Most banks spend somewhere between 55% and 78% of their entire IT budget just keeping existing systems running. Not building anything new. Not improving the customer experience. Just maintenance.
According to McKinsey, only 5 to 10 cents of every technology dollar at a typical bank delivers actual business value. The rest disappears into patching, maintaining, and babysitting decades-old infrastructure.
That’s the problem API-first banking is designed to solve.
And if you’re evaluating banking platforms, payment infrastructure, or core system upgrades for your business, understanding what API-first actually means (and what it doesn’t) could save you millions in wasted spend and years of frustration.
What Does API-First Banking Actually Mean?
API-first banking means the core platform was designed from day one so that every function — accounts, payments, lending, cards — is accessible through APIs. Nothing is bolted on after the fact.
This sounds simple, but the distinction matters more than most vendor marketing would have you believe. There are really three tiers of API readiness in banking right now:
API-first platforms (Thought Machine, Mambu, 10x Banking) were built around APIs from scratch. Every capability is an API endpoint. The API isn’t a feature. It’s the architecture.
API-enabled platforms (Temenos, Finastra) are older systems that have added API layers over time. The APIs work, but they’re wrapping legacy architecture underneath. Think of it as putting a modern kitchen in a house with 1960s plumbing. It looks great until you need to change something structural.
Then there’s API-bolted-on, which is what most traditional banks are still working with. Screen-scraping, middleware, and custom integrations held together with duct tape and institutional knowledge. This is where the real pain lives.
The connection to composable banking is direct: API-first architecture is what makes it possible to swap individual components (your payments engine, your KYC provider, your lending module) without ripping out the whole system.
You pick best-of-breed tools for each function instead of being locked into one vendor’s full stack.
Why Are Banks Moving Away From Legacy Core Systems?
Legacy core banking systems consume the majority of IT budgets on maintenance alone, leaving almost nothing for new product development or customer experience improvements.
The numbers are genuinely staggering.
Deloitte’s 2025 Banking Industry Outlook found that 6 in 10 banking leaders cite legacy infrastructure as their single biggest challenge. And McKinsey’s research shows large banks are about 40% less productive than digital-native competitors. That productivity gap isn’t about talent. It’s about what those people are spending their time on.
And the part that doesn’t get talked about enough?
43% of banking systems in the US still run on COBOL, a programming language from 1959. The average COBOL developer is 55 years old. If we say 10% retire every year, banks are paying two to three times the market rate for anyone who can maintain these systems.
Morgan Stanley recently started using AI to reverse-engineer their own legacy codebase because, as one report put it, the auxiliary libraries were written decades ago by people who left the bank without properly documenting what they were doing.
So you’ve got a situation where the people who understand the old systems are retiring, the systems themselves are eating most of the budget, and competitors built on modern cloud-native saas banking platforms with API-first architecture are launching new products in weeks, while legacy banks take 12 to 18 months.
Something has to give.
What Are the Real Benefits of API-First Core Banking?
The biggest wins are speed to market, lower total cost of ownership, and the ability to plug in best-of-breed services instead of being stuck with a single vendor’s entire stack.
The speed advantage is the one that gets underestimated the most.
Judo Bank in Australia migrated to Thought Machine’s Vault Core on AWS and completed the whole thing in 12 months. Their transaction processing dropped from 4 to 8 seconds to 1 second. Issue resolution now happens the same day. Zero downtime during migration. That’s not a marketing claim. It’s an AWS case study.
And the market is moving fast.
Juniper Research projects that open banking API calls will grow from 137 billion in 2025 to 722 billion by 2029. That’s a 427% increase in four years. The businesses and banks building on API-first banking platforms are positioned to capture that growth.
The ones still wrestling with legacy integrations… aren’t.
There’s an embedded finance angle here, too.
API-first architecture is the foundation that makes Banking-as-a-Service possible. Without clean, well-documented APIs, you can’t offer banking features inside non-bank products. And that embedded finance market is projected to hit $588 billion by 2030 (Grand View Research).
If your banking infrastructure can’t support third-party integrations natively, you’re locked out of a massive growth channel.
What's the Difference Between API-First and API-Enabled?
API-enabled means a legacy system had an API layer added on top of the old architecture. API-first means the system was built around APIs from the ground up, and that distinction affects everything from integration speed to long-term maintenance costs.
The practical difference shows up fastest when you try to do something the original system wasn’t designed for.
With an API-first core banking software vendor like Mambu or 10x Banking, launching a new product type is a configuration change. With an API-enabled legacy vendor, it might require months of custom development because the underlying data model wasn’t built to be flexible.
Tuum (an Estonian core banking platform) published one of the better explanations of this: in an API-first system, the API is the product.
In an API-enabled system, the API is a translation layer between the outside world and an older system that was originally designed for batch processing and branch-based banking.
For anyone evaluating the best companies for API-first core banking integration, the question to ask vendors isn’t “do you have APIs?”
Because everyone says yes now. The question is: “Were your APIs designed before or after the core system?” That answer tells you almost everything about what the integration experience will actually be like.
What Are the Risks of Migrating to API-First Banking?
The biggest risk isn’t choosing the wrong platform. It’s choosing the wrong migration approach. Only about 30% of complete core banking migrations have succeeded over the past decade, according to McKinsey.
That stat should give anyone pause, but the cautionary tales are even more instructive.
In April 2018, TSB Bank tried to migrate 5.2 million customers from Lloyds Banking Group’s systems to a new platform in a single weekend cutover. The result was catastrophic. Millions of customers got locked out. Some could see other people’s account details. Fraud attacks spiked to 70 times normal levels.
Recovery took eight months. Total cost: £330 million in compensation, consulting fees, and lost revenue. Regulatory fines added another £48.65 million. The CEO resigned.
And TSB isn’t an outlier. IBM’s Institute for Business Value found that less than half of banking CIOs reported meaningful gains from their modernisation projects.
Uncomfortably, 73% said cost management actually got harder after modernisation, not easier. 69% said the same about risk management.
One commenter on Hacker News summed up the practitioner view pretty well: “A rewrite in a different language is a really dumb thing to do unless there is no way to keep the old code working. A rewrite will rarely fix problems but always will introduce new ones.”
The industry consensus now is clear: phased migration with co-existence (running old and new systems in parallel) is the only approach that consistently works.
Big-bang replacements are essentially dead, and Oliver Wyman notes that regulators are actively pushing back against them due to “their inherent unpredictability.”
How Should Businesses Evaluate API-First Banking Partners?
Start with your actual business requirements, not vendor feature lists. The right API-first banking platform depends on your regulatory environment, transaction volumes, geographic reach, and how your industry is classified from a risk perspective.
This is where things get tricky for a lot of businesses. The vendor market is consolidating fast (Visa acquired Pismo for $1 billion, Fiserv bought Finxact, SoFi acquired Technisys for $1.1 billion), and the API-first platforms that look great on paper don’t all serve the same markets.
If you’re in crypto, gaming, FX, or any industry classified as high-risk, the pool of API-first banking platforms willing to work with you shrinks considerably. Many of the cloud-native providers that are excellent for mainstream retail banking simply won’t onboard certain business types.
That’s a reality that vendor comparison articles rarely mention.
A few things worth checking beyond the standard feature comparison: Is the platform truly API-first, or API-enabled with good marketing? What’s the actual migration timeline for a business of your size? Do they support your regulatory jurisdictions? What’s the pricing model — pure SaaS, or are there hidden license costs?
And critically, what does their partner and integration network look like? A platform with 200 pre-built integrations will get you live months faster than one where everything is custom.
The Bottom Line
The architecture problem isn’t going away. McKinsey’s data shows banks increased technology spending by 38% between 2013 and 2022, but most of that money went straight to maintenance.
The gap between API-first banking platforms and legacy-trapped institutions is getting wider every quarter, not narrower.
But the migration path matters as much as the destination. Rushing into a big-bang replacement because a vendor’s sales team made it sound simple has destroyed more value than legacy systems ever did.
The smart approach is phased, well-planned, and honest about the risks.
If you’re running a business in a complex or high-risk sector and you’re trying to figure out which banking and payment infrastructure actually fits your needs, that’s exactly what we help with at Capitalixe.
We work with over 100 financial institutions worldwide and specialise in matching businesses with the right providers — including API-first solutions that can scale with your operations.
Get in touch for a free consultation to talk through your options.
