In Saudi Arabia and the United Arab Emirates (UAE), outdated legacy systems, and a lack of execution control are hindering innovation in the financial services industry. According to new research commissioned by Stitch, financial institutions in the region are planning to address these issues by upgrading their systems within the coming year, with unified systems emerging as the leading solution.
The study, conducted by YouGov, reveals that banks and financial institutions globally have embraced external technology vendors, with more than 87% incorporating them into their current tech setup. This figure rises to over 94% in the UAE, suggesting that vendor adoption is no longer a strategic choice but an operational baseline.
Across institution types, exchange houses and financing companies lead this year, with a 93% adoption rate, followed by banks at 87%, and fintech companies at 84%.
Outdated infrastructure persists
Despite the widespread reliance on third-party tech vendors, legacy systems remain largely in operation. Rather than replacing these older infrastructures with modern solutions, institutions frequently layer new technologies on top. This means that while customer-facing experiences are undergoing modernization, the underlying systems remain anchored to obsolete technology.
This is evidenced by the fact that more than six out of ten institutions that offer lending products still operate on exclusively legacy technology setups, highlighting significant adoption gaps.
This environment creates a fragile equilibrium, where modern capabilities are constrained by legacy foundations. Layered systems frequently slow down modernization efforts and execution, as each new capability introduces additional dependencies, coordination, and operational overhead costs.
Lost business opportunities
These fragmented and legacy-constrained setups negatively impact financial institutions, Stitch says, causing them to miss critical business opportunities. In Saudi Arabia, 64% of financial institutions reported that their current tech setup has resulted in missed business opportunities, a figure which stands at 54% for UAE institutions.
For institutions operating in the environment of real-time money movement and competitive pressure, the cost of delay is immediate, with missed opportunities translating directly into lost momentum. Across industry verticals, fintech companies suffer the most from these fragmented setups, with 76% reported missed opportunities due to their tech infrastructure. Exchanges houses and financing companies follow closely with 70%, and banks with 50%.
Losing execution control
Though opting for tech vendors allows financial institutions to rapidly deploy advanced capabilities, reduce upfront capital expenditure, and focus internal resources on core strategy, this reliance also introduces significant new challenges.
In particular, institutions are increasingly losing control over how and when product launches and updates. Release cycles now depend heavily on vendor coordination rather than internal priorities, eroding execution speed and autonomy.
In Saudi Arabia, 73% of financial institutions reported heavy dependence on third parties for launches and updates, a figure that stands at 66% in the UAE.
Beyond delays, institutions also face fragmentation challenges when working with external vendors. Institutions often work with multiple providers, and these different systems may be difficult to integrate. Furthermore, these ecosystems frequently come with high cost for modifications, and offer limited flexibility and customization.
Towards a single, unified system
Against this backdrop, Stitch advises for a shift towards a modern, immediate, and unified system. This system should offer a single operating layer across financial products, one control plane for launches, updates, and scaling, and act as a source of truth for operations and data.
Results from the industry survey show strong support for this approach. In Saudi Arabia, 73% of financial institutions agree that a single unified vendor offers more value than managing multiple vendors, a sentiment shared by 66% for players in the UAE.
Exchange houses and financing companies are the most eager for such a system, cited by 83% of respondents, followed by fintech companies at 80%.
A unified system is expected to deliver clarity, speed, and control. 55% of institutions believe that such a platform would simplify management, 52% say it would improve customer experience, and 50% say it would allow for faster product launches.
With frustration mounting over systemic constraints, financial institutions in both countries are planning upgrades and modernization efforts this year. In Saudi Arabia, 84% of financial institutions intend to upgrade or modernize their tech infrastructure in the next year, a figure that stands at 78% for institutions in the UAE.
Again, exchange houses and financing companies are the top movers, with 93% of respondent planning upgrades, following by fintech companies at 84%.
The cost of legacy systems
These findings align with broader industry studies. A 2022 study by Forrester, commissioned by MongoDB, found that 57% of decision-makers in financial institutions believe that legacy infrastructure is too expensive and fail to meet the requirements their organization need for modern applications. Additionally, 50% said their organization possess excessive legacy technology to support the volume, variety, and velocity of their current transactional data volumes.
An analysis by William Flaiz, a startup founder and former Novartis executive director, shows that these systems are significant liabilities that incur substantial hidden costs of up to US$2.4 million annually.
For a mid-sized enterprise running 12 legacy applications, legacy systems can require 3-4x more maintenance hours than modern platforms. This translates to an estimated US$720,000 in direct annual maintenance.
These systems also harbor security vulnerabilities that modern platforms address natively. Consequently, mid-sized organizations can invest up to US$840,000 per year on additional security tooling, compliance audits, incident respondents and remediation, and regulatory penalties.
Legacy systems also require custom integration work, including API development and maintenance, data transformation, and integration testing cycles. This integration overhead is estimated at about US$480,000 per year.
Finally, legacy systems stifles innovation through delayed time-to-market, lost revenue opportunities, and stalled strategic initiative. The resulting cost is estimated at US$360,000 annually.
Download the “Barriers to financial innovation in the Kingdom of Saudi Arabia (KSA) & the UAE” whitepaper here.
