specific expertise—is the best path to secure, scalable, and futureproof banking.
Ultimately, Temenos and Microsoft are showing the industry what it means to drive innovation with purpose: not just chasing technology trends, but embedding trust, transparency, and agility at the very core of financial services. As the AI revolution continues to unfold, expect this partnership—and the ecosystem thinking it champions—to influence every dimension of banking for years to come.
Source: FF News | Fintech Finance TCF 2025: Temenos and Microsoft Are Driving Innovation Through Ecosystems PT 2
Building an Innovation Ecosystem for Core Banking
The Temenos-Microsoft partnership is uniquely positioned at the crossroads of cloud computing, AI, and regulated banking. With Temenos’ core banking solutions natively delivered on Microsoft Azure, the collaboration enables banks to embrace agility, security, and faster go-to-market strategies—a necessity in an environment where digital transformation is not a luxury, but a baseline expectation.Monty Bhatia of Temenos outlined how their long-standing relationship extends beyond infrastructure hosting to include co-innovation on AI and automation. This relationship is directly aimed at streamlining product upgrades in banking software, reducing long and costly implementation cycles, and introducing AI-based self-diagnostic capabilities to detect, and even autonomously resolve, operational discrepancies before they escalate. These enhancements promise to reshape how banks implement, maintain, and evolve their mission-critical technology.
Sandy Gupta from Microsoft added that Azure’s robust security infrastructure and Microsoft’s industry expertise are the engines powering this transformation. Azure’s hyperscale capabilities, coupled with a growing suite of AI services, allow banks to deploy and scale solutions like AI Foundry and CoPilot with strong governance, compliance, and observability at their core.
Responsible AI: From Vision to Operations
The rise of generative AI (GenAI) and agentic AI—systems capable of autonomous decision-making—has dramatically accelerated opportunities for banks but also introduced new risks around compliance, security, and explainability. Both Microsoft and Temenos recognize this duality and have staked much of their joint strategy on implementing robust, transparent, and auditable controls.Microsoft, for example, has invested heavily in responsible AI, establishing comprehensive governance frameworks and toolsets as part of Azure AI Foundry. This includes built-in observability and compliance dashboards, model traceability, and controls to ensure data privacy and bias monitoring—a vital capability given the sensitivity and regulatory scrutiny of financial data. CoPilot for Financial Crime is emblematic of this approach, combining large language models with governance and oversight to support fraud detection, anti-money laundering, and regulatory compliance initiatives.
Temenos, for its part, is embedding these controls in its platform with automated self-diagnostics and standardized AI-enabled upgrades, removing much of the historical friction around core banking changes. By ensuring that AI deployments are explainable and monitorable, Temenos not only satisfies regulatory demands but builds institutional trust.
Industry Trends: Agentic AI Redefining Core Workflows
The future of banking technology is agentic: systems able to autonomously identify problems, propose and enact solutions, and continuously learn from their environments. Gartner forecasts that by 2028, one-third of all enterprise applications will include agentic AI, up from less than 1% today—a staggering leap that is mirrored by the rapid adoption of these technologies within banking and fintech.Concrete examples are already emerging. For instance, Temenos is implementing autonomous agents for core maintenance and diagnostics, while Azure AI Foundry provides orchestration for deploying thousands of models, each tailored to distinct banking workflows. On the compliance side, Microsoft's Entra Agent ID allocates unique, trackable identities to AI agents, dramatically improving the traceability and management of AI-driven automation—a leading concern for risk-averse financial institutions.
Furthermore, CoPilot and other agentic assistants are being used not just for coding or back-office automation but to empower frontline employees, speed up onboarding, enhance customer service interactions, and streamline fraud detection practices.
Security and Compliance: The Backbone of Financial AI
Banking, as one of the most heavily regulated industries, faces unique cybersecurity, privacy, and compliance challenges. Microsoft addresses these through multi-layered controls, from Azure’s encrypted data storage and secure compute environments to advanced monitoring and breach detection. With tools such as Entra Agent ID and Azure AI Foundry Observability, every AI operation, model decision, and agent activity is logged and auditable. This not only helps organizations comply with regulations such as GDPR, PSD2, and industry-specific mandates, but also builds client trust in AI-driven services.Temenos’ move to make self-diagnostic tools standard further fortifies this trust. Combined with Microsoft’s responsible AI guardrails, the partnership sets a benchmark for how banks can safely operationalize AI at scale while maintaining robust data governance.
Table: Key Security & Compliance Features
| Feature | Temenos Implementation | Microsoft Azure Support |
|---|---|---|
| Data Encryption | All banking data | At rest, in transit |
| Audit & Observability | Self-diagnosis, logging | Azure Foundry dashboards |
| Access Management | Role-based controls | Entra Agent ID, Azure AD |
| Regulation Alignment | Built-in compliance | Ongoing certification (GDPR, etc.) |
| Model & Agent Logging | Diagnostic reporting | Extensive audit trails |
Accelerating Innovation: Co-Innovation in the Digital Era
The story of Temenos and Microsoft is also one of co-innovation. Over the past decade, the two have progressively shifted from cloud hosting to deep product collaboration. AI Foundry—a suite of AI models and orchestration tools built on Azure—demonstrates the maturity of this partnership. It gives banks one-click access to over 1,900 AI models and more than 10,000 open-source models, supported by seamless “Model Router” technology that intelligently assigns the best solution for each banking task.Temenos leverages these innovations not only for its own development but also to enable its bank customers to build, deploy, and manage tailored AI agents for everything from customer support to anti-fraud. This self-service approach, supported by AI tools like Copilot Studio and pre-built connectors, allows organizations to dramatically cut the time and cost of modernizing their IT stacks.
Notable Strengths of the Partnership
- Acceleration of digital transformation: Banks deploying Temenos on Azure can reduce implementation timelines and upgrade cycles, freeing up IT budgets and speeding up the launch of customer-facing digital services. Tools such as Copilot for Financial Crime and AI-powered self-diagnostics play vital roles.
- Security-first innovation: With built-in compliance, AI transparency, and personalized controls, the partnership is trusted by even the most risk-mitigated institutions.
- Industry leadership in responsible AI: The emphasis on explainability, traceability, and bias mitigation provides a best-practice template for the industry.
- Ecosystem leverage: Banks gain from both Temenos’ deep domain expertise and Microsoft’s global infrastructure, developer tools, and AI governance frameworks.
Potential Risks and Critical Challenges
Despite the many strengths, no innovation is risk-free, and the Temenos-Microsoft vision faces several tangible challenges:1. Expanding Attack Surfaces
As agentic AI becomes more autonomous, the threat landscape grows exponentially. A compromised AI agent or misconfigured automation could propagate errors or security breaches throughout the banking ecosystem at unprecedented speed. Microsoft's introduction of agent identities and centralized management is a strong countermeasure, but the risk is not eliminated. The need for continuous threat modeling and adaptive controls is more important than ever.2. Skills and Cultural Change
The promise of streamlined upgrades and agentic automation is appealing but hinges on banks’ ability to reskill their staff. AI-first banking demands new modes of collaboration between business users, IT, and compliance teams. Organizations must foster a culture where employees understand and trust AI-generated insights, not merely comply with automation.3. Regulatory Fragmentation
The complexity of managing compliance across jurisdictions remains a hurdle. Microsoft and Temenos both have global customer bases; their platforms must continuously adapt to diverging data privacy laws and banking regulations. While both partners invest in compliance toolchains, legal experts warn that rapid regulatory changes, such as those seen in India and the EU, pose ongoing challenges.4. Interoperability and Vendor Lock-In
Multi-agent interoperability—a highlight of Azure AI Foundry’s “Model Context Protocol”—is intended to help banks avoid being trapped in a single ecosystem. However, meaningful cross-vendor operability remains an open challenge, with most financial institutions still early in their journey toward fully modular AI.5. Explainability vs. Complexity
While operational logging and observability tools have advanced, ensuring model decisions are truly explainable to non-technical regulators and end users remains a moving target. The expanded decision-making capabilities of GenAI and agentic AI create new levels of complexity—even as they solve old problems. Institutions must remain vigilant and transparent in how these models make decisions affecting customer accounts, credit, and more.Best Practices Emerging from the Temenos-Microsoft Model
Financial institutions looking to follow in Temenos and Microsoft’s footsteps should consider these best practices:- Centralized data governance: Consolidate data on secure, compliant cloud platforms before deploying GenAI models.
- Automate with transparency: Employ self-diagnostic tools and agentic AI with robust, auditable logging. Make explainability a basic requirement, not a compromise.
- Collaborate across business units: AI is no longer an “IT thing” but a multidisciplinary mission. Upskill teams to ensure they can interpret, validate, and augment AI-powered processes.
- Participate in regulatory development: Engage with regulators, industry groups, and peers to shape standards and compliance in the evolving AI landscape.
- Invest in continuous monitoring: With every innovation, fold in new controls for bias, drift, and attack resilience. Use tools like Azure AI Foundry’s expanded observability features to stay ahead of compliance and cybersecurity risks.
The Road Ahead: From Co-Innovation to Industry Transformation
The joint journey of Temenos and Microsoft over more than ten years shows how cloud and AI are intertwined in the future of banking. As more banks deploy GenAI and agentic automation, the fusion of efficiency, security, and responsible innovation will remain decisive. In a world where consumer demands, regulatory mandates, and competitive pressures are all accelerating, the ability to build on a trusted, evolving ecosystem is paramount.For other banking technology vendors and IT leaders, the partnership serves as both inspiration and a yardstick. It demonstrates why collaboration—blending infrastructure prowess, AI innovation, and domain-specific expertise—is the best path to secure, scalable, and futureproof banking.
Ultimately, Temenos and Microsoft are showing the industry what it means to drive innovation with purpose: not just chasing technology trends, but embedding trust, transparency, and agility at the very core of financial services. As the AI revolution continues to unfold, expect this partnership—and the ecosystem thinking it champions—to influence every dimension of banking for years to come.
Source: FF News | Fintech Finance TCF 2025: Temenos and Microsoft Are Driving Innovation Through Ecosystems PT 2
