Banks hit IT inflection point; over a quarter (26%) of mission-critical tech reaches end-of-service.
Kyndryl Financial Services Readiness Report finds banks accelerating AI and cloud investment amid geopolitical and regulatory upheaval.
Banks and financial institutions are hitting a decisive moment in their technology journeys, according to research from Kyndryl (NYSE: KD), a leading provider of mission-critical enterprise technology services.
The Financial Services Readiness Report 2025 paints a picture of an industry pushing hard on innovation while anchored to aging foundations. Three-quarters (75%) of financial services leaders are investing in AI to strengthen cybersecurity, as well as increasing cloud migration and deployment spend by an average of 31%. Nearly nine in ten (88%) believe AI will completely transform roles and responsibilities within their organisations in the next 12 months.
Yet that ambition is colliding with the reality of aging legacy technology. More than a quarter (26%) of mission-critical networks, storage and servers are already at end-of-service, and eight in ten (77%) leaders say they experienced a significant outage in the past year, a stark reminder of the struggles with resilience complex organisations face.
For many banks, innovation is being slowed by weaknesses in the core tech stack: over half (58%) say foundational technology issues are delaying progress, while six in ten (61%) admit they are struggling to keep pace with the speed of technological change. Compounding the challenge, 58% say their current cloud environment “happened by accident” rather than by intentional design.
Innovation at Odds with Infrastructure
The result is a balancing act: banks are accelerating AI adoption while continuing to wrestle with decades of technical debt and fragmented systems. AI strategies are advancing faster than the foundations required to support them, exposing operational risk at the very moment institutions are seeking the speed, scale and intelligence to expand services.
External forces are adding further complexity. More than two-thirds (68%) of financial services leaders say they have already made changes to their cloud strategies in response to geopolitical pressures, including data sovereignty regulations.
Concern is intensifying, with three quarters (77%) increasingly worried about geopolitical risks tied to storing and managing data in global cloud environments. As regulatory dynamics shift, and with the prospect of consolidation in parts of the US banking sector, institutions face mounting pressure to integrate disparate IT estates while maintaining compliance and operational resilience.
A Strategic Reset for Cloud and Compliance
Looking ahead, a major shift will emerge toward agentic AI in banking, with institutions deploying AI agents to manage compliance-heavy functions such as know-your-customer (KYC), anti-money laundering (AML), vendor risk assessments and real-time anomaly detection.
At the same time, regional banks are expected to undergo a quieter but profound modernisation drive, migrating key applications to the cloud to improve customer experience and strengthen competitiveness in an increasingly digital market.
Banking is reaching an IT inflection point. AI investment is accelerating rapidly, but many institutions are still running on infrastructure that wasn’t designed for this level of speed, scale or scrutiny. With how interconnected technology is with financial services in 2026, this is like driving with the handbrake on.
Anju Tiwari, Vice President of Banking, Kyndryl Consult UK&I
One in four (26%) mission-critical networks, storage and servers are already at end-of-service. The winners in the next 12 months will be those modernising their core technology stack, strengthening resilience and intentionally redesigning their cloud strategies to handle geopolitical and regulatory complexity.
Anju Tiwari, Vice President of Banking, Kyndryl Consult UK&I
Banking and financial services are fully dependent on efficient technology. And with more functionalities and convenience emerging, you can’t build next-generation AI on last-generation infrastructure. Technology foundations and flexibility determine the future.
Anju Tiwari, Vice President of Banking, Kyndryl Consult UK&I
