Digital banking modernization in Latin America covers a wide range of consumer-facing issues: which institutions retain deposits, launch products on time, and meet rising fraud and compliance demands. SoFi Tech Solutions' latest research, The Future of Digital Banking in Latin America, quantifies exactly where legacy infrastructure is costing banks ground across the region.
What it found is that legacy infrastructure doesn't fail all at once, but it can contribute to thousands of small failings that add up to a huge technical debt: one missed deadline, one fraud complaint, and one lost deposit at a time.
Here are six of its key findings, combined with a specific, addressable starting point for modernization.
Key takeaways
Budget and speed problems are linked:
legacy maintenance costs eat the resources that would otherwise fund faster product cycles.
Real-time payments and real-time fraud detection share the same root problem:
batch-based systems can't keep pace with either.
Inclusion and modernization are intertwined:
reaching underserved segments profitably requires the same flexible infrastructure as launching any new product fast.
Most banks aren't choosing between legacy and full replacement:
the real decision is which segment to modernize first.
1. 60% of tech budgets go toward just keeping the lights on
More than 60% of banking technology spending in Latin America goes toward platform maintenance, legacy infrastructure patches, and routine IT overhead. That leaves less than 40% of the budget for anything customer-facing. A more intuitive mobile banking experience, a new SME banking portal, or faster account opening for a targeted segment.
Increasing spending alone won't fix legacy infrastructure. What actually works is spending smarter. Institutions modernizing effectively aren't spending more, they're using API-driven layers to extend existing infrastructure instead of maintaining it feature by feature.
The question to ask: If the next major technology investment went entirely toward new capabilities instead of upkeep, what would get built first?
2. Fintechs launch new features 2–4x faster
Traditional banks average 12 months to bring a new digital account feature to market. Digital-first competitors complete the same cycle in 3 to 6 months. While some might suppose this is because fintechs have a more innovative culture, SoFi Tech also found it’s down to something as simple as the plumbing. Fintechs build on modular, API-first architecture that lets them test, ship, and iterate without touching the underlying core each time.
For traditional banks, their plumbing problems tend to compound. Every product cycle a bank loses to internal sign-off chains and vendor scheduling is a cycle where a competitor is already live, gathering usage data, and iterating again. Patches can only fix so much. Over several cycles, this translates directly into lost market share.
The question to ask: How many product cycles have been lost to internal coordination rather than customer demand?
3. Instant payments jumped from 620 million to nearly 80 billion transactions in seven years
Real-time account-to-account transfers now account for roughly 45% of all digital payments across Latin America. They’ve seen a 129x increase since 2017. Regional rails like Brazil's Pix, Colombia's Bre-B, and Argentina's Transferencias 3.0, each enabling instant, 24/7 account-to-account transfers, have made instant movement the default expectation and no longer something banks can offer as a premium feature.
The problem is that banks architected most legacy cores for batch processing. This means scheduled settlement windows, not continuous, high-throughput transaction flow. That mismatch shows up as latency, failed reconciliation, and, increasingly, customers defaulting to fintech wallets that feel faster. Infrastructure built for yesterday's transaction patterns can't be patched into real-time performance. It has to run on systems designed for it.
The question to ask: Does a banking platform treat instant payments as a bolt-on feature, or as the default transaction pattern it's become?
4. 75% of LatAm banks say legacy tech is capping financial inclusion
Three in four Latin American banks report that legacy technology actively limits their ability to deliver inclusive financial products. And for much of the continent, access still depends heavily on geography, the opposite of what digital banking is supposed to solve. In Colombia, deposit-product penetration reaches 89% in urban centers but drops to just 53% in rural communities.
Serving underbanked and rural populations profitably requires products with different risk models, different price points, and different distribution. But legacy systems built around one-size-fits-all retail banking can't flex that way without significant custom engineering. Reusable, API-driven infrastructure changes the economics: the same account, identity, and payments layer can support a dramatically different product without a dramatically different tech stack.
The question to ask: Is a platform capable of launching a product tailored to an underserved segment without standing up a parallel system to support it?
5. Mobile fraud complaints topped 240,000 in a single quarter
In Colombia alone, formal fraud complaints exceeded 240,000 in Q3 2025, with 26% originating directly inside mobile banking apps. Regulators across the region, including Mexico's CNBV and Colombia's SFC, are responding with tighter, more granular reporting and monitoring requirements.
Legacy, batch-based fraud systems struggle here for the same reason they struggle with instant payments: fraud detection that only updates on a delayed cycle can't catch a fast-moving account-takeover attempt in progress. Real-time fraud decisioning requires real-time visibility into account, transaction, and identity data, a connected view that most siloed legacy environments never provide.
The question to ask: Can a fraud team see a suspicious pattern as it's happening, or only after the damage is done and the complaint is filed?
6. 52% of banking leaders are modernizing in phases, not all at once
More than half of banking leaders across Latin America are pursuing phased modernization, layering modern, API-driven capabilities alongside existing infrastructure rather than betting everything on a full core replacement.
This shift reflects a hard-won lesson: total core migrations are expensive, risky, and slow, and most institutions don't have the multi-year runway or risk appetite to attempt one while competitors keep moving. A side-by-side approach, sometimes called a sidecar core, lets a bank pick one high-value segment or product, connect it via APIs, prove out the value, and expand from there. It's a lower-risk path that still produces real, measurable progress.
The question to ask: If a bank could modernize one product or segment in the next 90 days without touching its core, which one would move the needle fastest?
All six of these findings point toward one clear conclusion: while legacy infrastructure is causing serious drag, it doesn't need to be replaced overnight to stop holding a bank back. Every bank's starting point will be different.
See how SoFi Tech Solutions' modular platform fits yours: download [The Future of Digital Banking in Latin America].
Frequently asked questions
Timelines vary by scope, but institutions taking a side-by-side approach often see initial results within weeks rather than years, since a bank can connect a single product or segment via APIs without touching the core. Banco Nación, for example, reduced a UX feature launch cycle from months of vendor coordination down to four business days after adopting a modular platform – a result visible almost immediately after implementation began, not after a multi-year rollout.
A sidecar core is a modern banking platform that runs alongside an institution's existing core system rather than replacing it. It connects via APIs to handle specific products, segments, or customer journeys, for example, corporate digital banking, while the legacy core continues processing everything else. A full core replacement, by contrast, migrates all banking functions to a new system at once, typically requiring a multi-year timeline and carrying significant operational risk. A sidecar approach lets a bank modernize one piece at a time, proving value before expanding further.
The main risks are integration failures, data inconsistency between old and new systems, and scope creep if a phase expands beyond its original boundaries. These are typically managed by starting with a narrowly defined segment or product, testing the new environment thoroughly in a sandbox before it touches live transactions, and setting clear success metrics before expanding to the next phase. Because the legacy core keeps running throughout, a failure in the new environment doesn't take down existing operations, which is the main risk-reduction advantage of this approach over a full core migration.
It applies across the size spectrum, though the entry point differs. Larger institutions often start with a high-value segment like corporate or SME banking, where the cost of legacy friction is easiest to quantify. Smaller or regional banks facing acute competitive pressure from neobanks may instead start with a single customer-facing pain point, like instant payment support or account onboarding, where speed to market matters most for retention.
Governance, more often than technology. Because a phased approach touches live systems incrementally rather than all at once, it requires clear agreement upfront on which segment goes first, how the team will measure success, and how the new and legacy environments will coexist operationally. Institutions that skip this alignment step tend to stall after the first phase, even when the underlying technology performs well.
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