Discover what maintaining legacy back-office systems is really costing Australian financial institutions, and what they risk from delaying a digital transformation.
The bank of the future is often imagined as a series of intelligent customer experiences. The way it anticipates your needs, personalises your interactions, and automatically adjusts budgets based on predictive insights or market fluctuations.
At the same time, the investor gauntlet has been laid down on Australia's leading financial institutions to drive continued margin improvements, despite the volatile macro-economic climate.
Australian banks, wealth managers, FinTech companies and insurers are the bedrock of Australia’s economy. For years, they have served as a source of innovation and national pride.
But as we look to a future of endless possibilities, fueled by developments in areas like generative and agentic AI, there is a genuine fear that the innovation coming from our leading financial services firms will be throttled by the very technology they run to manage their own organisations.
While some Australian financial services firms have realised the value of modernising HR, finance and payroll functions, for many it’s still an afterthought, relegated to legacy, on-premise technology built more than 30 years ago that's depreciating in capability and relevance.
The question isn't if companies need to modernise their back-office, the question is when. And the answer is now.
Here are three reasons I believe make a compelling case for starting that digital transformation journey in 2025-26, and how it will better equip the Australian financial services sector to meet the demands of an AI-powered future.
Using legacy ERP systems to power modern AI outcomes is like trying to run the latest version of ChatGPT on a type-writer.
The Governance Institute of Australia’s 2025 AI Deployment and Governance Survey Report found that 88% of respondents reported difficulties integrating AI with existing systems. It's understandable; untangling decades of customisations and a spider-web of integrations is a daunting task.
But bolting on AI and cloud-native tools over legacy on-premise products is simply kicking the can down the road, when integration re-wiring would inevitably be required in the future.
Using legacy ERP systems to power modern AI outcomes is like trying to run the latest version of ChatGPT on a type-writer. We’ve all seen the proliferation of digital alternatives, like Apple Wallet, and how seamless those mobile-friendly services are to use. Why should HR and finance teams expect any less?
AI is also only as good as the data that feeds it. Legacy ERPs have fragmented data that is trapped in siloes, forcing accountants to perform manual corrections rather than solving actual business problems. This 'garbage in, garbage out' conundrum makes it difficult to generate accurate AI-driven insights, and the longer this foundational problem is ignored, the longer that data will remain trapped.
Beyond these technical considerations, the cost of deferring back-office digital transformation can also mean squandering future revenue opportunities.
A Publicis Sapient study revealed that 64% of Australian banks believe their legacy infrastructure is hindering them from providing the digital experiences their customers expect, while 73% admit their firms must do more to appeal to digital native customers. Enabling greater agility across the organisation was outlined as Australian banks’ top priority.
Legacy ERPs are a growing liability, not a strategic asset. They simply weren’t built for today’s cybersecurity and regulatory demands, and their continued use poses a direct threat to the operational health of our financial services industry titans.
These legacy systems also create massive technical debt, diverting significant IT budgets and resources away from value-add innovation to costly maintenance instead.
As these systems continue to age, companies risk being left with technology stacks facing end of life, with a shrinking pool of vendors willing to support them (as the consulting ecosystem shifts to newer, more sustainable cloud-first, AI-powered service offerings).
A culture of intellectual curiosity and continuous improvement rarely thrives on a foundation of outdated technology and legacy habits.
Most CFOs typically make decisions through a risk and return lens. But with heightening scrutiny around resource utilisation and workforce productivity, it seems an obvious question to ask: are our financial services leaders “doing things right” and “doing the right things” by maintaining servers for products that the vendors themselves have declared will face depreciation, and receive no further innovation or investment?
People are often an organisation's biggest cost. The battle for talent is also predicated on a battle for technology. When the brightest technical minds are focused on keeping the lights on for aging infrastructure, they're diverted away from growth initiatives or improving customer experiences that help an organisation be more competitive in this digital era.
A culture of intellectual curiosity and continuous improvement rarely thrives on a foundation of outdated technology and legacy habits. Our financial service leaders cannot attract and retain the best talent—who expect to work with modern tools—when their technology signals a commitment to the past. Top professionals will choose other alternatives that offer more dynamic, engaging and fulfilling career experiences.
Workday’s own skills research found that 51% of business leaders are concerned about potential skills shortages in the next three years due to the pace of technological change, among other factors.
According to Gartner, 74% of CFOs also cite a lack of skills as the reason that finance departments did not go further with AI. This shows that AI adoption is not just about the technology — it's a shift that requires finance departments to move away from the old mindset of 'this is how we’ve always done it' to 'what if…we did it this way?'.
Having an AI-powered HR function can help proactively identify skills gaps across the employee lifecycle, from candidate matching and new hire interviews to performance reviews, disciplinary actions, and engagement trends.
Embedding AI agents (digital employees) alongside human workers can also help in augmenting skill deficiencies, while enabling employees with opportunities for upskilling and re-skilling too.
Upgrades become updates, innovation is consumed on auto-pilot, and security patches are applied instantaneously.
The need for modernisation of the back office is also driven by an industry shift away from traditional software vendor relationships to cloud partnership models.
Instead of one-off implementations where the software ‘concrete is poured’ and the system then becomes impossible to change, organisations can now leverage cloud-native platforms to make changes on-the-fly, and adopt new capabilities that are released weekly, not every few years.
Upgrades become updates, innovation is consumed on auto-pilot, and security patches are applied instantaneously.
This digital transformation allows financial leaders to future-proof their operations and adapt to market shifts far more quickly. Not only is this approach much more efficient, but it significantly increases the long-term value of the technology over time (the notion of an appreciating cloud asset vs depreciating software licenses).
Of course, like any partnership, it's a two-way street. The cloud partner can harness lessons learned from one customer and re-purpose that to benefit all, while customers can also contribute to the vendor’s technology roadmaps to co-design their shared future.
This multi-tenant (one-to-many) commitment helps ensure the platform can grow and evolve with industry needs, with customers benefiting from shared innovation, scrutiny and security.
As AI continues to evolve, the cost of inaction increases by the day. Modernising your core platforms is the first step towards building an agile, intelligent, scalable and extensible business that will help create the AI future we all envisage.
For Australia's banks and leading financial institutions, the time is now. With decisive leadership, we can forge towards an AI-powered future, drive more fulfilling career experiences and opportunities, and safeguard Australia’s leading financial institutions against bad actors and cybersecurity threats ahead.
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