As much as 70 per cent of banks’ IT budgets are being consumed by maintaining outdated legacy systems, according to a new whitepaper by RS2, a payments processor and technology provider.
According to the new RS2 whitepaper, ‘How to Solve Banks’ Legacy System Challenges While Controlling Risk‘ suggests that unnecessary expenditure on legacy systems is drastically hindering innovation and digital transformation – but an AI-enabled solution could present a solution.
Legacy systems can pose a wide range of challenges, including reduced efficiency, rising operational costs, and an inability to deliver superior digital experiences. In fact, legacy systems were identified as the top barrier to transformation in another recent survey, where over half of banks said limitations to their existing core solutions was the biggest roadblock to achieving business goals.
Following its research, RS2 reveals the pitfalls of traditional ‘patch and upgrade’ approaches, which often leave banks with fragmented, siloed platforms incapable of providing the seamless, data-driven services that today’s customers expect. Instead of debating whether to build, buy, or partner with new technology, the report argues that banks should adopt AI-powered orchestration layers to enhance existing systems without the cost and risk of a full-scale overhaul.
“The insights in our research make it clear: banks cannot afford to continue patching outdated systems while the financial landscape evolves around them,” explained Radi El Haj, CEO of RS2. “Instead of investing their IT budgets in maintenance and patching, banks must prioritise and allocate their investments in innovation and new products if they want to stay ahead.
“We’ve explored how AI-enabled orchestration layers offer a smarter path forward—one that modernises operations in a phased approach, mitigating risk while unlocking new efficiencies. By implementing this strategy, banks can enhance customer engagement, optimise performance, and drastically reduce operational costs, all without undertaking disruptive system overhauls.”
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RS2’s research finds that an AI-driven orchestration layer can optimise banking operations by intelligently routing transactions to lower processing fees, increase authorisation rates, and reduce failures. It also strengthens fraud detection and risk management through AI-powered scoring and real-time monitoring, minimising chargebacks while ensuring compliance with evolving regulations.
Furthermore, advanced analytics unlock deep customer and merchant insights, enabling banks to offer personalised promotions, competitive pricing, and predictive customer engagement strategies. Compliance and reporting are also streamlined with automated processes, including real-time AML and KYC checks, significantly reducing manual workloads and regulatory risk. Additionally, AI-driven predictive analytics enhance system reliability, minimise downtime, and optimise resource allocation for peak efficiency.
With the November 2025 ISO 20022 deadline approaching, RS2 says banks must act quickly to modernise their infrastructure. RS2’s whitepaper aims to offer a roadmap for financial institutions looking for a way to break free from the constraints of legacy systems and embrace the future of AI-driven banking.
