Why staying put is no longer the safe option for payments innovation

Banks clinging to outdated systems risk security breaches, regulatory headaches, and lost market share—modernisation isn’t just an upgrade, it’s a survival strategy.

For years, banks have been reluctant to modernise their legacy infrastructure, believing that change outweighs the risks of staying put. But as the financial landscape evolves, that mindset is in danger of proving very costly.

Legacy systems are increasingly unreliable, expensive to maintain, and resistant to modern payment innovations. The financial world is moving toward real-time payments, embedded finance, open banking, AI, robot process automation (RPA), and global interoperability—but outdated technology is slowing banks down, creating higher security risks, compliance challenges, and operational inefficiencies.

The real question is no longer whether banks should modernise but how to do it with minimal risk and maximum value.

The high price of legacy in a payments-first world

Banks that continue to rely on legacy infrastructure face mounting challenges:

• Limited scalability: Legacy tech wasn’t built for real-time, cross-border, 24/7 payments or seamless integration with regional schemes.
• Security & compliance risks: Meeting growing AML, fraud prevention, and regulatory demands is difficult with rigid, outdated infrastructure.
• Integration headaches: Open Banking, APIs, and AI-driven automation often require costly, unreliable workarounds.
• Rising costs & skills gaps: Maintenance costs are skyrocketing while expertise in legacy tech is fading.
• Operational risks: Multi-day banking outages are becoming more common, eroding trust and attracting regulatory scrutiny.
• Customer expectations: In an always-on world, customers won’t tolerate downtime or outdated services.
• Growing risk of outages: Recent high-profile multi-day banking outages highlight the risks of ageing infrastructure, undermining customer trust and regulatory confidence
• Customer service demands: Generations that are growing up in an ‘always on’ global financial and IT landscape will find it hard to understand why systems are ‘down for maintenance’ or showing yesterday’s news today, cashe-ing and stand-in-processing were adequate once, but less so today.

A smarter approach to modernisation: Fix the pain points first

Instead of treating core banking modernisation as an overwhelming, all-or-nothing transformation, banks should take a phased approach.

Starting with their most pressing product, operational, security, or compliance challenges, they should select a future-proof platform to enter a new geography, fix a problem, or launch a new product. These could include projects such as customer/SMB-focused risk-based loan products, Shariah banking, or launching the Bank or its digital brand in a brand new country or market segment.

With next-generation core banking platforms, banks can progressively modernise, solving critical challenges step by step while ensuring seamless integration with existing infrastructure.

By adopting a modular, API-first approach, banks can:

• Reduce staff, hosting and operating costs by launching a low-code, fully extensible loans, cards, payments, and core banking solution on the most appropriate and cost-efficient hosting platform. This can be on-prem, or hosted in any private or public cloud.
• Enhance cross-border payments by integrating an always-on solution directly and locally with regional and global payment networks, ensuring compliance with constantly evolving regulatory standards.
• Future-proof payment and banking infrastructure by implementing cloud-native, AI-driven automation, and Open API solutions that streamline payments and improve fraud detection.
• Improve resilience and security by embedding real-time monitoring, automated KYC/AML compliance, and fraud prevention directly into payment workflows.
• Reduce costs and operational risk by migrating gradually, using a POC approach, instead of investing in an expensive, lengthy, and high-risk, large-scale system overhaul. Deliver, or fail fast, fix, and move on!
• Ensure seamless payment integrations across multiple regions, supporting local schemes like SEPA, FedNow, FPS, and instant payments without complex workarounds.

By addressing focused use cases, banks can reduce risk, improve ROI, and incrementally build toward a fully modernised, scalable banking, cards, loans and payments infrastructure.

Debunking the cost & risk myth

A major misconception is that replacing core systems is always expensive and inevitably comes with an astronomical level of risk.

Knowing what we do about modern, agile, cloud-agnostic platforms and cost-effective incremental change, Migration from legacy tech is a much lower-risk strategy, removing the risk of premature ‘C’ suite departures.

According to Gartner’s modernisation framework, banks typically choose between:

• Rearchitecting – Moderate cost & risk, but still heavily constrained by outdated infrastructure.
• Rebuilding or Replacing – Historically seen as high-cost, high-risk—but now delivering the best long-term benefits at lower costs and risks when done progressively.
• Encapsulating or Rehosting – Quick fixes that preserve legacy inefficiencies, limiting agility and competitiveness.

The outdated assumption that replacing core systems comes with high costs and risks is clearly no longer valid.

With a modern, API-first, modular approach, banks can achieve:

• Lower total cost of ownership (TCO) by moving off expensive-to-maintain legacy platforms supported by ageing service engineers
• Minimal migration risk through phased rollouts, POC’s, parallel-run deployments, and real-time resilience testing.
• Shorter ‘time to value’, launching new core banking and payment capabilities in months, not years.

The urgency for payments modernisation

The payments industry is accelerating at breakneck speed, with banks that fail to modernise losing market share and future growth opportunities to more agile competitors that will happily steal their lunch.

• Global interoperability is becoming the norm: With the rise of cross-border instant payments and open banking, financial institutions (FIs) must be able to integrate agile Core systems with multiple domestic and international payment systems quickly and seamlessly.
• Regulations are tightening: Compliance with ISO 20022, PSD3, AML directives, DORA and evolving cybersecurity mandates requires payment platforms that are secure, reliable, flexible and scalable.
• DORA (digital operational resilience act) is now in effect: EU banks must prove they can withstand cyber threats and disruptions—legacy.
• Customer expectations have changed: Businesses and consumers now demand frictionless, real-time transactions, which legacy systems struggle to support.

With modern core banking platforms, banks can break free from legacy constraints, innovate with confidence, and future-proof their payments strategy—all while reducing costs and ensuring operational resilience. The real risk isn’t in modernising—it’s in waiting too long to start.