Modernizing Legacy Banking Systems: From Mainframes to Microservices—A Practical Guide for 2025

Introduction

As we enter 2025, the imperative for banks to modernize their legacy systems has never been clearer. Market volatility, evolving customer expectations, and the rapid acceleration of AI are reshaping the financial services landscape. Yet, many banks still rely on decades-old mainframes and COBOL-based systems—reliable, but increasingly a barrier to agility, innovation, and cost efficiency. The challenge is daunting, but the rewards are transformative: streamlined operations, enhanced customer experiences, and the ability to leverage generative AI at scale.

This guide offers a step-by-step, practical approach to legacy modernization, drawing on the latest industry insights, real-world case studies, and proven strategies from recent events like VivaTech 2025. Whether you’re a technology leader, operations executive, or transformation sponsor, this page will help you navigate the journey from mainframes to microservices with confidence.

Why Modernize Now?

Legacy systems have been the backbone of banking for decades, but they are increasingly ill-suited to today’s demands. Only 35% of banks report having agile systems in place, and the gap between digital leaders and laggards is widening. As interest rates normalize and profitability pressures mount, banks must find new efficiencies and growth opportunities—many of which are only possible with modern, flexible technology foundations.

Modernization is not just about technology. It’s about enabling new business models, improving resilience, and meeting regulatory requirements in a world where compliance, security, and customer trust are paramount. The rise of generative AI and cloud-native architectures means that banks can no longer afford to treat modernization as a back-burner project.

Step 1: Assess and Document Your Legacy Estate

The first step is to gain a comprehensive understanding of your current systems. Many banks have millions of lines of COBOL code running on mainframes, with business logic that is poorly documented and deeply embedded in daily operations. Recent advances in AI-powered code analysis now make it possible to reverse engineer these systems efficiently:

AI-driven code analysis can read decades-old COBOL, generate documentation, and map business logic to current processes.
This approach not only accelerates understanding but also creates a regulatory audit trail, ensuring compliance from the outset.

At VivaTech 2025, leading banks demonstrated how AI tools can transform legacy code into well-documented, API-accessible services, turning mainframes from liabilities into strategic assets.

Step 2: Define a Phased Modernization Roadmap

Attempting a “big bang” replacement of core systems is risky, costly, and rarely successful. Instead, banks are adopting phased modernization strategies:

Prioritize high-impact modules for early migration—such as customer onboarding, payments, or risk management.
API enablement allows legacy systems to interact with modern applications, enabling new digital experiences without immediate full replacement.
Microservices architecture: As modules are modernized, they are rebuilt as independent, cloud-native services (often in Java), which can be deployed, scaled, and updated independently.

A major European bank recently reported reducing a €200 million, five-year modernization program to €40 million and a phased rollout, going live with new modules in months rather than years.

Step 3: Leverage AI and Automation Throughout the SDLC

Modernization is not just about rewriting code. AI-powered development platforms are revolutionizing the software development lifecycle (SDLC):

Automated code generation and testing accelerate delivery and reduce defects.
Embedded compliance checks ensure that new code meets regulatory requirements (e.g., GDPR, MiFID II) before it reaches production.
Continuous integration and deployment enable weekly releases instead of quarterly or annual cycles, dramatically improving time-to-market.

One European bank cut its mobile app release cycle from quarterly to every two weeks, with a 40% improvement in defect rates, by adopting AI-driven SDLC tools.

Step 4: Ensure Regulatory Compliance and Security by Design

Regulatory compliance is non-negotiable in banking. Modernization efforts must embed compliance and security from the start:

Automated documentation and audit trails are generated as part of the development process.
Data residency and privacy controls are built into new architectures, ensuring alignment with local and international regulations.
Domain-specific AI models trained on financial regulations can flag potential breaches that generic models might miss, as demonstrated by leading banks at VivaTech 2025.

Step 5: Address Cost, Risk, and Cultural Change

Modernization is a significant investment, but the cost of inaction is higher. Successful banks are:

Phasing investments to deliver value early and reduce risk.
Redeploying staff from manual operations to higher-value roles, as automation frees up capacity.
Investing in change management to bring the workforce along, addressing cultural resistance and building new skills.

A phased approach, supported by clear business cases and measurable outcomes, helps secure executive buy-in and maintain momentum.

Regional and Strategic Considerations

Modernization is not one-size-fits-all. Regional priorities vary:

In the UAE and Saudi Arabia, banks are leveraging AI as a core driver of modernization and growth.
In the UK and Australia, the focus is on simplification and cost reduction.

Regardless of geography, the principles remain the same: build on a strong technical foundation, enable agility, and ensure compliance.

The Road Ahead: From Legacy to Leadership

The journey from mainframes to microservices is complex, but the path is now well-trodden. AI and automation are turning legacy systems into assets, not anchors. Phased modernization, API enablement, and cloud-native architectures are delivering measurable cost savings, faster innovation, and improved resilience.

Banks that act now will be positioned to thrive in 2025 and beyond—delivering exceptional customer experiences, driving operational efficiency, and unlocking the full potential of generative AI.

Ready to modernize your legacy systems? Publicis Sapient partners with leading banks worldwide to design and execute practical, risk-managed modernization journeys. Contact us to schedule an executive briefing and see how these solutions can work for your organization.