Legacy payments infrastructure has become one of the financial sector’s more complicated inheritances.
It’s difficult to replace, expensive to maintain and still central to how money moves across the banking system.
Yet for many credit unions, the older systems that increasingly frustrate modernization efforts also remain the foundation of trust, resiliency and regulatory discipline.
During an installment of the “What’s Next in Payments” series on legacy systems, Velera Senior Vice President of Product Experience and Enablement Cody Banks discussed why the debate around legacy systems has shifted away from replacement and toward adaptation.
“There’s a tendency to talk about legacy infrastructure as though the rails themselves are broken,” he said. “But for financial institutions, especially credit unions, the real question is how to modernize without dismantling the reliability consumers already depend on.”
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Many incumbent institutions retain structural advantages that newer entrants still struggle to replicate. Banks pointed to resiliency and regulatory rigor as enduring strengths that continue to matter as payments become faster and more digital.
“I don’t think the rails are broken, but I do think that some of the assumptions built around them definitely need some ‘rethought,’” he said.
At the same time, he acknowledged that many older systems were not designed for modern data environments, real-time payment expectations or AI-driven operational models. Data often remains trapped inside siloed systems, limiting fraud detection, analytics and personalization efforts.
The pressure on credit unions is no longer simply about digitizing consumer experiences, Banks said. It is increasingly about deciding which parts of the existing infrastructure should remain stable and which require modernization.
“We can do anything, but we can’t do everything,” he said. “You’ve got to separate out what is stable and needs to stay stable versus what needs to evolve.”
That balancing act has intensified with the arrival of instant payments, digital wallets and newer payment rails such as the FedNow® Service. Many institutions are reassessing their technology stacks because the market surrounding them has changed, Banks said.
Rather than replacing entire systems, institutions should take a measured approach that preserves operational continuity while improving functionality around the edges, he said.
“It’s more of a chisel versus a sledgehammer,” Banks said. “How do we make sure that the member experience is at the forefront? How do we make sure the value we’re providing with AI, with data, with insights, is really driving engagement?”
That philosophy also extends to partnerships between incumbent institutions and FinTech firms. Financial institutions cannot realistically build every capability internally. Partnerships allow banks and credit unions to test new technologies while maintaining operational safeguards around trust and compliance, he said.
“FinTech’s role is to move fast and break things fast, fail fast, but financial institutions need to move fast, and they can’t afford to lose trust,” Banks said.
He pointed to instant payments as an example where partnerships can help institutions modernize incrementally rather than rebuild their infrastructure from the ground up. Payment gateways and orchestration layers can improve workflow efficiency and provide access to real-time payment rails without requiring institutions to replace every legacy back-office system simultaneously.
The use of orchestration is a larger strategic benefit, he said. The industry has become overly focused on replacement while underestimating the importance of connecting systems, channels and data sources into a coherent operational framework.
“The real opportunity and the rethinking around payments is around orchestration,” Banks said. “You can have a very pretty UI and UX, but if it lacks the connectivity into what the consumer is looking for, that’s where it falls apart.”
Artificial intelligence is likely to intensify those pressures. Banks described AI as “brutally honest” because it exposes weaknesses in fragmented systems and disconnected data environments. While AI can extract greater value from legacy infrastructure, retrofitting older systems for advanced AI capabilities can become prohibitively expensive if the underlying architecture remains too fragmented.
Banks stopped short of arguing for wholesale replacement. Instead, he maintained that credit unions should concentrate on practical modernization strategies that align with their operational scale, member demographics and capital constraints.
“How can you make that incremental modernization of the technology that’s both practical and effective?” Banks said, adding that “you’ve got to figure out where you’re going to place your bets.”
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