Banks are the backbone of the global economy, powering payments, credit, and compliance across markets. For decades, legacy banking systems have provided resilience, but they are increasingly unfit for the demands of a digital-first financial world. The global digital payments market is projected to reach USD 361.3 billion by 2030, growing at a CAGR of 21.4% from 2025 (Grand View Research). This rapid growth underscores the urgency for banks to modernise their infrastructure.
Yet the challenges in legacy system migration in banks remain significant, spanning data integrity, compliance, costs, and customer experience. To address the challenges of migrating legacy banking systems, financial institutions are turning to end-to-end core banking modernisation services that streamline processes, safeguard compliance, and accelerate transformation while ensuring business continuity.
challenges in legacy system migration for banks
The banking industry faces a range of hurdles when modernising its core systems. These issues not only raise costs but also put operational resilience and customer trust at risk.
high operational and migration costs
Replacing or upgrading decades-old mainframes requires large investments in infrastructure, licensing, staff training, and parallel system operations. Unlike other industries, banks must maintain uninterrupted service during migration, which adds to expenses. McKinsey reports that banks spend up to 70% of their IT budgets maintaining legacy systems, leaving little room for innovation and growth (McKinsey).
lack of technological expertise
The legacy banking system often runs on outdated languages such as COBOL. Skilled professionals who can maintain and integrate these systems are scarce, while modern architectures demand expertise in APIs, cloud, and real-time processing. This talent gap frequently causes delays and increases project risk.
data security and compliance risks
Banks manage highly sensitive financial data. Moving records across systems raises the risk of breaches and data loss. At the same time, institutions must comply with strict regulations such as GDPR, PCI DSS, and central bank mandates. Data Ladder highlights how poor data quality, inconsistent formats, and schema mismatches often undermine migration efforts.Ensuring compliance while protecting data is one of the most complex aspects of core banking transformation.
To mitigate these risks, financial institutions increasingly rely on core banking modernisation services that combine expertise, proven frameworks, and robust governance to reduce errors and protect compliance.
key benefits of modernising the legacy banking system
In banking, modernisation programmes include migrating core platforms, integrating APIs, and enabling real-time transaction processing. Depending on strategy, banks may adopt a phased migration, a hybrid coexistence model, or a full system replacement. With modern platforms, institutions gain efficiency, scalability, and resilience to meet evolving demands.
operational efficiency and expertise
Modern systems streamline core processes such as account management, payments, and reporting. Automation and real-time data access reduce manual effort, cut costs, and support faster decisions. External partners offering core banking modernisation services provide the specialised expertise required to manage complex migrations effectively.
improved customer service
The legacy banking system often limits mobile-first and personalised banking experiences. Modern platforms support omnichannel access, instant loan approvals, and faster digital payments. By freeing staff from maintenance-heavy legacy tasks, banks can redirect resources to customer innovation, building stronger loyalty.
enhanced resilience and scalability
Modern platforms are designed for agility. They can handle peaks in transaction volumes, adapt to regulatory changes, and integrate with fintech partners more easily. Cloud-ready infrastructure also ensures resilience against disruptions without compromising performance.
the strategic importance of core banking transformation
Modernisation is not only a technology project but a long-term strategic decision. It determines how banks compete, innovate, and sustain resilience in a rapidly evolving financial landscape.
advanced analytics and AI for decision-making
New platforms integrate analytics and AI, enabling fraud detection, customer insights, and process optimisation. These tools help banks respond quickly to market shifts while improving profitability and customer trust.
proactive compliance and cybersecurity
Modern systems embed compliance frameworks and advanced cybersecurity into every layer, making it easier to meet regulations such as GDPR, PCI-DSS, and local central bank requirements. This reduces vulnerabilities during and after migration.
scalable operations and resilience
Upgraded systems allow banks to scale services quickly during peak demand and maintain continuity during crises. Cloud-ready platforms further enhance resilience against cyberattacks or economic shocks, ensuring uninterrupted service delivery.
A well-executed transformation offers superior agility, compliance, and customer-centricity. When selecting a partner, financial institutions should seek end-to-end core banking modernisation services that combine deep domain expertise with secure, scalable technology to future-proof their operations. Beyond operational benefits, modernisation also positions banks to integrate seamlessly with fintech ecosystems, support open banking models, and embrace innovations such as embedded finance. This makes transformation not just a response to current pressures but an enabler of long-term growth and competitiveness.
FAQ
The primary risks include severe data integrity issues and schema mismatches between outdated COBOL structures and modern cloud architectures. A massive scarcity of skilled professionals capable of maintaining legacy code further complicates the integration of real-time API layers. These technical gaps often lead to project delays and heightened operational vulnerability during the parallel system phase.
Modernization shifts the budget from maintenance to innovation by reducing the 70% of IT spend currently consumed by legacy upkeep. Upgrading to cloud-native platforms lowers high infrastructure and licensing costs associated with aging hardware. This reallocation allows banks to invest in advanced analytics and AI, which drive significant long-term profitability and competitive advantage.
A hybrid coexistence model ensures uninterrupted business continuity by allowing modern and legacy systems to operate simultaneously during the transition. This approach mitigates the compliance and data security risks inherent in "big bang" full system replacements. Leveraging specialized core banking modernization services ensures that institutions meet strict GDPR and PCI DSS mandates while scaling digital capabilities.
Modern systems embed proactive compliance frameworks and advanced cybersecurity layers directly into every transaction layer. Unlike vulnerable legacy platforms, cloud-ready infrastructure handles transaction volume peaks and cyber threats with automated elasticity. This resilience protects customer trust and ensures uninterrupted service delivery despite the evolving threats of the 2026 digital landscape.
