A new whitepaper by global payments processor and technology provider, RS2, has revealed that a staggering 70% of banks’ IT budgets are consumed by maintaining outdated legacy systems. The paper entitled How to Solve Banks’ Legacy System Challenges While Controlling Risk suggests that this unnecessary expense is hindering innovation and digital transformation and presents a groundbreaking AI-enabled solution that allows banks to modernize without excessive risk.

The whitepaper underscores the significant challenges legacy systems pose, including reduced efficiency, rising operational costs, and an inability to deliver superior digital experiences. Legacy systems were similarly identified as the top barrier to transformation in a recent survey, where over half of banks said limitations to their existing core solutions was the biggest roadblock to achieving business goals.

The research also explores the pitfalls of traditional “patch and upgrade” approaches, which 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 for 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.

RS2’s research concludes that an AI-driven orchestration layer can optimize banking operations by intelligently routing transactions to lower processing fees, increase authorization rates, and reduce failures. It also strengthens fraud detection and risk management through AI-powered scoring and real-time monitoring, minimizing chargebacks while ensuring compliance with evolving regulations.

Furthermore, advanced analytics unlock deep customer and merchant insights, enabling banks to offer personalized 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, minimize downtime, and optimize resource allocation for peak efficiency.

Commenting on the whitepaper’s release, RS2’s CEO, Radi El Haj, said: “The insights in our research make it clear: banks cannot afford to continue patching outdated systems while the financial landscape evolves around them. Instead of investing their IT budgets in maintenance and patching, banks must prioritize and allocate their investments in innovation and new products if they want to stay ahead.”

He added: “We’ve explored how AI-enabled orchestration layers offer a smarter path forward—one that modernizes operations in a phased approach, mitigating risk while unlocking new efficiencies. By implementing this strategy, banks can enhance customer engagement, optimize performance, and drastically reduce operational costs, all without undertaking disruptive system overhauls.”

With the November 2025 ISO 20022 deadline approaching, banks must act quickly to modernize their infrastructure. RS2’s whitepaper offers a roadmap for financial institutions looking to break free from the constraints of legacy systems and embrace the future of AI-driven banking.