5 indicators that show you need to consolidate your banking legacy systems

Is it time to update your banking legacy systems? If you recognize these five warning signs, the answer may be “yes”. 

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5 indicators that show you need to consolidate your banking legacy systems


Is it time to update your banking legacy systems? If you recognize these five warning signs, the answer may be “yes”. 

5 indicators that show you need to consolidate your banking legacy systems

Like many banks, we’re willing to bet your core processes run on a legacy mainframe. These systems may be decades old, predating many of your employees. And while they still get the job done, that doesn’t mean they do the job well.

Certain legacy systems can hinder your digital and data enablement initiatives due to connectivity problems, costly maintenance, and security vulnerabilities. If left unaddressed, these problems can ultimately impact your customer retention and satisfaction rates.

As such, it’s important to modernize these systems where needed. This may involve replacing your systems completely or innovating onto them and balancing your focus between your new and old technology.

To help you understand whether it’s time to modernize, we’ve compiled a list of five telltale warning signs.

5 signs your legacy tech is holding you back

1. Your IT maintenance costs are unsustainable

Is your legacy environment costing you an eye-watering amount? If so, you’re not alone. It’s thought maintaining outdated payment systems will cost banks around $57 trillion by 2028. This figure includes typical hardware and software maintenance, as well as sourcing scarce spare parts.

It’s also worth noting the burden of recruiting resources to maintain your legacy environment. Because these systems are decades old and use outdated technologies and programming languages, such as COBOL, they require legacy specialists. Of course, as newer generations enter the workforce without these specialisms, and talent shortages continue, specialists are increasingly hard to come by.

2. Your systems don’t comply with regulations

Many of the regulations your bank must abide by are younger than your legacy systems. In other words, your systems weren’t built to serve them. Nor can they easily facilitate the data architecture you need to conduct audits and provide regulatory reports.

This is because traditional banking legacy environments consist of multiple systems, with each serving a single purpose or application, such as loan processing or account opening. The problem with these disparate systems lies in their inability to interact with one another. Because of this, it’s more difficult to trace your data and, in turn, comply with important data and banking regulations.

3. Customers and employees are complaining

Services that run on legacy systems are often slower and less flexible than more up-to-date equivalents. In a world where we value fast, convenient services, this can seriously

impact your customer experiences.

Take the account opening process as an example. If it takes a customer an hour to open an account, they may become frustrated and abandon the application completely. And, even if they do struggle through the process, they’ll be less likely to want to hear about your other services or offerings.

But the problems don’t end there. You must also consider your customers’ holistic experiences with your bank.

If your legacy systems are disconnected and your data is siloed, it can result in inconsistent customer communications. For example, a customer may contact two different departments within your bank with the same query and be given two entirely different answers. This is because there’s no data sharing between your systems — or your teams.

4. You’ve become an easy target for cybercriminals

In 2022, 80 percent of financial institutions experienced data breaches due to legacy authentication systems. Despite this startling number, the majority of these organizations did not update their technology stack.

If you’ve experienced a similar security scare, it’s time to face the uncomfortable truth: cybercriminals will continue to take advantage of vulnerabilities within your legacy systems. Why? Because these technologies are often less secure and easier to exploit than modern systems. Even if you do spend the time and money to secure them, that’s time and money you could be spending on more innovative IT projects.

5. You’re struggling to keep up with your competitors

Banks are losing up to a fifth of their customers to their competitors due to poor customer experience. To make matters worse, over 60 percent of banks claim they’re failing to win new customers because their digital transformation efforts are taking too long.

By nature, legacy systems are inflexible. Beyond data architecture problems, it’s also difficult to scale your efforts or react quickly to market changes. For example, if customers suddenly demand mobile applications that deliver personalized spending breakdowns and advice, you’ll struggle to design and launch the service before your competitors. Without this agility, you’ll struggle to meet customer demands and they may look elsewhere.

Is it time to modernize your banking legacy systems?

Do these five scenarios sound all too familiar? If so, it may be time to let go of your outdated legacy systems and embrace modernization. 

This doesn’t always require a complete upheaval of your technology environment. Your modernization journey will depend on your unique business needs and challenges. Some banks will fare better if they replace their old systems entirely. Others may be able to consolidate and build onto their legacy systems through “digital decoupling”. 

No matter your route, a successful modernization will offer you:

  • Enhanced security and data compliance
  • Better data insights and a single source of truth
  • Slicker, more competitive customer experiences
  • Lower maintenance and operational IT costs
  • More time to focus on innovative projects

Of course, to reap these rewards, you must work with experts either internally or externally to assess your needs, design a tailored digital roadmap, and implement your new systems. If you choose to keep your core mainframes, these experts should also ensure you don’t neglect your legacy technology in favor of your new add-ons. With this expert guidance, you’ll extract the most value from your entire technology investment.

At Modes, we work as your co-creator, guiding you on your journey from cumbersome legacy systems to complete digital enablement. To learn more about our strategy, design, and digital implementation services, please get in touch with our team.

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If you have a digital project in mind, we’d love to hear about it. Let’s connect on how we can help.

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