Digital channels have become the backbone of today’s banking journey. Consumers expect a seamless, hyper-personalized experience across all platforms, and FIs must adapt to meet these ever-changing demands.
If you are still using legacy technology or an early modern platform–originally built on-premises but migrated to the cloud–you’ve likely experienced unplanned downtime, an influx of support calls, heightened security risks, and additional costs associated with testing and resolving issues, especially during platform upgrades.
Consumers won’t understand why they can’t do all of their banking online. They don’t know why the process is so cumbersome. They don’t see how it could take a quarter, a year, or more to add new features. They won’t blame your vendor when outages or other problems happen; they’ll blame you.
The burgeoning and sometimes intangible costs associated with remaining on old technology are far too high and unpredictable to absorb. Lumin’s white paper, “The high cost of standing still,” examines these costs in detail.
The costs of continued technical debt
1. Increased customer churn and attrition
Friction in the user experience will drive customers to your competitors. The fact that they keep their account open at your institution doesn’t mean they aren’t seeking auto loans, investments, or additional products and services elsewhere.
- A recent study found that FIs could lose up to 20% of their customers due to a poor digital experience.
- Another reports that nearly 60% of consumers would consider changing FIs if they were not happy with their digital experience.
- Nearly 60% say they have chosen a financial product from a provider other than their primary FI.
2. Operational inefficiencies and higher costs
Upgrades, integrations, and dwindling coding expertise cause legacy and early modern systems to be difficult and expensive to maintain. Not the least of these challenges are high opportunity costs.
- Outdated systems could cost FIs more than $58 billion annually by 2028, with notable foregone opportunities in payments infrastructure.
- Approximately 60% of financial services CTOs say their legacy tech stack is too costly and insufficient for modern applications, while 57% say these systems lack business agility.
- Those skilled in older programming languages are aging out of the workforce and becoming difficult to find as newer graduates are trained on more modern systems.
3. High security risks and regulatory challenges
Cyber threats and security protocols evolve continuously, requiring technology that can keep pace.
- The average cost of a data breach reached $4.45 million, the highest ever, in 2024.
- Legacy and early modern digital systems struggle to support today’s compliance requirements, which will mandate FIs to manage data better, file more reports, and retain more information.
- Global regulators clamped down on banks and financial institutions in 2023, a record year, and enforcement actions increased by 57%.
4. Missed revenue opportunities
Legacy and early modern FIs are at a competitive disadvantage because they can’t identify customers’ needs or predict churn. Their lack of modern analytics and AI means reduced potential for cross-selling, upselling, and increasing share of wallet and customer lifetime value.
5. Inability to innovate
Consumers now seek “banking as a lifestyle” — experiences that integrate personalized services and insights. Many FIs offer personalized savings and debt repayment plans. They also provide financial education resources through apps and interfaces with gamification strategies to increase financial literacy. Without modern architecture, FIs are limited in their ability to innovate and quickly integrate with emerging technologies–making it hard to keep up with more agile competitors.
- Six out of ten FI leaders say legacy infrastructure is the top challenge impeding their organization’s growth, and many “feel like hostages” to their legacy systems.
- In some instances, legacy systems can add more than a year to the release time of a new product.
6. Brand and reputation damange
Perception and trust are everything in a competitive market. Consumers expect the technology in every part of their lives, including their banking platform, to keep pace with emerging capabilities. Failure to do so will harm your reputation. It doesn’t matter that your competitors may be bigger or have more resources; you will be held to the same standards. Nearly a third of consumers (32%) say they would stop doing business with a brand after only one negative interaction.
7. Employee dissatisfaction and turnover
Inefficiency, frustration, and decreased productivity and morale caused by lagging technology can lead to higher turnover rates and make it challenging for FIs to attract top talent.
- Half of branch managers and staff say they intend to leave their jobs in the next 12 months due to low job satisfaction.
- A similar portion said they spend more time weekly on administrative and operational tasks than customer-facing activities.
- 63% of branch employees say a lack of modern technology reduces job satisfaction.
What you can do next
You don’t have to live with the high price of legacy technology. Read “The high cost of standing still: The pressing need to adopt a future-ready digital platform.” You’ll learn more about what future-ready technology can do for you, and how to assess your current platform.
