Legacy card technology might feel like a steady foundation for your card program, but it’s often a liability in today’s competitive financial landscape. From rising operational costs to shifting consumer expectations, legacy systems pose significant risks that can undermine a financial institution’s growth.
The six risks facing card programs today fall into two categories: push factors, which impact cost and efficiency, and pull factors, which influence revenue and competitiveness.
Push Factors: Cost and Efficiency Challenges
Retiring COBOL Programmers
Legacy systems, often built on the COBOL programming language, face a critical issue: a shrinking pool of programmers. COBOL facilitates a significant portion of global banking transactions, but with programmers nearing retirement, maintaining these systems is becoming increasingly expensive and risky.
Branches Are No Longer Growth Engines
The traditional branch model is declining in relevance. Digital-first banks are capturing market share with advanced, cost-effective tech. For instance, BBVA reports that 78% of sales transactions in 2023 were digital. Traditional institutions cannot compete with these nimble, tech-savvy challengers without modern card systems.
 Frequent Updates for Regulatory Changes
Adapting to regulatory updates is a persistent challenge for institutions using legacy systems. Modern systems are designed for flexibility and enable faster, more cost-effective compliance.
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Pull Factors: Revenue and Competitiveness Drivers
Demand for Seamless Digital Experiences
Consumers increasingly expect intuitive, digital-first experiences. According to a study by IDC Financial Insights, in 2023, fintechs and digital banks accounted for 47% of new account openings. Legacy systems lack the flexibility to deliver these modern experiences, driving customers to more innovative competitors.
Real-Time Data Is Non-Negotiable
Modern consumers demand real-time insights—whether it’s instant fraud alerts or spending analyses. Legacy systems relying on batch processing cannot deliver the speed and responsiveness required in today’s financial ecosystem.
AI Is a Prerequisite for Success
Artificial intelligence (AI) is transforming the industry, enabling personalized experiences and improving fraud detection. However, AI relies on real-time data access and scalability, both of which legacy systems lack. Without modernization, institutions risk falling behind.
According to Datos Insights, failing to modernize legacy systems puts 10% to 15% of retail banks’ payments revenue at risk annually—equivalent to $100 billion to $150 billion globally. Incremental upgrades may seem safer, but hybrid systems often result in higher long-term costs and diminished competitiveness.
Modernization: A Strategic Imperative
The key benefits of modernizing card programs include:
- Real-Time Data Access: Crucial for delivering personalized, timely customer experiences and proactive fraud management.
- Digital Issuance: Facilitates instant onboarding, improves customer experience and reduces operational costs.
Legacy systems are no longer outdated; they’re liabilities that hinder growth, revenue and competitiveness. Embracing modern card technology is essential to future-proofing your institution.
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