Legacy systems are putting banks at risk

Patricia Montesi is co-founder and CEO of Qolo, a payments infrastructure company focused on modernizing commercial banking.

Banks, especially regional and community banks, are currently crying foul about the possibility of stablecoins that can offer interest-style rewards, saying that allowing this runs the risk of deposit flight from regional and community banks that could hurt the communities they serve. Loopholes in the GENIUS Act that allow third-party platforms to offer rewards have fueled fierce disagreements, stalling passage of the CLARITY Act, which is meant to establish the market structure for digital assets.

The intensity of the debate is obscuring the fact that regional and community banks have bigger problems, which have existed for a lot longer than the current stablecoin debate. They’re held hostage by core technology that was decades behind a decade ago. That lack of progress is getting exposed in starker and starker ways. While a lot of the fintech and embedded finance innovation we’ve seen was a great user experience on top of a partner bank, stablecoins present real innovation that could exist outside of traditional banks.

The fight over interest-bearing stablecoins has become a convenient stand-in for a deeper problem facing regional and community banks. While banks warn that stablecoins could siphon deposits and undermine local lending, the bigger competitive threat is closer to home. Decades-old core systems built for batch processing and basic ledgering have left many banks unable to deliver real-time visibility, flexible cash management, or modern commercial products. Even if banks succeed in blocking stablecoins, the structural disadvantages baked into their technology stacks will continue to erode their relevance.

Community and regional banks are increasingly forfeiting their share of the massive $1.3 trillion global transaction banking revenue pool. The vast majority of their revenue comes from 20% of their larger commercial customers, which increasingly are deferred to third-party providers for large parts of the business. Regional and community banks need to put themselves in a position to be able to build modern and personalized products for the realities of commercial banking in 1966, not 2026.

Drowning under the weight of old technology

Regional banks don’t run on technology anyone would recognize in 2026. They don’t even really run on technology people would recognize in 2006. Or 1996. Banks largely run on core banking platforms that are 60 or 70 years old and run off COBOL, a coding language that is largely unrecognizable for modern engineers. A CIO study found that 63% of banks still rely on code written before the year 2000. That same study found that more than three-quarters of banks reported that they only had one or two people in their organization with the skills to maintain their legacy code.

Sure, these platforms reliably clear trillions of dollars each day. But the banking industry’s reliance on COBOL and mainframe computers has been held against traditional financial institutions since the dawn of fintech.

This technology was built for another world, and change isn’t happening fast enough. Regional banks can’t build competitive products to counter risks like stablecoins because they’re simply not in a position to capitalize on the opportunity in the market to build modern, real-time, personalized commercial banking products. According to Accenture’s 2026 survey on banking trends, only one in five banks have data quality frameworks that help them leverage the digital information they collect.

Banks are behind — and their ability to innovate is being choked off by maintaining core systems that aren’t keeping pace. Some 70% of bank IT budgets go to maintaining technical debt, according to the Accenture survey.

The rise of real-time payments is exposing how old this technology is

The swift adoption of RTP has exposed how glaring this issue is. Adoption of FedNow by financial institutions more than doubled between early 2025 and 2026, according to J.P. Morgan. A Citizens Bank survey found that almost three quarters of businesses now use some form of instant payment method.

The problem is that banks typically rely on batch uploads or manual reconciliation process payments. So if payment settles instantly on a Sunday morning, and your core banking system, digital banking layer, and client’s accounts aren’t in agreement, you have a problem. Speed without accuracy is just chaos moving faster. If an RTP transaction posts instantly but takes hours to show up on the books, customers can’t trust their balance. Their view of their own liquidity is broken.

In a recent webinar Qolo ran with American Banker and commercial banking clients, an informal survey of 100 participants found that one quarter said posting consistency — when payments settle versus when they appear — was the top issue they wanted improved. With existing core technology, even modern developments like real-time payments create more operational drag than value.

Regional banks aren’t giving customers a proper view of where they money is

Banks are being asked to deliver increasingly modern payment experiences on creaking, outdated infrastructure. Large commercial customers don’t want a single pot of cash. They want sub-accounts for different business lines, and often sub-accounts within those. Banks largely can’t provide this view, forcing customers to rely on manual reconciliation and creating downstream inefficiencies. These customers want to control and segment spending in real time. They want to see where their money is going and make liquidity decisions instantly, with a consolidated view across business units and projects. But they can’t.

As a result, those customers inevitably turn to a piecemeal network of vendors to fill the gaps. At best, banks are sending their highest-value clients to third-party solutions. At worst, they’re creating a series of siloed systems that can’t support complexity or growth, turning their own core function into a commodity.

Banks relied on mainframe systems 60 years ago because all they had to do then was process and clear transactions, and those systems did that perfectly. They have to do more than that now. Banking technology isn’t built for the modern culture and expectations of what people want from banks in 2026. Among the more vulnerable regional and community banks, little has changed. These banks have treated the GENIUS Act and the possibility of stablecoins bearing interest as an existential threat.

There’s a path here for these banks not just to survive, but to thrive. By delivering modern services on top of or around their core products, banks can strengthen relationships with their core constituencies and achieve feature parity with peers. Well positioned with their own customers, they are better placed to compete in a modern landscape that includes stablecoins.

The existential threat to these banks has been there for decades. It’s time they face the future and accept that stablecoins aren’t the problem. The call is coming from inside the house.