Why Legacy Systems Are Holding Back Pakistan’s Banks
A banking app can look brand new while the system behind it is decades old. Most customers never see that system. They only become aware when a transfer goes wrong, or when their bank starts to acquire something that other banks have got for years. In this article, you will learn about the expense of legacy systems, why banks continue to maintain them, and what they are.
What is a legacy banking system?
In banking, a legacy system is a core, payments, lending, or customer-facing application that still processes live business but can’t be updated, integrated, or scaled at an acceptable cost and risk. Many core banking systems still run on COBOL, a programming language designed in 1959.
Most organizations use them because of familiarity, but their disadvantages can seriously constrain growth and efficiency in today’s digital transformation era.
Why Pakistan’s banks still rely on them
If these systems are so old, why do banks keep them? Primarily because making changes is a massive undertaking and a highly risky move.
The bank can’t pause: A large bank serves millions of people every day. For instance, HBL’s new platform will be used to move more than 40 million accounts and approximately 20 million transactions per day. A bank of this size will not shut its doors for a month to rebuild the core and if they made a mistake in that process, all of those customers will be affected.
It takes years and a lot of money: Core system replacement is risky, expensive, often over budget and takes years to complete. Leaders may not want to spend money on long-term projects that do not have short-term returns.
Everything is wired into it: Over the years, apps, ATMs, payment channels and reports have all been linked to the core, making replacement a difficult task. Changing the core means testing every link, and any one that breaks can stop a service customers depend on.
The people who know it are leaving: The engineers who understand these systems are leaving, which makes the system riskier to touch and harder to replace.
Advantages of legacy systems
To be fair, these systems earned their place.
Stability: Legacy systems have been running for years and most of their bugs have also been identified and corrected. They handle millions of transactions per day and aligns with their security compliance, which is why banks have long accepted their cost as the price of stability.
Familiar workflows: Staff are familiar with these workflows and the procedure was designed around them. No retraining is needed and daily operations are predictable.
Efficiency for specific tasks: They process more efficiently with predetermined tasks, the problem is not that they can’t do these tasks. Problem involves anything outside of them.
Disadvantages of legacy systems: where they hold banks back
As soon as a bank feels the urge to make a change, that’s when the trouble begins.
Not much room for innovation: New products have to be built around the old system, not on top of it. An idea that would take weeks to finish may take months, while features offered to customers arrive by stages, well after other apps have already introduced them.
Slow deployment: Older systems often follow slow, step-by-step development models, and release windows are tightly controlled to limit risk. Even a small update can take a long time to reach customers.
Poor fit with modern tools: Legacy systems don’t easily connect with APIs, fintech platforms or third-party tools. Every integration needs custom work, which is slow and fragile.
High maintenance cost: Maintaining a legacy system can be expensive. Over time, as technology becomes obsolete, it costs more to keep legacy systems running. These systems need to be allocated more resources to be managed so that they are less cost-effective for the businesses.
Disengaged staff: People who spend their days working around a tool, and not using it to do real work, get frustrated. Skilled individuals can move out to join companies that provide them with the latest equipment.
What customers are saying
Customers done use the term ‘legacy systems’, they describe what old technology looks like from the outside.
On Reddit, X and Facebook, Pakistani users have been sharing screenshots and personal stories about banking and wallet apps that fail when they’re needed most. The complaints repeat, our payments don’t go through, accounts can’t be accessed, and transactions appear deducted but don’t reach the recipient. People struggle to pay utility bills, send money to family and pay at shops. Small business owners say they can’t receive payments through mobile wallets, which hits their daily sales.
One customer complained that updating a single phone record at their bank had taken more than three weeks, and the request was still not done. Delays like that are what manual, disconnected back-office processes tend to cause.
Not every outage traces back to old systems, and the causes aren’t always made public. But the question users keep asking is hard to dodge: when your own money becomes inaccessible, who should be held responsible?
What modernisation actually means
Modernising doesn’t mean building a new app. It means changing what sits behind it, so the bank can launch things faster and keep running while it does. In practice that can be a new core system, connecting old and new parts through APIs, or moving some work to the cloud.
Most banks do it in stages. HBL started with 200 branches and is rolling out to the rest.
Legacy systems carried Pakistan’s banks this far. The question is whether they can carry them further. For broader picture, read why Pakistan’s banks need to rethink digital transformation.
