A new study from Aqua Global suggests that compliance obligations are increasingly dominating the payments modernisation agenda at European banks, often taking precedence over improvements to customer experience.
The research surveyed 150 IT banking leaders across Europe, with half of the respondents based in the UK. The findings indicate that regulatory pressure is shaping investment priorities and technology decisions as banks attempt to upgrade legacy payments infrastructure while meeting evolving compliance requirements.
According to the report, 77% of banks say regulatory demands now outweigh customer needs when it comes to payment modernisation initiatives. Many institutions also report that a significant proportion of their effort is directed towards maintaining regulatory alignment rather than developing improved customer-facing capabilities.
In fact, 67% of respondents said they spend more time adapting their systems to meet new regulatory standards than enhancing the user experience for payments.
The research also highlights the operational risks associated with failing to meet regulatory milestones. A majority of respondents, 77%, said that missing a key regulatory deadline could lead to serious operational disruption as well as reputational damage for their organisation.
At the same time, many banks acknowledge that their current technology environments are struggling to cope with regulatory change. Around 60% admitted that their existing infrastructure finds it difficult to keep pace with evolving standards.
Richer data requirements are also placing additional strain on payment systems. Some 72% of respondents said expanded data obligations – including requirements linked to anti-money laundering (AML), sanctions screening and fraud detection – have exposed structural weaknesses in their technology architecture. Capturing structured addresses, AML and sanctions-related information, and counterparty identifiers such as BIC and LEI were cited as among the most difficult data elements to manage within current systems.
Aqua Global chief technology officer Elliot Wood said, “The challenge with richer payment data isn’t availability, it’s fragmentation. Information sits across multiple systems and formats, making it hard to build a complete, trusted view of a transaction.”
Wood added, “The ability to manage, govern and validate data at scale is quickly becoming a defining factor in payments resilience. This is why 81% of respondents believe a unified messaging hub across multiple channels will be essential to remain compliant and competitive in the future.”
The study also examined the impact of major regulatory initiatives such as ISO 20022 migration and the transition to T+1 settlement. These initiatives are accelerating regulatory timelines while exposing limitations in legacy infrastructure.
One in five banks reported experiencing downtime or payment disruption during their transition to ISO 20022. Nearly all respondents – 97% – encountered some form of challenge during the migration process. The most frequently cited issues included legacy systems that were unable to handle structured ISO 20022 data, poor underlying data quality for enriched fields, and integration difficulties with third-party systems such as AML, sanctions and fraud monitoring platforms.
To remain compliant, many banks are still relying on temporary workarounds. Around 65% said they continue to depend at least partly on translation tools, even though 83% believe such stopgap solutions will ultimately increase costs over time.
Similar concerns are emerging as banks prepare for the shift to T+1 settlement. While 21% of institutions have already begun preparations, 23% said they currently have no plans in place. Respondents identified legacy systems incapable of supporting compressed settlement windows without substantial investment as the most significant barrier.
Aqua Global CEO Cian Fernando said, “The migration challenges we’re seeing aren’t isolated incidents – they expose the structural limits of legacy payment architecture.”
Fernando added, “Treating regulatory change as a tick-box exercise encourages short-term fixes that increase complexity. Banks that modernise natively reduce cost, operational risk and friction over time. As regulatory deadlines tighten and data requirements grow richer, banks relying on fragmented systems face rising operational risk and mounting cost pressures, with less capacity left to compete on customer experience.”
Overall, the report suggests that the increasing pace of regulatory change, combined with the demands of richer data standards, is forcing banks to reassess the resilience of their payments infrastructure. For many institutions, modernising legacy systems may become essential not only for compliance, but also for maintaining competitiveness in an evolving payments landscape.
Keep up with all the latest RegTech news here
Copyright © 2026 RegTech Analyst
Copyright © 2018 RegTech Analyst
