Banks today face a critical challenge that threatens both their bottom line and competitive position: legacy core banking systems that were built decades ago but still power their core operations.

Global spending on outdated banking technologies is projected to rise from $36.7 billion in 2022 to an alarming $57.1 billion by 2028, according to IDC Financial Insights–with maintenance costs growing at 7.8 percent annually. For U.S. banks specifically, the situation is equally concerning. According to a report by Deloitte, IT departments already allocate over 55 percent of their technology budgets just to maintaining business operations, while only 19 percent goes toward developing innovative solutions, the study found. 

Despite those eye-opening figures, the problem for banks goes well beyond direct cost. Instead, outdated core technology is hindering institutions’ ability to develop and deliver the innovations that will be necessary to compete in the banking landscape of the future. 

Hidden risks of legacy banking systems

While the direct costs of maintaining legacy systems are substantial, the hidden costs may be even more damaging to financial institutions:

1. Security Vulnerabilities: Legacy core banking systems lack robust security features needed to combat modern cyber threats. Data breaches in financial institutions typically cost 28 percent higher than the global average—approximately $5.9 million per breach, according to a study by IBM.

2. Lost Opportunities: In a survey by Morning Consult, nearly 80 percent of business and technology leaders report that technical debt has caused cancellation of business-critical projects, organizational paralysis, delayed innovation and increased costs.

3. Talent Challenges: A Capgemini study found that approximately 40 percent of banks are operating without a consistent technology experience, and finding qualified personnel to maintain legacy systems becomes increasingly difficult and expensive as programming languages like COBOL become obsolete.

4. Integration Complexity: Legacy banking systems often have limited capabilities when it comes to reporting and are frequently restricted in their ability to work with modern digital channels, necessitating manual processes for what should be simple tasks.

In light of these challenges, financial institutions recognize the need for change–but may hesitate to undertake comprehensive system replacements due to high costs and perceived risks. 

How Banking Technologists and Growth Leaders Can Align on Core Modernization

Until recently, the only available option for system modernization was total replacement, making the prospect of technology upgrades a daunting proposition. This all-or-nothing approach has kept many institutions locked into outdated technology, unable to compete effectively with more agile fintech competitors and digital-native banks.

The benefits of modular modernization

Galileo’s Cyberbank Digital offers banks the ability to modernize without the costs and risk of complete system replacement. By leveraging a modular, API-driven approach, Cyberbank Digital enables banks to modernize at their own pace, without disrupting their entire operation. Here's how it works:

• Side-by-Side Innovation - Rather than replacing your entire core system at once, Cyberbank Digital operates alongside your existing infrastructure. This side-by-side approach means you can gradually transition services while maintaining operational continuity.

• Microservices Architecture - By transforming monolithic legacy systems into smaller, more manageable microservices through modern tools, Cyberbank Digital facilitates easier maintenance, scalability, and flexibility. Each component can be upgraded independently, dramatically reducing risk.

• API-First Integration - Open APIs enable collaboration with ecosystem partners and fintech startups, creating entirely new business models and revenue sources that would be difficult to implement with legacy systems. Cyberbank Digital's API-driven design makes this possible without replacing your core infrastructure.

• Future-Proof Technology - Recent technology advances now provide banks with more options for modernization, making the task much less daunting. Cyberbank Digital leverages these advances to give you flexibility and control over your modernization journey.

How to Get Banking Core Modernization Right

By choosing Galileo’s modular approach to modernization, financial institutions can achieve:

• Reduced Operational Risk: Isolate upgrades by service line instead of risking entire system failures

• Lower Integration Complexity: Seamlessly connect with modern tools and fintech innovations

• Decreased Maintenance Costs: Gradually shift resources from maintenance to innovation

• Accelerated Time to Market: Launch new products and services without waiting for core system updates

• Enhanced Customer Experience: Deliver the digital capabilities today's banking customers expect

How to modernize banking systems for future growth

Banks simply cannot afford to continue running their core operations on legacy systems built more than 30 years ago, which are costly to maintain, slow to scale, and difficult to integrate with new technology.

Cyberbank Digital provides a modern, side-by-side path to innovation—without a full rip-and-replace. Its modular, microservices-based design lets institutions modernize at their own pace, isolate upgrades by service line, and reduce operational risk.

The future of banking requires both stability and innovation. With Cyberbank Digital, you don't have to choose between them.

Contact us to learn how Galileo can help your bank modernize at the pace that’s right for you.