Banks struggle with legacy systems as regulatory pressures intensify

Financial institutions are finding themselves increasingly hampered by the twin burdens of outdated technology and rising compliance obligations, according to new global research from Bottomline.

Banks struggle as regulatory pressures intensify

The firm’s fifth annual Future of Competitive Advantage in Banking & Payments survey, based on insights from 220 banking and non-banking financial institutions, paints a picture of an industry caught between accelerating customer expectations and the realities of decades-old infrastructure.

Compliance at breaking point
An overwhelming 91 per cent of respondents said maintaining compliance will be a challenge in the year ahead, as banks try to reconcile customer demand for speed with regulatory scrutiny and the persistent threat of fraud.

The strain is compounded by the complexity of international rulebooks and the need for robust anti-financial crime measures.

Legacy systems obstructing progress
The survey shows 42 per cent of institutions still view legacy systems as the principal barrier to implementing real-time payments, while nearly a third say those same systems slow regulatory compliance.

The tolerance that once allowed firms to defer investment has all but evaporated in the face of rapid fintech innovation and constant regulatory change.

Operational resilience under scrutiny
Concerns about infrastructure fragility are also rising. More than a third of respondents emphasised the importance of alternative payment channels in the event of outages across key networks such as Bacs, CHAPS or Faster Payments.

Institutions are increasingly looking to integrate “back-up rails” to safeguard critical transactions and protect customer trust.

Modernisation and visibility priorities
Despite these hurdles, the direction of travel is clear. Almost a third of firms cite the adoption of new payment rails and improved cross-border strategies as top priorities.

Yet many continue to wrestle with a fragmented view of their own finances: half of respondents lack end-to-end cash visibility, while 45 per cent report that only partial automation limits their ability to assess liquidity in real time.

Shifts in global payments technology
The survey also points to a sharp rise in adoption of Swift’s Global Payments Innovation (GPI), prioritised by 56 per cent of institutions in 2025 compared with just 35 per cent last year.

This reflects frustration with slow and opaque cross-border transactions, a pain point identified by 61 per cent of respondents.

Meanwhile, false positives in sanctions screening remain a persistent obstacle. Accuracy was flagged as the most critical factor in selecting compliance technology, with 57 per cent of banks seeking solutions that cut down unnecessary alerts that consume time and resources.

Regional disparities
Europe appears better prepared than North America when it comes to payment verification, particularly in the context of SEPA Instant.

Thirty-eight per cent of European institutions report readiness, compared with just 11 per cent in North America, where two-thirds admit to being only at the planning stage.

The balancing act ahead
As Vitus Rotzer, Chief Product Officer for Financial Messaging at Bottomline, notes, institutions are “caught in a difficult balancing act” between compliance deadlines, infrastructure upgrades and customer demand for transparent, real-time services.

Competitive advantage, he argues, will come from agile technologies capable of modernising core systems, enhancing resilience and leveraging new standards such as ISO 20022.

For banks and payment firms alike, the survey underscores an urgent truth: modernisation is no longer optional, but essential to survival in an era of relentless regulatory change and heightened customer expectations.