The Balancing Act: Modernizing Finance Software While Preserving Legacy Systems

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Software modernization is usually a never-ending story, where we are constantly improving process efficiency and updating customer service capabilities to push for even better financial results. How can you balance the rush for innovation with the smooth handling of daily tasks and customer experience? Discover our strategies in the article!


Because of the specific industry, financial institutions must take special care of their software. Outdated software is an easy target for cybercriminals and a concern for authorities who pay attention to compliance with legal requirements. In addition, new customers are added every day, and with them comes an increasing amount of financial data to compute. Therefore, financial services must be in a permanent digital transformation process to meet the market, legal challenges, and stakeholders’ expectations.

However, modernization of financial systems can’t come at the cost of daily operations. Changing from a legacy application to a new solution will cause chaos and a revolt among employees who won’t know how to navigate the new system smoothly. An alternative to financial transformation is gradual system updates, where legacy code can easily integrate with modern systems, employees have time for thorough training, and customers do not experience interruptions in accessing the bank.

The Need for Modernization in Finance Software

Technological development is surging forward, and customer expectations are rising as well. Many financial institutions would like to deliver faster and more personalized services. But legacy apps and technical debt don’t allow them to. Long postponement of modernization can lead to rising maintenance costs for solutions and processes that can be automated.

Modernizing legacy systems is a win-win for everyone. Customers are more likely to leave their savings in the accounts of modern financial companies and choose new products more often. Banks see a noticeable increase in operational efficiency (up to 35%, according to EY) and regain their competitive position. They also generate savings by delegating repetitive tasks to automation software instead of hiring human staff.

Understanding Legacy Systems in Finance

Despite the significant benefits of legacy modernization in the finance industry, by 2020, as many as 90% of the top 50 banks were using mainframe-based systems whose origins date back 80 years. Approximately 30 billion transactions and 90% of all card transactions are processed daily on the mainframe, which processes over ten times more transactions per second than Google processes queries.

Why is it so hard to work without the mainframe? These age-old systems are incredibly secure, highly reliable, and very compatible. Every mainframe operation leaves a trail of logs, making it easy to identify unauthorized access attempts. Thanks to automatic detection of faulty hardware and software components, mainframe systems are available 99.9% of the year.

Challenges in Modernizing Finance Software

How can you modernize finance systems successfully? You need to keep both business and technology principles in mind. However, even despite the best efforts of your entire team, you may encounter one or more challenges of legacy system upgrades. Before you begin, discuss costs, migration complexity, inability to integrate with modern solutions, and potential risk of service disruptions.

Knowing what technical problems may arise during modernizing banking and financial services, you should convert them into inconveniences for customers. Is there a risk of delays in processing transactions, fulfilling agreement obligations, or accessing financial services applications? Modernizing outdated systems can’t affect business continuity much, so gradual transformation is far more convenient than a revolution in updating legacy systems.

Challenges in Modernizing Finance Software

Strategies for Gradual Transformation

The financial services industry can’t afford one or more days of downtime. Every extra hour of absence means customers will leave for competitors. Therefore, to reconcile business and technological needs, there is a modernization approach: gradually migrate to newer solutions. Check out the following strategies to help you keep up with the market and care for your customers with fewer difficulties.

Assessing Current Systems and Needs

Where is the best place to start with finance transformation? With an in-depth audit and performance evaluation of all business processes executed by existing software solutions. Throughout the environment, there are certainly a few business-critical systems that should be upgraded first.

Prioritizing Business Continuity

While upgrades of outdated technology and infrastructure are essential, you must put your customers first. Ensure that implementing new features will only minimally affect your business operations. You can protect your organization by temporarily using parallel systems. Before you start, also plan procedures in case of emergencies to smoothly return to standard working mode or undo negative changes.

Integrating New and Old Systems

Integrating outdated and brand-new solutions might be the most challenging part of the financial industry’s transformation. To avoid disappointments in implementing finance software products, use middleware and APIs that enable seamless communication between legacy and updated core systems. In the case of digital banking products, you can update their subsequent components when outdated ones have low business relevance.

As Scalo Digitization Consultant Paul Mydlo says, “Writing software is the easy part—connecting it seamlessly to existing assets is the real challenge. Risking business disruptions isn’t an option for most companies. A thoughtful, strategic approach is essential, even if it means taking extra time to get it right.”

Best Practices for Balancing Modernization with Legacy Preservation

Legacy systems upgrades in the financial industry always affect other business elements—your company’s change of solutions impacts many departments and even your customers. Find out how to go through this process without deteriorating the digital banking experience.

Stakeholder Engagement

Stakeholders may be opposed to change upfront, especially if it is costly. Provide them with data that shows how your company loses money and other opportunities when using outdated systems. Convince them to be actively involved in all phases of the transformation, from planning to execution. This strategy will help them understand the process and agree to further changes.

Incremental Implementation

There is no perfect time to modernize your outdated financial systems. But by dividing the entire process into phases, you’ll find it easier to manage them and introduce further elements of modern technology into your business. A phased implementation will also allow you to easily monitor whether your assumptions about increasing efficiency or cost reduction are meeting reality.

Training and Support

New systems require spending time training employees. In addition to investing in agile software and data migration services, provide professional support during the first days of using the new software. Arrange training for technical staff and office team on the features affecting them. There may be additional questions from employees for several weeks after implementation, so ensure you have unlimited contact with consultants with high expertise.

Future Outlook and Conclusion

At some point, legacy systems are no longer compatible with modern, flexible platforms. That’s why your company needs to start modernizing financial services. The modern market also requires this, as customers have clear expectations and will not accept half measures.

If you want to gradually and evenly adapt digital finance functions to the latest trends and your customers’ demands, don’t hesitate to contact Scalo. We will help you start your transformation journey and assist you at every stage, from planning to employee training. With Scalo, you will enter the modern age with data safety and financial security.

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