TL;DR: Most FinTech modernisation projects fail because they try to replace everything at once. A roadmap-first approach (assessing real costs, sequencing by risk, and modernising in composable layers) lets you move fast without gambling the business on a single migration.
Legacy systems in financial services age at a compounding rate. The same platform that processed payments reliably in 2005 now blocks API integrations, fails to meet DORA compliance requirements, and forces your engineers to spend more time patching than building. Meanwhile, the IDC Financial Insights projects that banks failing to modernize could lose over $57 billion collectively by 2028, primarily through missed payments revenue and operational inefficiency.
The impulse is to tear everything out and start again. That impulse has killed careers.
This guide is written for technology leaders who need to move fast without triggering a catastrophic migration event. It covers how to assess what you actually own, how to sequence modernisation for maximum impact and minimum disruption, and how to staff the work without stalling delivery on everything else.
Why the "Legacy Problem" Is Actually a Cost Accounting Problem
Most organisations underestimate what their legacy stack costs. They look at the vendor contract and stop there. That number rarely tells the full story.
A 2025 analysis from IDC found that enterprizes maintaining legacy systems spend up to 42% more on operational overhead than those running modern infrastructure. That gap shows up across four categories that most IT budgets treat separately: direct licensing and support, staff inefficiency and workarounds, compliance overhead, and what some analysts call the innovation tax: the cost of delayed releases, missed market windows, and features you simply cannot build on an inflexible core.
FIS and Oxford Economics put a concrete number on this in May 2025: the average financial institution loses $93.6 million per year as a result of legacy system limitations. That includes $11.2 million in operational inefficiencies and close to $60 million in losses from cyberthreats, fraud exposure, and compliance gaps.
The business case for modernisation rarely needs to be manufactured. It already exists in your current cost structure. The challenge is surfacing it in a way that makes the investment decision obvious to the board.
This matters because the budget conversation shapes everything that comes next. When modernisation is framed as a cost, it gets treated like a cost: negotiated down, delayed, scoped to the minimum. When it is framed as cost elimination, the maths change. A phased programme that cuts operational overhead by 30% while removing a $4 million compliance burden is not a technology expense. It is a margin improvement.
That shift in framing is often the first real task for a technology leader building a modernisation case.
Step 1: Audit What You Actually Have
Before sequencing any work, you need an honest inventory. This sounds obvious. It is routinely skipped.
The goal of a legacy audit is not to produce a complete system catalogue. That project never ends. The goal is to identify your highest-risk and highest-drag systems: the ones that are costing the most, blocking the most, and carrying the most compliance exposure.
For each system, ask four questions. How much does it actually cost to run, including the full overhead calculation? What would break if it went offline for 24 hours? What new capabilities does it block? And what regulatory exposure does it carry given frameworks like DORA, PSD2, or NIS2?
Systems that score high on all four are your priority targets. Systems that score high on compliance exposure alone become urgent regardless of their operational stability, because regulators do not wait for convenient modernisation timelines.
The Software Improvement Group's Finance Signals 2025 report found that 37% of systems built on legacy technologies carry below-average architecture ratings, and that these systems deliver updates 40% more slowly than modern alternatives. That velocity gap compounds directly into your ability to respond to market changes and regulatory shifts.
One important output of this audit is a map of dependencies. Legacy systems in financial services rarely sit in isolation. A core banking platform that feeds a reporting system that feeds a compliance tool creates a chain that dictates your migration order. You cannot modernize the middle without understanding what sits on either side.
Step 2: Stop Thinking in Terms of "Rip and Replace"
The full-replacement approach is expensive, high-risk, and largely obsolete. The banking sector's migration away from it is well documented. IDC projected that 40% of global banks would be pursuing a sidecar modernisation strategy by 2026, running a new core in parallel with the legacy system and migrating workloads incrementally.
That shift reflects a hard lesson: big-bang migrations generate big-bang failures. The 2018 Truist outage, caused by a Hitachi storage system tied to outdated backend infrastructure, halted services for 15 hours. That kind of event destroys customer trust in ways that take years to rebuild.
Progressive modernisation works differently. Instead of replacing the entire stack at once, you isolate functions, build modern versions of them as composable services, and migrate traffic gradually. Payments. Onboarding. KYC. Lending. Each module can be modernized independently without disrupting the others.
This composable approach has structural advantages beyond risk reduction. It allows you to prioritize by revenue impact. You modernize the systems that unlock new product capability or competitive speed first, which means the programme starts generating return before it is complete. That changes how the board perceives the investment.
The strategies available to most financial institutions fall into three broad categories:
Phased replacement involves gradually replacing legacy components while maintaining operational continuity. Lower risk, manageable scope, quicker initial wins. The trade-off is a longer total timeline and temporary integration complexity while old and new systems run in parallel.
Parallel core migration means building a new system alongside the existing one, then migrating customers and functions in coordinated waves. Cleaner architecture, shorter overall timeline, but higher initial investment and significant change management demands.
BaaS layering uses cloud-based Banking-as-a-Service platforms for specific functions while keeping legacy systems for others. Fastest time to market with the lowest capital requirement, but carries vendor concentration risk. Best suited to institutions launching a digital brand or entering a new segment without wanting to touch core infrastructure.
Most mid-market FinTechs end up using a combination. A sidecar for new product lines, phased replacement for high-risk legacy components, and BaaS for capabilities they do not need to own.
Step 3: Sequence by Risk, Revenue, and Regulatory Pressure
Once you know what you have and what strategy fits each component, you need to sequence the work. Three factors should drive that sequence: regulatory pressure, revenue impact, and technical risk.
Regulatory pressure is non-negotiable. Under DORA, financial institutions operating in the EU must demonstrate operational resilience, with requirements for ICT risk management, incident reporting, and third-party vendor oversight. Systems that fail these requirements are not modernisation candidates; they are urgent remediation items. They come first, regardless of their revenue profile.
Revenue impact shapes the middle of your roadmap. If your legacy core cannot support real-time payments, and your competitors can launch embedded finance products in days while you need months, the cost of that gap is measurable. A 2024 study from 10x Banking found that 55% of institutions cite their legacy core as the biggest barrier to achieving digital transformation goals, with 53% unable to scale due to data silos and production bottlenecks. Modernising the payment layer unlocks revenue. That makes it a higher priority than, say, modernising internal reporting infrastructure.
Technical risk is the sequencing constraint. Some modernisation work creates dependencies you must resolve before you can move forward. Your audit will have surfaced these. Respect them. Projects that try to modernize systems with unresolved upstream dependencies fail at integration, which is exactly where big-bang migrations also tend to fail.
A practical heuristic for sequencing: regulatory-critical first, revenue-generating second, operational efficiency third. When two items of similar priority compete, pick the one with fewer dependencies and a clearer path to migration.
Step 4: Choose Your Architecture Principles Before You Buy Anything
Vendors will pitch you their platforms before you have settled your architecture principles. That is the wrong order. Architecture decisions made under vendor influence tend to produce vendor lock-in rather than genuine modernisation.
Three principles that should precede any vendor selection in FinTech modernisation:
API-first integration. Every modernized system should expose its functions via open APIs. This is not a nice-to-have. It is the prerequisite for composability, third-party integration, and the ability to replace any component in the future without a destructive migration. If a vendor cannot commit to open API standards, that is a meaningful red flag.
Event-driven architecture for real-time processing. Legacy systems were built for batch processing. Modern FinTech operations require real-time data flows: instant payments, live fraud detection, continuous KYC. Event-driven architecture, built around streaming tools and automated risk engines, is the technical foundation for these capabilities.
Cloud-native with modular components. Cloud migration alone generates measurable operational cost savings through automated scaling and reduced downtime. More important than the cost saving is the operational model change: cloud-native infrastructure allows your teams to deploy, test, and roll back independently, which directly accelerates delivery velocity.
These principles also have compliance implications. Under DORA and NIS2, financial institutions must prove operational resilience and incident response readiness. Modern cloud-native architectures with proper logging, rollback capability, and vendor-diversity make those proofs significantly easier to produce than patchwork legacy environments do.
For a deeper look at cloud architecture decisions in the context of FinTech delivery, see our Cloud Hub overview.
Step 5: Build the Team Around the Roadmap
A modernisation roadmap is only as credible as the team executing it. This is where many programmes stumble, not because the technical plan was wrong, but because the organisation tried to run it entirely on existing headcount, which was already committed to keeping the lights on.
Legacy modernisation creates a genuine resourcing paradox. The engineers who know your legacy systems best are the ones you need for migration planning. They are also the ones spending the most time patching those systems. Pulling them into a modernisation programme without backfilling their operational responsibilities creates a dual-track execution problem: the migration slows down because the people running it keep getting pulled back to production issues.
The most effective response is to staff the modernisation track separately. Bring in specialists with direct experience in the technologies you are migrating to: cloud-native architecture, modern API platforms, the specific compliance stack your target environment requires. Keep your existing team on operational continuity with reduced scope, not eliminated responsibilities.
This is where dedicated software development teams become a practical tool rather than a staffing shortcut. They let you stand up a migration squad quickly, with relevant expertise, without disrupting your existing delivery commitments. The team works alongside your engineers on knowledge transfer rather than replacing them, which is critical for maintaining institutional context during a complex migration.
The team composition you need will vary by phase. Early phases are architecture-heavy: you need engineers who can design the target state, identify integration risks, and build the foundational services that everything else will connect to. Later phases shift to migration execution and testing. The Legacy App Modernisation and Platform Modernisation services at Scrums.com are built specifically for this pattern: an architecture-led engagement that then hands off to a delivery team with the context to execute.
One point worth making explicitly: the talent pool for legacy COBOL maintenance is shrinking fast. Specialized COBOL engineers cost two to three times more than engineers working on modern stacks. That cost differential is itself a modernisation argument, but it also means that waiting gets more expensive each year, not less.
Step 6: Measure Progress Against Delivery Outcomes, Not Migration Milestones
Modernisation programmes have a well-documented tendency to measure themselves on the wrong things. Teams track lines of code migrated, systems retired, and infrastructure moved to cloud. These are activity metrics. They do not tell you whether the programme is generating value.
The measures that matter are delivery-side: time to market for new features, deployment frequency, change failure rate, and mean time to recovery. These are the four DORA metrics, and they are the clearest proxy for whether your modernized architecture is actually performing better than what it replaced. See our DORA Compliance: Banking DevOps at Speed guide for the implementation detail.
Beyond DORA metrics, track the cost curve of your legacy estate over time. If your modernisation programme is working, the percentage of IT budget consumed by maintenance should be falling. Legacy systems in banking can consume up to 64% of total IT budget. Every point you recover there is a point you can redirect to building new capability.
Customer-facing metrics matter too. If your modernisation is unlocking real-time capabilities (instant payments, personalized products, faster onboarding), those outcomes should show up in product adoption and retention figures. A phased migration at a mid-sized European bank, documented by the European Banking Association, delivered a 38% reduction in system costs over 18 months and a 62% improvement in time to market for new products. These are the numbers that keep a modernisation programme funded.
For engineering leaders who want a unified view of these metrics in real time, the Engineering Observability Services at Scrums.com provide DORA tracking, velocity analysis, and delivery visibility across distributed teams, including modernisation squads running in parallel with core delivery work.
Step 7: Treat Compliance as Architecture, Not as an Afterthought
One of the most common mistakes in FinTech modernisation is treating regulatory compliance as a downstream concern, something you address after the technical migration is complete. That approach creates rework, delays, and the kind of architecture debt that you were trying to eliminate in the first place.
Compliance requirements should shape your target architecture from the start. DORA requires financial institutions to demonstrate ICT risk management, operational resilience, and third-party vendor oversight. If your target architecture cannot produce audit trails, support incident reporting, or isolate third-party dependencies, it will fail compliance review regardless of its technical merit.
Build the compliance requirements into your architecture principles. Every service you modernize should be designed with auditability, rollback capability, and access control as first-class requirements. The Secure and Compliant Software Delivery use case at Scrums.com reflects this principle: compliance controls that are embedded in the delivery process generate far less friction than controls bolted on after deployment.
This is also where the distinction between compliance and security becomes important in practice. Compliance tells you the minimum floor: what regulators require you to demonstrate. Security tells you what your threat model actually requires. Legacy systems that are technically compliant but architecturally weak (outdated encryption, fragmented data silos, patchwork access controls) can pass a compliance audit while failing a serious breach attempt. Your target architecture should satisfy both.
Outdated core systems carry three times more security vulnerabilities than modern alternatives. When you combine that with the average $6.08 million cost of a data breach in financial services (22% above the global average), the security case for modernisation is every bit as strong as the compliance case.
What a Credible Modernisation Roadmap Looks Like in Practice
To pull this together, here is what a realistic 18-month roadmap structure looks like for a mid-market FinTech:
Months 1–3: Audit and architecture. Complete the legacy cost audit. Map dependencies. Select your architecture principles. Engage modernisation specialists and begin the compliance gap analysis against DORA and applicable frameworks. Output: a prioritized backlog of modernisation targets and a target architecture document.
Months 4–9: High-priority migrations. Tackle regulatory-critical systems first, then the components blocking your highest-revenue capabilities. Stand up parallel infrastructure, run migration workloads in sidecar mode, and validate that the new components meet compliance requirements before traffic is shifted. Output: two to four key systems migrated, compliance gaps closed, measurable delivery velocity improvement.
Months 10–15: Revenue-generating modernisation. Modernize the systems that unlock new product capability: real-time payments rails, embedded finance APIs, modern KYC and onboarding flows. Begin decommissioning retired legacy components. Output: new product capabilities live, legacy infrastructure costs declining.
Months 16–18: Operational optimisation. Focus on the remaining operational efficiency targets. Automate the infrastructure you have built. Reduce the legacy estate further. Track DORA metrics and cost curve improvements. Output: measurable reduction in IT budget consumed by maintenance, delivery metrics showing sustained improvement.
This is not a prescription. The actual sequence depends on your audit findings, your regulatory deadlines, and your product roadmap. What it illustrates is the shape of a credible programme: compliance-led, revenue-sequenced, and measured on outcomes rather than activity.
The One Thing That Kills Modernisation Programmes Before They Start
Senior leaders frequently ask what the single biggest risk to a modernisation programme is. The answer is almost never technical.
It is the failure to build and maintain internal alignment on why the programme exists.
Modernisation creates disruption. It takes engineers away from product work. It introduces temporary complexity as old and new systems run in parallel. Without consistent, visible leadership commitment, and a business case that stays alive throughout the programme rather than being made once at kickoff, these disruptions become reasons to pause, deprioritize, and eventually abandon.
The business case framing from step one is not a one-time presentation. It needs to be revisited and refreshed as the programme progresses, incorporating the actual cost savings and velocity improvements you are recording. A programme that started as "reduce technical debt" becomes much more defensible when you can show the board that operational overhead is down 18% six months in.
The strongest modernisation programmes we see are led by technology leaders who treat the internal stakeholder case as a continuous responsibility, not a box checked before kickoff.
Ready to Start?
FinTech modernisation does not have to be a single high-stakes bet. A roadmap-first approach (with clear cost accounting, risk-sequenced phases, and the right team structure) turns it into a series of manageable, measurable steps that compound over time.
If you want to work through what that looks like for your specific stack, start a conversation with the Scrums.com team. We work with FinTech and banking organisations specifically, and we can help you move from audit to architecture to execution without stalling your current delivery commitments.
For additional context, see our related resources:
- The Complete Guide to Legacy Software Modernisation
- A Step-by-Step Guide to Migrating from Legacy Systems
- DORA Compliance: Banking DevOps at Speed
- How CTOs Cut Costs Without Slowing Delivery
- Modernize Legacy Systems Without Risky Rewrites
Frequently Asked Questions
What is a FinTech modernisation roadmap?
A FinTech modernisation roadmap is a structured plan for replacing or upgrading legacy technology systems in a financial services organisation. It defines what gets modernized, in what order, and why: based on cost impact, regulatory requirements, and revenue opportunity. A good roadmap treats modernisation as a sequenced programme with measurable outcomes, not a single large-scale migration event.
How much does FinTech modernisation typically cost?
Costs vary significantly by scope, but the more useful question is what legacy systems currently cost to maintain. IDC research found that enterprises with legacy infrastructure spend up to 42% more on operational overhead than modernized counterparts. FIS and Oxford Economics estimated the average financial institution loses $93.6 million per year from legacy system limitations. A phased modernisation programme that eliminates those costs often pays back the investment within 18 to 24 months.
What is the difference between a "rip and replace" approach and phased modernisation?
A rip-and-replace approach decommissions the entire legacy system and replaces it in a single migration event. Phased modernisation replaces components incrementally, running old and new systems in parallel during each transition. The phased approach carries significantly lower risk of catastrophic failure, allows you to validate each component before migrating traffic, and starts generating return earlier because high-value components can be modernized first.
What is a sidecar modernisation strategy in banking?
A sidecar strategy involves building a new core system alongside the existing legacy platform, then gradually migrating customers and workloads to the new system in waves. It avoids the need to take the original system offline during migration and allows the organisation to validate that the new core is stable and compliant before completing the transition. IDC projected that 40% of global banks would adopt this strategy by 2026.
What role does DORA play in FinTech modernisation?
The Digital Operational Resilience Act (DORA) requires financial institutions operating in the EU to demonstrate ICT risk management, operational resilience, and third-party vendor oversight. Legacy systems often cannot satisfy these requirements without significant remediation. Modernisation programmes should treat DORA compliance as an architecture input, building auditability, incident reporting capability, and resilience controls into the target state from the start, rather than addressing them as a post-migration retrofit.
How do you build a team for a FinTech modernisation programme without slowing down existing delivery?
The most effective approach is to staff the modernisation track separately from the team responsible for operational continuity. Bringing in specialists for the migration work (particularly for cloud-native architecture, compliance integration, and API platform development) allows your existing team to maintain delivery commitments without being pulled in two directions. This model also supports knowledge transfer, ensuring institutional context is preserved throughout the migration.
What DORA metrics should a modernisation programme track?
The four core DORA metrics (deployment frequency, lead time for changes, change failure rate, and mean time to recovery) provide the clearest measure of whether a modernisation programme is improving engineering performance. A successful modernisation should increase deployment frequency and reduce both change failure rate and recovery time, reflecting the stability and agility of the new architecture compared to the legacy environment it replaced.
What is the biggest risk in FinTech modernisation projects?
The biggest risk is usually not technical. It is the failure to sustain internal alignment on why the programme exists. Modernisation creates short-term disruption (engineers pulled from product work, temporary complexity from running parallel systems) and without consistent leadership commitment and a regularly refreshed business case, these disruptions become reasons to deprioritize or stop. The organisations that complete modernisation programmes successfully treat stakeholder management as a continuous responsibility throughout the programme, not a one-time exercise at kickoff.
