Even while banking companies have made strides in integrating technology, there will still be issues in 2025 that need to be resolved if the sector is to maintain its development.

Banks must prioritize their efforts to modernize and move away from outdated systems due to a number of factors, including increased cybersecurity risks, negotiating changing regulatory compliance, and the expense and difficulty of successfully integrating AI.

In order to securely handle and analyze enormous volumes of data and sustainably satisfy changing client needs, modernization will be essential.

Here, we chat with Srinivasan Seshadri, HCLTech's Chief Growth Officer and Global Head, Financial Services, who shares his thoughts on some of the most important technical challenges that banks may encounter in 2025.

Investments in the modernisation of IT platforms

Digital transformation and investment must be seen by banks as a long-term approach rather than a temporary solution. Many banks still use antiquated technology, which limits their capacity to innovate, adjust to changing market needs, and successfully satisfy client expectations.

To increase operational effectiveness, reduce expenses, boost customer satisfaction, and eventually spur creativity, transformation is required. Modernizing IT infrastructure, enabling new business models, and spurring innovation all depend on investments in AI, cloud, analytics, and blockchain.

The sector should focus on modernizing IT systems and moving away from old platforms.

This can be accomplished by investing in contemporary technology, such as cloud, AI, cloud, analytics, and blockchain—all crucial elements to modernizing IT platforms—or by utilizing strategic alliances with top cloud providers like AWS, Azure, and GCP to ease the transition of legacy systems to the cloud.

By investing in state-of-the-art IT solutions or collaborating with a cloud provider, these organizations can stay ahead of the curve and ensure that they can adapt to any future changes in customer needs while also providing unmatched value to their clients.

Cybersecurity threats

Banks are more susceptible to hacks as they actively embrace new technology and continue to digitize. It is crucial to make sure that cybersecurity safeguards are in place to preserve sensitive information and uphold client confidence.

This entails putting end-to-end encryption, safe data storage, and proactive vulnerability management into practice while adhering to rules like DORA, ISO2022, and SOC2.

Infrastructure and cloud security, application security, governance, risk and compliance, identity and access management, and business continuity/disaster recovery should be the main focuses of cybersecurity efforts.

Banks must adopt a comprehensive strategy to assist reduce risks, guarantee regulatory compliance, and preserve client confidence.

This strategy involves, among other things, resolving current issues and enhancing automated processing while cutting costs through governance, risk and compliance, infrastructure and cloud security, and application security.

Regulatory compliance

Modern technologies like blockchain and artificial intelligence are being adopted at a rapid pace, and banks will need to effectively manage changing regulatory environments. It will be very difficult to strike a balance between innovation and compliance, particularly in light of the increasing expectations for third-party risk management, transparency, and adherence to standards like as DORA.

Regulatory agencies are calling for strong risk mitigation plans and are focusing more on cybersecurity, third-party risk, and liquidity risk management. It will be crucial for banks to work with compliance subject matter experts to create a thorough plan to handle these issues.

In order to ensure adherence and preserve the flexibility required to keep producing business results, this strategy should eventually concentrate on three areas: people, processes, and technology.

AI integration

It's no secret that generative artificial intelligence (Gen AI) and artificial intelligence (AI) are boosting innovation and operational effectiveness across many industries, not just the banking industry. Effective management of these technologies is necessary for banks to handle ethical issues while maintaining cost effectiveness and transparency.

Banks can improve risk management, expedite customer service with intelligent chatbots, and improve fraud detection by utilizing AI-driven analytics and machine learning.

By automating intricate processes like regulatory reporting and customized financial advising, Gen AI in particular is revolutionizing operations. AI adoption, like all new adoptions, must prioritize ethical, transparent, and traceable practices while utilizing machine learning and natural language processing to enhance decision-making.

In order to achieve digital transformation and provide value to end users, the viewpoint on AI implementations should be focused on utilizing technological developments, cultivating strategic relationships, and investing in innovation.

Legacy systems and integration challenges

Many banks still use antiquated technology, which limits their capacity to innovate, adjust to changing market needs, and successfully satisfy client expectations. Banks sometimes have several monolithic systems spread across several business divisions or geographical locations, which causes inefficiencies and integration problems.

Using strategic alliances with top cloud providers like AWS, Azure, and GCP to ease the transition of old systems to the cloud, the industry should focus on modernizing IT infrastructures and moving away from archaic platforms.

This guarantees scalability, cost effectiveness, and improved operational performance while also aiding in the deciphering of intricate legacy platforms. By addressing the current issues with legacy systems, this strategy sets banks up for future expansion and change.

Scalability and reliability of solutions

Scalable and dependable systems that can manage enormous volumes of data and transactions are essential for large companies. Banking organizations and fintechs need to work together to create systems that operate perfectly in situations with significant demand.

Successful digital transformation requires scalability without sacrificing functionality or speed.

Data management

For banks and other financial organizations, securely and effectively managing and analyzing enormous volumes of data is essential.

Banks must have strong and thorough data governance frameworks, as well as a wealth of data management and analytics expertise. They should concentrate on creating and overseeing effective data pipelines and utilizing cutting-edge technologies to generate business value in a safe setting.

While adhering to data protection laws in various jurisdictions, financial institutions will require sophisticated systems and procedures to handle data safely. They will also employ data analytics to enhance risk management and customer service.

Growing fintech ecosystem and technological advancements

Fintechs, which are upending established banking structures and changing the financial landscape with creative solutions, pose serious threats to banks and other financial institutions.

Fintechs also thrive at providing individualized financial services, using AI and big data to customize products that traditional banks find difficult to match because of outdated processes.

Traditional banks are forced to constantly innovate due to the fintech disruptors' quick technical advancements, but how can banks stay up to date? Banks must embrace cutting-edge technology like blockchain, artificial intelligence, and digital banking systems in order to remain competitive.

Furthermore, banks must make significant investments in modernizing their IT infrastructure in order to compete with fintechs' cutting-edge technology, which makes digital transformation expensive for them.

While managing lengthy sales cycles and coordinating operations, conventional banks may improve their digital capabilities and provide exceptional client experiences by forming strategic alliances with fintechs.

Talent acquisition and upskilling to manage updated IT platforms

Banks need to have the competence to handle new technology as it develops. Financial services' approach to upskilling and talent acquisition should be firmly anchored in a systematic framework created to satisfy the changing needs of contemporary IT platforms and the changing technological environment.

Strong training programs to prepare a competent and future-ready staff are one way to show a commitment to upskilling.

Banks will be put to the test in the upcoming year to see how they can best position themselves for expansion in the rapidly changing financial and technology world.

These difficulties highlight the necessity for banks to continue being flexible, creative, and proactive when implementing new technology while maintaining security and compliance at all times.

With its cutting-edge and varied products, HCLTech is well-positioned to assist financial organizations in successfully navigating the significant technical obstacles that lie ahead in the next year.

HCLTech's strong domain competencies and engineering DNA at its heart allow it to expedite its digital transformation approach for its banking clients. We are strong in all areas, including customer service, execution, and innovation.

As previously said, there could be certain technological and legislative obstacles in 2025.

Nevertheless, despite the challenges, we anticipate that financial institutions will expand in 2025 with the appropriate modernization tactics, cybersecurity and regulatory compliance adoption, integration of the newest technology, and selection of the best digital partner.