Most banks struggle to adopt new digital solutions because of their legacy infrastructure. As cybercriminals follow the money, financial institutions have become prime targets. Another major incentive for attackers is the vast amount of data banks store. Sensitive information like personal details, transaction histories, loan applications, and account balances weave a story about their customers’ lives. If modern technology now powers fraud, the systems and defenses protecting against it must evolve — and ideally, stay a step ahead.

The Prevalence of Legacy Systems in Financial Institutions

Newer, more advanced systems are emerging as digital-native fintechs gain experience in the industry. However, the continued reliance on legacy solutions is one major barrier to this growth. These outdated platforms support core banking functions such as account opening, transaction processing, deposits and loan management.

This reliance is especially common in central banks. One report found that 75% of financial institutions struggle to adopt new payment methods due to aging core systems. These often lack the flexibility, security updates and vendor support needed to address modern cyber threats.

How Legacy Systems Undermine Cybersecurity

Antiquated platforms pose a significant risk, especially as they reach or exceed their intended lifespans.

1. Increased Vulnerability to Sophisticated Attacks

Many legacy tools can no longer receive the latest security patches or support advanced protective features. Even with strong perimeter defenses like firewalls, the remaining attack surface is still exposed to skilled cybercriminals.

In December 2023, the Central Bank of Lesotho was forced to upgrade its security after five servers were hacked and encrypted. The ransomware attack halted their payment system and delayed recovery due to outdated infrastructure.

2. Difficulty in Regulatory Compliance

Regulatory frameworks require digital services to be secure to protect individuals. The EU’s General Data Protection Regulation (GDPR) introduced hundreds of new requirements for organizations worldwide. In the U.S., the California Consumer Privacy Act (CCPA) grants consumers new privacy rights. Banks often hold personal data collected from marketing, websites or third parties, which are not covered by the Gramm-Leach-Bliley Act and are therefore subject to the CCPA.

Legacy technologies struggle with compliance due to outdated architectures and limited security capabilities. While regulatory bodies do not explicitly penalize banks for using legacy systems, obsolete platforms often lack the technical features to meet legal standards, creating compliance risks and hefty fines. For example, the National Bank of Greece was fined €100,000 or around $110,000 for violating GDPR principles related to client data’s accuracy, integrity and confidentiality.

3. Operational Inefficiencies and Increased Costs

Legacy systems are also expensive to maintain and entail operational drag. Studies show that organizations spend up to 80% of their IT budgets on maintaining legacy applications. Additionally, outdated tools reduce efficiency compared to modern AI-based solutions. This slower performance can frustrate employees and clients, negatively affecting overall business performance.

4. Talent Retention and Skill Gaps

For financial institutions, recruiting and retaining IT professionals is a top challenge. New professionals often prefer working with modern tools, leaving a gap and resulting in understaffed security teams. Today’s systems may become the next generation of legacy technology in just 10 years, continuing the cycle.

5. Third-Party and Supply Chain Risks

Outsourcing legacy system components to third-party providers can also introduce additional cyber risks. In 2024, Sweden’s Sveriges Riksbank was linked to a cyberattack on a third-party provider, Tietoevry, which disrupted the bank’s HR and salary structure. This highlights how legacy dependencies can magnify vulnerabilities beyond an organization’s internal controls.

Practical Strategies to Mitigate Legacy System Cybersecurity Risks

These risks cost banks time and money to resolve and may erode client trust. Here’s what they can do to reduce the impact.

1. Invest in Cybersecurity Talent and Training

Addressing the talent shortage requires active recruitment, ongoing training and knowledge transfer focused on legacy and modern systems. Organizations should incentivize cybersecurity professionals to work with outdated environments while building skills in emerging fintech technologies.

Banks should also reinforce basic cyber hygiene practices. Encourage regular password updates every three months and require passwords to exceed 16 characters. This makes it harder for attackers to succeed with brute-force methods.

2. Prioritize Modernization of Application Servers

Upgrading outdated systems is a critical step toward stronger cybersecurity. Look for application servers that include built-in security policies and frequent updates. A recent study found that 55.3% of organizations cited budget and resource limitations as key obstacles to modernization. Allocating the necessary resources should be a priority — it reduces long-term costs and improves security readiness.

3. Develop a Tailored Migration Roadmap

Shifting away from legacy systems requires a well-planned approach. Start with a thorough assessment of your existing architecture and its risks. Then, create a detailed migration roadmap with clearly defined phases to minimize downtime and maintain business continuity. Working with middleware providers can also help streamline the transition and provide strong support throughout the process.

4. Integrate Modern Architectures

Adopting microservices and cloud-native infrastructure can greatly improve security and scalability. These architectures allow for faster patching, real-time monitoring and better isolation of critical systems. Surveys show that 12% of organizations outperform competitors by using AI. Integrating modern technologies creates a stronger cybersecurity posture and enhances operational agility.

5. Enhance Third-Party Risk Management

Banks must closely examine the cybersecurity practices of third-party vendors, especially those supporting legacy systems. This includes requiring security audits, strong incident response plans and clear contingency procedures.

The High Cost of Holding On

Ultimately, banks must address replacing legacy systems — ideally before these platforms compromise funds or client data. Modernization should be a priority to protect institutions and meet the demands of today’s digital environment. It also offers a competitive advantage. Delaying modernization can lead to consequences beyond security, while acting early helps to future-proof the business.