AI-Driven Modernization: Tackling Tech Debt in Financial Services

The $2 Trillion Challenge: Why Tech Debt Demands a New Approach

Financial services organizations—banks, insurers, and asset managers—are at a pivotal crossroads. Decades of incremental technology investments have left many with a tangled web of legacy systems, siloed data, and mounting technical debt. Global estimates put the accumulated tech debt across major enterprises at up to $2 trillion, with financial services bearing a disproportionate share. This burden is more than a technical liability; it’s a strategic threat that hinders innovation, operational efficiency, and the ability to deliver secure, personalized experiences at scale.

Despite dedicating nearly 30% of IT budgets to modernization, only a minority of organizations have successfully modernized their core applications. The result? Operational inefficiencies, slow time-to-market, and an inability to fully leverage emerging technologies like artificial intelligence (AI). For financial institutions, the stakes are even higher: integrating legacy systems, meeting stringent regulatory requirements, and delivering rapid innovation are all essential to remain competitive in a digital-first world.

The Five Debts Hindering AI Adoption and Digital Transformation

Through extensive industry engagement, five critical forms of “debt” have been identified as the primary barriers to AI-driven modernization in financial services:

Technology Debt: Outdated core systems and fragmented architectures slow innovation and increase risk.
Data Debt: Poor data quality, siloed information, and lack of governance hinder AI adoption and regulatory compliance.
Process Debt: Manual, paper-based, or inconsistent processes limit scalability and efficiency.
Skills Debt: A shortage of AI and data talent impedes the ability to implement and scale new solutions.
Cultural Debt: Resistance to change and a lack of an “AI mindset” can stall transformation before it begins.

Addressing these debts holistically is essential for rapid, sustainable AI value creation. Publicis Sapient’s work with leading institutions demonstrates how tackling these debts—by building AI/ML catalogs, modernizing data infrastructure, and driving new business models—lays the foundation for enterprise-scale AI adoption.

AI: The Catalyst for Modernization

AI is not just another tool in the modernization toolkit—it is the catalyst capable of dismantling even the most persistent forms of tech debt. Over 80% of senior executives in financial services believe AI is the breakthrough needed to overcome entrenched technical debt. However, technology alone is not enough. Success demands a shift in mindset, delivery models, and operating architecture.

The Rise of Services-as-Software and AI-Led Service Models

A key insight from recent research is the emergence of “services-as-software”—a new paradigm where technology, not just people, delivers services. For financial services, this shift is critical. Traditional IT services often focus on maintaining legacy systems rather than driving transformation. AI-led service models, by contrast, enable:

Faster innovation and time-to-market
Operational agility and cost savings
Enhanced customer and employee experiences
Proactive risk management and regulatory compliance

Three in four enterprise leaders now expect a pivot from staff augmentation to services-as-software, and 71% are ready to switch providers for better AI execution and leadership. The message is clear: financial institutions that fail to embrace AI-driven modernization risk being left behind.

AI in Action: Modernizing Legacy Systems and Streamlining Compliance

AI-driven modernization is already delivering measurable impact across the financial services value chain:

Legacy System Modernization: Generative AI and automation are accelerating the migration from mainframes and monolithic architectures to cloud-native, modular platforms. For example, a major global bank leveraged generative AI to enhance the software development lifecycle, boosting efficiency by up to 40% and reducing modernization timelines from years to months.
Regulatory Compliance: AI-powered frameworks are automating compliance monitoring, risk detection, and reporting. These solutions adapt to evolving regulations, reduce manual effort, and improve accuracy—critical in a sector where compliance failures can have severe financial and reputational consequences.
Data Modernization: Modernizing data infrastructure is essential for real-time insights, predictive analytics, and regulatory reporting. Data leaders are investing in governance, advanced analytics, and machine learning infrastructure, enabling seamless integration of generative AI and unlocking new business opportunities.

Delivering Hyper-Personalized Experiences at Scale

Customer expectations in financial services have never been higher. AI enables hyper-personalization—tailoring products, services, and interactions to individual needs and behaviors. Banks and insurers are deploying AI-powered recommendation engines, proactive service bots, and omnichannel experiences that build trust and loyalty. These innovations require robust data strategies and secure, compliant platforms.

Overcoming Barriers: From Experimentation to Enterprise-Scale AI

Despite the promise of AI, many financial institutions remain stuck in the experimentation phase. Key barriers include:

Integration with legacy systems
Data quality and governance
Regulatory and ethical concerns
Talent shortages

To move from pilots to production, financial services leaders must:

Treat tech debt like financial debt—track, prioritize, and eliminate it systematically
Build around AI, not just bolt it onto existing systems
Shift from labor-first outsourcing to outcome-based partnerships
Redesign roles, processes, and culture for continuous AI-driven reinvention

Publicis Sapient’s SPEED Capabilities: Accelerating Financial Sector Transformation

At Publicis Sapient, we help financial services organizations tackle tech debt and drive modernization through our integrated SPEED capabilities:

Strategy: Defining a clear vision and roadmap for AI-driven transformation, aligned to business goals and regulatory requirements.
Product: Reimagining financial products and services for the digital age, leveraging AI to create new value propositions.
Experience: Designing seamless, personalized experiences for customers and employees, powered by real-time data and AI insights.
Engineering: Modernizing core systems and integrating AI solutions to enable agility, scalability, and resilience.
Data & AI: Building robust data foundations, ensuring data quality and governance, and deploying AI at scale to unlock actionable insights.

Our approach is holistic: we assess data and AI readiness, manage implementation from proof-of-concept to enterprise scale, and help clients establish self-sufficient AI operating models. This ensures that modernization is not a one-off project, but a sustainable capability embedded in the organization.

Real-World Impact: Case Studies

Publicis Sapient’s work with leading financial institutions demonstrates the tangible benefits of AI-driven modernization:

Deutsche Bank: Built an AI/ML catalog, modernized data infrastructure, and drove new business models—laying the foundation for rapid, sustainable AI value creation.
Operational Efficiency: For a multinational investment bank, AI-powered document imaging and automation streamlined email and unstructured data handling, saving tens of millions of dollars and driving significant process efficiencies.
Data Modernization: A UK-based retail bank accelerated time to insights for data scientists, enhancing productivity and enabling the bank to stay ahead in a competitive market.
Regulatory Compliance: AI integration into compliance workflows has automated regulatory processes, reduced manual effort, and improved accuracy—critical in a sector where compliance is non-negotiable.
Asset & Wealth Management: A global asset manager used AI to unify data access, streamline operational processes, and accelerate decision-making cycles, all while ensuring compliance and traceability.

The Path Forward: Building Future-Ready Financial Services

The future belongs to financial institutions that can break free from tech debt and harness AI as a driver of innovation, efficiency, and customer value. By addressing technology, data, process, skills, and cultural debts in tandem, banks, insurers, and asset managers can move from incremental change to enterprise-scale transformation.

Five Moves for Financial Services CIOs

Adopt AI-led delivery models that prioritize automation, agility, and platform thinking.
Invest in data modernization to ensure AI solutions are built on a solid, governed foundation.
Shift to services-as-software to reduce reliance on manual processes and legacy systems.
Foster a culture of innovation and change management to overcome resistance and skill gaps.
Partner for success, choosing providers with proven AI expertise and a track record of delivering transformation at scale.

Publicis Sapient stands as a trusted partner for this journey—combining deep industry expertise, proven frameworks, and a relentless focus on outcomes. With AI as the catalyst, financial services organizations can rewrite the rules of modernization and lead the next wave of industry innovation.

Ready to smash through tech debt? Let’s talk about your modernization journey.