Modernisation in banking is an ongoing and often contentious topic. While banks recognise the need to evolve, they must also grapple with legacy systems, regulatory constraints, and the balance between innovation and operational risk.

We recently brought industry leaders together in Amsterdam, in collaboration with our partner Equinix, to explore these issues in depth during a round table dinner discussion held under the Chatham House Rule (therefore, no names or organisational affiliations are referenced in this article).

The conversation revolved around defining modernisation, managing legacy systems, leveraging technology, and aligning innovation with regulatory demands. This article summarises the key takeaways from that discussion.

Defining Modernisation in Banking

In order to set the scene, we first needed to ensure we were all “on the same page” as modernisation means different things to different stakeholders. For some, it is about migrating to the cloud; for others, it involves integrating new technology with legacy systems. Ultimately, the group agreed that modernisation should aim to:

• Make banking processes cheaper, faster, and better (and greener if possible).
• Improve customer experience by leveraging technology, automation and AI.
• Ensure security and compliance with evolving regulations.
• Provide agility and scalability for future growth.

The discussion highlighted that the business side of banking often perceives modernisation differently from IT and operations. While technology teams focus on infrastructure and system stability, business leaders are concerned with time to market, customer satisfaction, and cost efficiency. A key challenge is ensuring alignment between these perspectives to drive effective transformation.

Legacy Systems: The Double-Edged Sword

A fairly contentious question arose: “Why do so many banks still rely on legacy systems?”.

One of the primary barriers to modernisation is perceived to be the continued reliance on legacy infrastructure, particularly mainframes. While legacy systems have proven to be robust, secure, and capable of processing high transaction volumes, they can present significant challenges:

• Talent Shortages: Many mainframe developers have retired, leaving banks struggling to maintain their systems.
• Integration Issues: Legacy systems often lack APIs, making it difficult to connect with modern technologies.
• High Migration Costs: Banks hesitate to overhaul their core systems due to the prohibitive cost and complexity of migration.

A point was raised that for some organisations, while the need for modernisation is recognised, the majority of their revenue is generated from systems running on legacy infrastructure, and the risk of making significant changes is currently considered too high for fear of business interruption.

Legacy systems (like mainframes) can still be considered “fit for purpose”.

However, legacy technology itself is not always the issue—legacy thinking can be an even greater obstacle. Many organisations struggle to let go of outdated processes, even when better alternatives exist. The challenge is not just replacing old systems but also rethinking how banking operations should function in a digital-first world.

Buy vs Build: The Right Strategy for Modernisation

A key debate in the discussion was whether banks should develop technology in-house or rely on third-party SaaS providers. The consensus was that banks should follow a structured approach:

1. Reuse existing systems where possible.

2. Buy off-the-shelf solutions for non-differentiating functions.

3. Build only where competitive advantage is necessary.

This approach prevents banks from over-investing in custom-built systems that quickly become obsolete. The challenge, however, lies in standardisation—many banks customise SaaS solutions so heavily that they end up with the same maintenance burdens as in-house systems.

Regulation: A Barrier or a Catalyst for Change?

The introduction of the Digital Operational Resilience Act (DORA) and similar regulations was a major point of discussion. Regulation is often seen as a burden, increasing compliance costs and adding complexity to operations. However, the group also highlighted the opportunities that regulation presents:

• Stronger security: DORA and similar frameworks push banks to adopt best practices in cybersecurity and risk management.
• Greater customer trust: Compliance with stringent regulations enhances the credibility of banks.
• Standardisation: Regulations force banks to align processes, making future modernisation easier.

One diner pointed out that “regulation is just the cost of doing business” which is indeed, food for thought.

That said, compliance can also slow down innovation, particularly for smaller banks that lack the resources of larger institutions. A balanced approach is needed to ensure that regulatory requirements drive innovation rather than stifle it.

Human Capital: The Overlooked Aspect of Modernisation

Technology alone cannot modernise banking—people play a crucial role. Several participants emphasised that successful transformation requires cultural change within the organisation. Key human-related challenges include:

• Resistance to Change: Employees accustomed to traditional workflows may struggle to adopt new processes.
• Skills Gaps: As technology evolves, banks must invest in upskilling their workforce.
• Internal Silos: Collaboration between departments (IT, risk, compliance, business) is essential for effective modernisation.

A recurring theme was the need to take people along the journey. Engaging employees early, providing training, and fostering a culture of continuous learning are critical to overcoming resistance and ensuring smooth transitions.

Data and AI: The Next Frontier

Data is at the heart of modern banking, but many institutions struggle with fragmented systems that prevent them from leveraging their data effectively. APIs and AI-driven analytics are emerging as game-changers, enabling banks to:

• Detect and prevent fraud in real-time.
• Offer hyper-personalised services to customers.
• Streamline compliance and risk management processes.

However, regulatory concerns around data privacy and explainability of AI decisions remain significant hurdles. Banks must navigate these challenges while ensuring that AI and automation enhance, rather than replace, human expertise.

Conclusion: The Path Forward

Modernising banking is not a one-time project—it is an ongoing process that requires careful planning, strategic investment, and a willingness to embrace change. The key takeaways from the discussion include:

• Balance is key: Banks must find the right mix between maintaining legacy systems and adopting new technology.
• Regulation should be seen as an enabler, not a roadblock.
• People matter as much as technology: Change management and upskilling are crucial.
• Data and AI will define the next phase of modernisation, but banks must handle these technologies responsibly.

While the challenges are significant, the opportunities are even greater. With the right strategy, banks can modernise in a way that enhances efficiency, strengthens resilience, and delivers better experiences for customers. The industry must continue to share insights, collaborate, and push for innovation while staying grounded in the realities of compliance and risk management.

The future of banking will not be defined by technology alone, but by the ability of institutions to adapt, rethink, and reinvent themselves in a rapidly evolving landscape.

About Equinix
Equinix (Nasdaq: EQIX) is the world's digital infrastructure company®. Digital leaders harness Equinix's trusted platform to bring together and interconnect foundational infrastructure at software speed. Equinix enables organisations to access all the right places, partners and possibilities to scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value, while supporting their sustainability goals.