Modernizing for resilience, growth and competitive advantage

“For banks, modernization is no longer optional. It’s a financial necessity, a competitive differentiator and the foundation for delivering the digital experiences customers now expect. AI is changing how banks modernize, but lasting success still depends on disciplined execution, strong governance and measurable business outcomes.”

Banks are under growing pressure to reduce technology debt, meet rising customer expectations and respond to an increasingly complex regulatory environment. Rather than simply accelerating delivery, AI is changing the financial equation behind modernization, helping banks reduce technology debt while delivering business value sooner. Drawing on decades of experience helping financial institutions modernize complex technology environments, we spoke with Manoj Mishra, a leader in our banking practice, about why modernization has become an economic imperative and how AI is reshaping the path forward.

What is driving modernization across the banking industry today?

The biggest shift I've seen over the past several years is that modernization is no longer a technology conversation. It's a business conversation. For years, banks could afford to delay replacing legacy systems because the cost and risk of transformation felt too high. That's changing. Today, the cost of standing still is often greater than the cost of modernizing. Our 2026 Voice of Our Clients research found that 45% of leaders cite legacy systems as a top challenge. A CFO at a regional bank told me last year that the modernization conversation in his organization used to start and end in IT. Now it starts in his office, because he's the one watching the technology spend climb every quarter without a corresponding lift in business results.

Part of the issue is the technology debt that banks have accumulated over decades. Many institutions are spending a growing share of their IT budgets simply maintaining legacy platforms instead of investing in innovation. When technology spending continues to rise, but business value doesn't, it becomes clear that modernization isn't just an IT priority. It's a financial one.

At the same time, customer expectations have changed dramatically. Consumers don't compare their bank to others anymore. They compare every digital experience to the best one they had that day. Whether they're shopping online, booking travel or using their favorite mobile app, they expect the same speed, simplicity and personalization from their financial institution.

Then there's the regulatory environment. Regulation has always influenced banking technology decisions, but today it's also creating opportunities to modernize in smarter ways. Payments modernization is a great example. Many banks begin those programs because they need to meet evolving regulatory requirements. Along the way, they often discover they're improving customer experiences, simplifying operations and creating new opportunities for growth. What starts as a compliance effort becomes a catalyst for broader business transformation.

When you combine those forces, modernization stops being something you plan for someday. It becomes essential to stay competitive. The banks that approach it as an ongoing business discipline rather than a one-time technology project will be best positioned for what's next.

What separates banks that are modernizing successfully from those that struggle?

One pattern I've seen consistently is that the biggest differentiator isn't technology, but how modernization is managed. The banks making the greatest progress approach modernization as an enterprise change program that transforms people, processes and technology together, not just an IT deployment. That's an important distinction because successful modernization changes how the business operates, not simply the systems it runs.

I've also seen how organizational silos can slow progress. I have seen banks spend 12-14 months writing a business case and then blow through the funding in year one. Many financial institutions still operate with separate priorities across business units, creating inconsistent customer experiences and making enterprise-wide modernization far more difficult than it needs to be. Aligning business and technology around shared outcomes, rather than isolated initiatives, is key here.

Execution discipline is equally important. Large modernization programs are inherently complex, but the organizations that consistently succeed maintain rigorous control over scope, timelines and investment. That discipline builds confidence across the business and helps ensure modernization delivers measurable outcomes rather than becoming another initiative that continues indefinitely without creating lasting value.

How is AI changing banking modernization?

What's different today from anything I've seen earlier in my career is the impact AI is having on delivery. Historically, reducing decades of accumulated technology debt required enormous investments of time and effort. Today, AI is accelerating activities across the software development life cycle, helping organizations analyze legacy environments, automate development tasks and significantly increase delivery throughput.

That changes the economics of modernization.

On a recent engagement, a code analysis task that used to take our team several weeks, mapping dependencies across a legacy platform, took our team a few days with AI-assisted tooling. That's not a small efficiency gain; it changes what banks can justify starting.

This is creating a unique opportunity for banks. For years, many institutions recognized the need to modernize but struggled to justify the costs and disruptions of large-scale programs. AI has changed that equation. By accelerating development, testing and migration activities, organizations can generate value earlier, allowing early gains to fund future phases of modernization rather than waiting years to realize benefits.

Banks can accomplish more with the same investment, making it possible to reduce technology debt much faster. AI is also evolving well beyond the early use cases many organizations associate with the technology. Just a few years ago, conversations centered on chatbots and fraud detection. Today, we're seeing organizations apply AI across the modernization life cycle to accelerate development while ensuring people remain in control of critical decisions.

We're entering a period where AI allows banks to reduce decades of accumulated technology debt much faster than ever before. Leaders who move now will be better positioned to redirect investment toward innovation, customer experience and business growth rather than maintaining legacy environments.

How is AI changing the relationship between banks and their modernization partners?

Not long ago, discussions focused primarily on project scope, staffing levels and delivery timelines. Increasingly, those conversations are centered on outcomes like how quickly organizations can modernize critical platforms, reduce technology debt and create measurable business value.

AI enables modernization partners to work differently, but technology alone isn't enough. Banking remains one of the world's most highly regulated industries, so success depends on combining AI with strong governance, industry expertise and a clear understanding of where human oversight remains essential.

The relationship is evolving from delivering projects to delivering outcomes. Organizations are looking for partners who bring practical experience, proven delivery discipline and lessons learned from modernization programs across the industry. That allows banks to move faster with greater confidence while avoiding many of the pitfalls that have slowed transformation efforts in the past. We operationalize this by combining AI-accelerated delivery with an embedded governance/model risk management.

What advice would you give banking leaders beginning the next phase of their modernization journey?

If there's one lesson I've learned working with banks over the past 25 years, it's that technology debt never gets smaller by waiting. Modernization has become both a business and financial necessity. The longer organizations delay, the more difficult and expensive modernization becomes.

At the same time, leaders shouldn't assume success comes from adopting the newest AI tools. The banks that create lasting value won't necessarily be the ones with the most AI. They'll be the ones that combine AI with disciplined execution, responsible governance and a relentless focus on results.

I've seen this play out with two banks. One delayed its core modernization until the scope and cost had roughly doubled. The other treated modernization as an ongoing priority and it's now years ahead, both technically and in confidence to handle whatever comes next.

Technology will continue to evolve, but the organizations that succeed will be those that modernize with purpose—reducing complexity, strengthening resilience and continuously improving the experiences they deliver to customers.