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5 min

How Your Legacy Banking System Holds You Down: Reasons to Upgrade

In one of our recent articles, we discussed legacy application modernization and the problems outdated systems bring to businesses. In this blog post, we would like to narrow down our focus and talk about legacy technologies in the banking sector. You see, most banking organizations recognize the importance of digital transformation. Yet only 43% commit to upgrading their legacy core systems and applications. Why does this happen? What stops banks from modernizing their legacy systems? And, more importantly, how outdated software undermines financial institutions? This article aims to answer all of these questions. As a customer-centric fintech software development company, AnyforSoft cares about your success and wants to bring benefit to your banking institution. That’s why today we want to discuss how your legacy banking system holds you down and, hopefully, convince you to upgrade. Don’t skip this blog post, as it will encourage you to embrace digital transformation. Let’s dive right in! What is a legacy banking system? A legacy financial system is banking/financial software developed using outdated technologies, programming languages, or frameworks. In general, any system that has reached its end of life, no longer receives updates and security patches, can’t be scaled, or relies on outdated architecture can be considered a legacy system. For example, Drupal 8 is a legacy product, as the community no longer supports it. Why legacy systems in banking are still used? The banking industry still heavily relies on outdated platforms, technologies, and frameworks. But why? Why don’t banks invest in legacy banking system modernization and improve their business processes as well as customer experience? Well, we can think of at least three reasons: Risk aversion. According to Reuters, outdated COBOL systems process over $3 trillion on a daily basis. Just to remind you, COBOL is a programming language created more than 64 (!) years ago. When the stakes are that high, it is no surprise that banking organizations and financial institutions are reluctant to /*-->*/ /*-->*/ /*-->*/ modernizing legacy systems. Digital transformation implies disruptions in the work of your organization, and if you process thousands of transactions daily, it’s only natural that you don’t want to disrupt that flow. High costs. The modernization of banking legacy systems requires significant upfront investments. Small financial organizations simply don’t have enough budget to embrace new technologies. However, maintaining and supporting outdated systems proves to be more expensive in the long run. Thus, even if you have a very tight budget, consider saving up money and investing in digital transformation. Fear of changes. Product innovation always comes with changes in a company’s business processes. It brings the need to learn and adapt to new workflows. For instance, if you want to implement artificial intelligence and machine learning in Fintech apps, your team has to be well-versed in Python development (and if your team doesn’t have such expertise, you will have to find and hire developers for your startup with Python experience). Changes like this can be uncomfortable for you, your employees and stakeholders, discouraging you from embracing new technologies. But even though legacy banking system modernization comes with its challenges and may seem like a lot of work, not investing in it is a serious mistake that could undermine your organization. How Legacy Core Banking Systems Hinder Your Success Legacy systems in banking damage the banking experience and hinder your success in many ways. Poor performance Legacy core banking systems and platforms are slow and inefficient, frustrating your customers and employees alike. If your clients experience disruptions or delays while using your banking services, they’re likely to go to your competitor. The same is true for your employees. Poor system performance negatively impacts the morale in your workplace, which may force your team members to leave your organization. All of this leads to loss of revenue, productivity, and, eventually, market share.