Why Banks Can’t AI Their Way Around Bad Data

Watch more: What’s Next in Payments With Mladen Vladic of FIS

Legacy systems occupy an awkward place in payments.

While they are often criticized for slowing modernization efforts, they continue to handle enormous transaction volumes with reliability that financial institutions cannot afford to jeopardize.

Mladen Vladic, head of product, payment networks at FIS, told PYMNTS that the industry often misunderstands what “legacy” actually means when it comes to payments infrastructure.

“We have a very specific view on this,” Vladic said as part of the “What’s Next in Payments” series on legacy technology. “There’s a tremendous opportunity for the legacy systems and for legacy providers when it comes to payments.”

Rather than viewing modernization as a wholesale replacement exercise, there is a more durable strategy that centers on orchestration, he said.

The challenge is not simply removing older systems, but determining how existing infrastructure, new technology and customer expectations can operate together without creating additional fragmentation, he said.

Legacy Systems Still Carry the Industry’s Core Functions

Vladic described legacy infrastructure less as obsolete technology, and more as the operational foundation supporting trust, resiliency and scale across banking and payments.

Leadership teams confronting modernization pressures should focus on three priorities: preserving trust embedded within core systems; modernizing engagement layers tied to customer experience; and building partnerships capable of extending existing capabilities, he said.

That multifaceted strategy becomes especially important as incumbents attempt to reconcile decades of infrastructure investments with mounting pressure to deliver faster and more personalized digital experiences.

Scale, capital and operational resilience remain advantages for established providers, he said, but added that those assets only retain value if institutions can layer newer technologies onto them in practical ways.

“We live in a marketer’s dream now,” Vladic said, referring to the ability to personalize experiences using broad pools of customer and transaction data.

For years, institutions lacked the infrastructure necessary to personalize engagement at a meaningful scale, he said. Advances in data processing and AI have changed that equation, but only if firms can connect fragmented systems that historically operated independently.

That fragmentation remains one of the sector’s largest operational weaknesses.

Vladic pointed to large enterprises operating multiple databases and disconnected systems that were built over long periods to support different business lines and customer functions. Those environments often prevent institutions from fully using newer artificial intelligence capabilities because the underlying data is not unified in useful ways.

“AI is [only] as good as the data available to feed these models,” he said.

The problem is not a lack of information. Financial institutions possess enormous transaction histories, behavioral records and operational intelligence. The challenge instead lies in turning those assets into data environments that AI systems can actually use effectively.

AI Pressures Are Forcing Long-Term Decisions

AI adoption is in its early stages, despite the rapid pace of announcements and investment across the sector, Vladic said, comparing the current period to the early years of eCommerce, before streamlined checkout experiences and predictive systems became the industry standard.

Much of the sector’s work centers on building the infrastructure and governance frameworks necessary to support future AI-enabled payment experiences, he said.

Those efforts range from back-office automation to the rise of agentic commerce, where consumers authorize software agents to make purchasing decisions or select payment methods on their behalf. However, those experiences cannot scale without corresponding investments in fraud management, authorization systems and authentication controls, he said.

He also warned that modernization efforts themselves can unintentionally create the next generation of legacy problems.

Many firms are under pressure to move quickly toward highly specific use cases without fully considering how those systems will fit into a broader long-term architecture, he said. That short-term focus risks creating additional layers of complexity that may limit future innovation.

“The risk is not holistically looking at the ecosystem,” he said.

That concern extends directly into partnership strategies. Successful partnerships depend less on speed and more on whether institutions align around long-term operational goals before integrating technologies or workflows, he said.

Legacy providers still possess advantages that newer entrants often underestimate, including transactional history, compliance structures, operational processes and network intelligence developed over decades, he said. But those advantages only matter if institutions can combine them with external innovation in disciplined ways.

As payment modernization accelerates, Vladic projected that the industry’s winners may not be the firms that replace the most infrastructure, but the ones that connect systems, partners and technologies without weakening the trust customers already expect.

“The future belongs to orchestration and not replacement,” he told PYMNTS.