Banking Technology Is Critical to Modern Business
Modern banking relies on back-end information technology systems called core banking systems (CBSs). These CBSs process the bank’s daily transactions and update financial accounts and records. They are a crucial foundation for the products and services that financial institutions like commercial banks, credit unions, savings and loan associations, and more offer their customers.
Some banks have relied on legacy CBSs for years—but we are reaching a point where old systems struggle to match the demand of modern banking services. Features like real-time payments, mobile banking, open banking, and personalization require flexibility that legacy CBSs often can’t provide. Thus, your bank’s technology could be significantly holding back your ability to continue providing what today’s customers need.
Let’s explore these different sides of the banking industry and technology.
What Is Banking Technology and How Is It Shaping the Industry?
Banking technology means the digital systems, tools, and processes financial institutions use to provide services and manage operations for enhanced, innovative customer experiences. It can refer to various technologies, such as mobile banking, artificial intelligence (AI), cloud computing, and data and analytics.
Over the decades, banking evolved from paper record-keeping and in-person transactions at banking branches to innovative technologies like ATMs, direct deposits, and electronic funds transfers. Now, banks are adding more advanced technologies like artificial intelligence (AI), machine learning (ML), open banking, and embedded finance. With these connected channels comes a need for enhanced security and mobile-first technology that reaches customers where they are—on their phones.
According to a 2024 Morning Consult survey conducted on behalf of the American Bankers Association, 55% of U.S. consumers banked through mobile apps over other methods in the last year. In addition, 22% banked online through laptops or PCs.
The 2020 pandemic accelerated the pressure for banks to adopt mobile options, allowing customers to deposit checks at home, split dinner costs from the restaurant table, or chat with virtual assistants without setting foot inside a branch. Customers highly value—and expect—their financial institutions to leverage these innovative technologies.
Benefits of Upgrading Your Banking Technology
What’s as important (if not more) as onboarding new customers? Keeping them loyal. Today’s account holders expect to be able to complete all necessary tasks through digital channels, for their financial institutions to automate these systems, and their banks keep them in the loop without added tasks or effort. Meeting (and exceeding) expectations means customers stick around.
Upgrading your banking technology comes with numerous benefits. Newer technologies like cloud computing, APIs, and micro-services offer greater flexibility and scalability, easing integration with other technologies. While legacy systems may seem cheaper to maintain, the costs increases compound over time due to inefficiencies and workarounds. Taking a hard look at existing systems and upgrading to modern technologies can save time and money internally, build customer interest and trust, and close security gaps at their source.
Core banking should provide the technology for banks to “drive growth, enhance customer experiences, and stay resilient in an evolving financial landscape,” according to Temenos. Let’s look at some rising trends in banking technology to consider when evaluating how your CBS holds up to modern times.
Banking Tech Trends to Support Growth in 2025
- Predictive AI — Implementing predictive AI to analyze patterns and behaviors at scale is one metric for digital maturity. AI banking assistants provide an additional service layer that’s available 24/7.
- Seamless Integration — Banking touch-points are no longer isolated to institution-owned platforms. Integration with third-party services like online shopping (e.g., buy now, pay later or BNPL), social platforms, and budgeting software offers convenience in fewer steps. Banking as a service (BaaS) allows financial institutions to integrate with non-banking companies, which can decrease your customer acquisition cost from $100-200 to $5-35, according to OliverWyman.
- Improved Security — Multi-factor authentication goes beyond text, email, or phone calls—incorporating biometrics like facial recognition and fingerprint scanning for faster, more secure transactions. Other technologies like blockchain decentralize recorded transactions so that they can’t be altered or deleted, reducing tampering or fraud.
- Personalization — Each customer is unique, and AI (like large language models or LLMs) combined with data analytics can help banks offer more unique, personalized, and tailored experiences. According to Deloitte’s Digital Banking Maturity 2024 survey, we’re seeing banks focus more on personalizing the customer experience versus simply developing new functionalities.
- Instant Payments, Open Banking, and Mobile Banking — Driven by customer demand for personalization, convenience, and security, these trends reflect a broader movement towards digital transformation in banking. They are crucial for meeting customer expectations and staying competitive in a rapidly changing landscape.
Choosing the Right Banking Technology Also Comes with Challenges
Although upgrading to modern tech offers benefits to both banks and customers, financial and operation concerns are valid. While core banking technology systems provide a backbone for your banking operations, they can impede your company’s growth in a few key areas.
- Outdated legacy systems — Relying so heavily, for so long, on legacy systems makes it hard to pivot to more modern systems. Replacing or upgrading a legacy CBS takes careful thought and planning that can’t happen overnight.
- Integration with other systems — Consumers expect smooth, seamless integration with other technologies. This poses a challenge when trying to implement new systems alongside old, existing systems.
- Security concerns — Robust security measures are critical for banks to protect sensitive customer information. Legacy core banking systems’ outdated technology and limited security features make them vulnerable to cyberattacks and data breaches. This lack of robust security protocols and encryption methods makes legacy systems no match against modern cyber threats.
- Handling modern data loads — Financial institutions manage enormous amounts of data. Banks using old CBSs must think about how to best manage and leverage this data, not to mention protect it.
- Scalability issues — As financial institutions grow, they can experience significant growing pains that require serious conversations about their tech. Integrations, data management, performance, infrastructure costs, and user experience are all concerns that scalability concerns that banking technology must be able to accommodate.
Banks must often choose between maintaining their legacy systems or investing in modernizing their core technology. The key to successful upgrades is to not make technology-related decisions in the dark. Banks need insight into how the technology will impact customers, internal teams, and core systems.
The Missing Piece: You Can’t Rely on Tech Alone
Like history, trends tend to repeat themselves. While customers expect and rely on digital banking systems, their needs are multifaceted, especially across an intergenerational customer base. Relying on technology alone without considering a 360-degree customer experience (CX) strategy could hurt your bottom line and erode trust in your brand.
While in-person banking was on its way out going into the 2020s, institutions like Capital One are bringing back the brick-and-mortar in the form of bright, plant-filled Capital One Cafes. These cafes bring in a wider audience than just banking customers, serving as community-focused third spaces for the public. Cafe customers are also offered the opportunity to engage with Capital One products through interactive displays in-store or chat with banking representatives at the cafe site for a full-service experience that entices interaction and builds both brand recognition and trust across demographics.
This illustrates the importance of staying innovative without losing the humanity threaded throughout the banking experience. The goal should be for banking technology to stay on pace with technological advances and modern banking services, all while keeping the customer firmly planted at the heart of it all.
Are You Maximizing Your Banking Technology? We Can Help.
According to a 2022 McKinsey & Company report, many depository institutions still use legacy core systems up to 40 years old that reside on mainframe hardware coded with outdated programming languages. So, why is this an issue in 2025? Modern security concerns and customer interactions require modern core systems.
Outdated systems leave institutions and their customers vulnerable to serious financial risk and even litigation. While costly and time-consuming up front, updates to digital infrastructure are a smart investment that will save money down the road.
Growth of technology in the banking industry is no longer monolithic. Success now requires a solid customer experience strategy that incorporates technology as a piece of the larger puzzle. If you see your organization’s growth slowing or your legacy systems need a revamp, let’s talk. As your CX solutions consulting partner, we can collaborate to determine how to develop or enhance your CX strategy to meet your organization’s goals.