A core banking system at a top-20 European bank runs on COBOL, a programming language created in 1959. The system processes millions of transactions daily. It works. But when the bank needs to add a real-time payment feature, the project takes fourteen months because the COBOL codebase has no native support for asynchronous processing, and the engineers who understand the system’s dependencies are approaching retirement. Meanwhile, a five-year-old fintech company built on a cloud-native architecture adds the same real-time payment capability in six weeks.
That gap, fourteen months versus six weeks for the same capability, is why banking infrastructure is being rebuilt. The rebuild is not theoretical. The banking-as-a-service market reached $18.6 billion in 2024 and is projected to grow to $73.7 billion by 2034, according to Global Market Insights. Fintech companies are building the replacement infrastructure, and banks are buying it.
What Is Actually Being Replaced
The term “banking infrastructure” covers four layers of technology that work together to operate a bank.
The core ledger is the system of record for every account balance, transaction, and financial position. Most large banks run core ledgers built in the 1970s and 1980s on mainframe computers. These systems were designed for batch processing, meaning transactions are collected throughout the day and settled in bulk overnight. Real-time processing was not a design requirement when these systems were built because real-time was not an expectation.
The payments layer handles money movement between accounts, banks, and payment networks. Legacy payment systems were built around specific payment rails (SWIFT for international transfers, ACH for domestic), with each rail requiring its own integration. Modern fintech infrastructure handles multiple payment rails through unified APIs.
The identity and compliance layer handles customer verification, transaction monitoring, and regulatory reporting. Legacy compliance systems are often bolted onto core banking platforms as afterthoughts, creating data silos that make holistic risk assessment difficult. Fintech as a strategic priority for financial institutions is driven partly by the recognition that compliance infrastructure built as an add-on cannot keep pace with evolving regulatory requirements.
The customer interface layer, mobile apps, web portals, and in some cases branch technology, is where customers interact with the bank. This layer has received the most investment in recent years, but modernising the interface without modernising the underlying infrastructure creates a new problem: a fast front end connected to a slow back end.
Why Banks Cannot Rebuild Their Own Infrastructure
If legacy infrastructure is the problem, the obvious question is why banks do not simply replace it themselves. The answer is a combination of cost, risk, and talent scarcity.
A full core banking replacement at a large institution costs hundreds of millions of dollars and takes three to seven years. During the migration period, the bank must run both old and new systems simultaneously, doubling operational complexity. Failed core banking migrations have cost banks billions in write-offs and years of disruption. The risk calculus makes internal rebuilds unattractive for all but the largest institutions.
The talent problem compounds the cost problem. COBOL programmers who understand legacy banking systems are retiring. Cloud-native engineers who could build replacement systems prefer to work at technology companies rather than banks. Fintech companies attract the engineering talent that banks need, which means banks increasingly purchase infrastructure from fintechs rather than building it internally.
According to Coinlaw’s 2025 analysis of API adoption in financial services, 81% of banks worldwide have now adopted open banking APIs. That adoption rate reflects the pragmatic choice most banks have made: instead of rebuilding from scratch, they connect to fintech-built infrastructure through APIs and gradually migrate capabilities to modern platforms.
How Fintech Companies Are Building the Replacement
Fintech companies building banking infrastructure operate differently from the technology vendors that banks have traditionally purchased from.
Traditional banking technology vendors sell monolithic software suites. A bank purchases a core banking platform from a single vendor and customises it over years of implementation. The vendor relationship lasts decades, and switching costs are enormous.
Fintech infrastructure companies sell modular capabilities through APIs. A bank can adopt a fintech provider’s payments processing without replacing its core ledger, or integrate a fintech compliance engine without changing its payments infrastructure. Each capability is independent, connected through standardised interfaces. The growth of API-driven banking platforms reflects this modular approach to infrastructure replacement.
The Global Market Insights data shows that the platform segment accounted for 69% of the BaaS market in 2024. These platforms provide the building blocks from which banks can assemble modern infrastructure without undertaking a monolithic replacement project. The U.S. market alone was worth $5.9 billion, with the top seven providers controlling approximately 33% of the market, leaving substantial space for specialised providers focused on specific banking functions.
The Gradual Migration Pattern
Most banks are not replacing their infrastructure in a single project. They are migrating gradually, moving one capability at a time from legacy systems to fintech-built platforms.
A typical migration path starts with payments. Banks connect to fintech payment APIs to add real-time payment capabilities alongside their existing batch-processing systems. Once the payment integration is stable, the bank migrates customer onboarding to a fintech identity verification platform. Then compliance monitoring moves to a cloud-based transaction monitoring service. Over several years, the bank’s operations shift from legacy infrastructure to a constellation of fintech-provided services connected through APIs.
This gradual approach reduces migration risk but creates a different challenge: orchestration. A bank using five different fintech providers for five different functions needs an integration layer that ensures data flows correctly between them. Fintech platforms enabling banking transformation increasingly provide this orchestration layer, positioning themselves as the connective tissue between banks and specialised infrastructure providers.
What the Rebuilt Infrastructure Looks Like
The banking infrastructure being built by fintech companies has characteristics that legacy systems lack.
Real-time processing is the default. Transactions settle in seconds rather than overnight batches. Account balances update instantly. Compliance checks run as transactions happen, not in retrospective batch reviews.
Cloud-native architecture means the infrastructure scales automatically with demand. A bank does not need to provision hardware for peak load and leave it idle during normal operations. The 67% cloud market share in BaaS reflects how thoroughly this architecture has been adopted.
API-first design means every function is accessible programmatically. Neobanks driving banking competition were the first to prove that API-first architecture enables product iteration speeds that legacy architecture cannot match. Traditional banks now purchasing fintech infrastructure are adopting the same architectural principles.
The $18.6 billion BaaS market growing at 15.1% annually is the financial expression of a structural shift. Banking infrastructure built decades ago is being replaced by fintech-built platforms because the old infrastructure cannot support the speed, flexibility, and cost structure that modern banking requires. The rebuild is underway, and the fintech companies building the replacement infrastructure are becoming the foundation on which the next generation of banking operates.
