How modernization is fueling growth in financial services
September 23, 2025
Key takeaways
- The time to modernize outdated financial systems is now, as substandard technology costs firms an average of $100 million annually, including $31.7 million lost to cyberthreats and $21.6 million to fraud.
- Prioritize your data framework, because siloed data can keep you from receiving the full value of your AI and automation investments.
- Adopt advanced fintech solutions or risk falling behind: Firms that utilize technology can improve efficiency, reduce costs and gain a competitive edge in a shifting market.
For trading, investment management and fund servicing firms, modernization is about more than adopting the latest, shiniest technology. It’s the shot in the arm your business needs to surmount its challenges, stimulate growth and make money work harder.
To modernize or not to modernize
This dilemma is hardly a question for today’s financial services market. With technology advancing at such a hectic pace, hanging onto legacy systems is no longer a viable option, and there’s a high price to pay for standing still.
The costs soon stack up. In our Harmony Gap survey of more than 500 C-suite executives and fintech decision-makers across the U.S., the U.K. and Singapore, FIS discovered that substandard systems and processes cost the average organization nearly $100 million each year, including $31.7 million lost to cyberthreats, $21.6 million to fraud, $14.9 million to regulatory and compliance issues and $11 million to operational inefficiencies. 1
In the longer term, there are strategic risks, too. Falling behind in, say, the adoption of AI hampers your ability to fully automate your operations and meet your customers’ new digital expectations, putting you at a considerable competitive and commercial disadvantage.
The choice is simple: Modernize fast or fail to keep pace with the rest of the market.
What’s holding you back?
Modernization may be mission-critical for financial services organizations, but it isn’t always easy. Although 58% of capital markets firms in the Harmony Gap survey have seen their digital transformation initiatives accelerate after investing in fintech, almost a quarter of these buy- and sell-side firms have yet to feel the same benefit. 1
For this significant minority, receiving a return on an investment may not just be a matter of patience. Before you can execute a modernization strategy, you need to ensure you have access to the right skills and software, plus a clear, long-term vision of what you want your team to achieve.
But hiring talent will cost, and so can the integration of new technology with your existing systems and underlying infrastructure.
Over time, large financial services organizations typically accumulate multiple layers of systems: a combination of internal builds, third-party tools and legacy vendor platforms, all stitched together with different data models and integration types.
Given the complexity of these technological environments, it’s easy to see why modernization might take longer than expected to pay dividends. But it’s also important to remember that no system is implemented in isolation.
The most effective modernization strategies involve rethinking entire operating models and reworking processes and workflows from end to end. That means getting your leaders on board and pinning down how different transformation initiatives should fit together.
Above all, you’ll need a coherent data framework , especially if you’re introducing AI. But as data is often stored in silos that can be easier said than done. Our survey shows that 46% of capital markets firms have still not had the chance to accelerate their implementation of AI and automation, compared to just 36% that have. 1
Large language models need easy access to all your data. And without having that data in order, you’re less able to connect and scale your operations. Again, it’s about developing a long-term vision for modernization: not just implementing innovative technologies piecemeal but fully utilizing their benefits as part of a well-integrated whole.
Who’s investing the most in modernization?
When it comes to adopting the latest technology and driving innovation, the Harmony Gap research reveals interesting variations between regions.
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The region is transforming quickly. As a digital-first mindset becomes second nature, APAC’s consumers have embraced embedded finance with enthusiasm, whether for booking taxis or redeeming rewards. Retail banking is predominantly digital, with a growing number of partnerships between banks and fintechs. And buy- and sell-side institutions are now more willing to experiment, too.
Regulation in APAC is also more supportive of digital transformation, creating something of a buoyant fintech ecosystem that, in many ways, is leading the U.S. and Europe. Singapore and Vietnam are exceptionally advanced in this respect, with the latter introducing a centralized legal framework for managing digital assets in June 2025. 2
But what about different financial services sectors and their respective fintech journeys? Again, there are notable variations. According to the Harmony Gap survey, 80% of banks, 73% of asset managers and 70% of fund administrators say they are making very good or moderate progress in their adoption of fintech, compared to just 45% of private equity firms.1
There are good reasons for the disparity. Private equity funds have traditionally run lean operations that are wholly committed to driving sales, making deals and growing value. So, they’ve not necessarily focused on noncore activities like technology development. Nor have they historically had the operational scale to benefit hugely from automation and AI.
But now, with the advent of large language models, more of these firms are beginning to use AI to help them carry out due diligence work. And they are starting to see the efficiencies that advanced tech can bring to their investment and deal-making processes and portfolio companies.
There’s also the influence of younger generations on technology strategies to consider. As more digitally savvy employees rise up the ranks in private equity and private credit firms, they are likely to drive the adoption of the same smart technologies that are transforming their personal lives, whether to digitize bespoke loan documents or provide superfast insights on their holdings.
Should you build or should you buy?
As advanced technologies continue to boost both the efficiency and accuracy of financial processes, financial services firms are taking different approaches to incorporating these innovations into their operations. Although 26% are purchasing ready-made fintech solutions to reduce errors and reworks, 22% are still building solutions in-house.1
It all comes down to the philosophy of your business. If you want control over your technology to protect your IP or develop highly customized functionality, you may be more tempted to opt for building over buying.
But think about your priorities and your core competencies. Yours is not a technology company: It is a financial institution that needs technology to accelerate its modernization and accelerate its time to market for new products or services. Building your own systems not only slows you down, but also adds development and maintenance costs and limits scalability.
When you purchase tech from a vendor, you get a faster return on investment and a solution that you know already works for hundreds of firms like yours. If you’re entering a new market, you’ll get access to best practices and expertise in that market, too, and benefit from years of investment in security, resilience and data integrity – modernized capabilities you could spend a lot of time and money on developing yourself.
Where will tech take you next?
Modernization is the gift that keeps on giving. With cloud-native, AI-driven modular platforms, real-time APIs and big data models, buy- and sell-side firms are constantly finding new ways to improve automation and efficiency, reduce costs, manage risk and make better, faster decisions that fuel growth.
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The end-to-end ecosystems that today’s organizations are putting in place are both scalable and flexible. As new technologies emerge, these solutions can continue to evolve and support the growing convergence between the buy and sell sides of the industry.
Retail services have set new expectations of capital markets firms, with your customers demanding a rich digital experience that only the latest technology can deliver. But modernization will also help future-proof your operations, giving you the agility you need to seize new revenue opportunities, keep money at work and lead an ever-changing market.
With a forward-thinking technology strategy, you can move more easily into new asset classes, geographical regions or business models. If your firm means business about modernization, the possibilities are endless.
1 FIS, The Harmony Gap: Finding the Financial Upside in Uncertainty (with Oxford Economics), May 2025
2 HKTDC Research, VIETNAM: New Digital Technology Law for Digital Assets and AI Use, July 23, 2025
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