Seventy-two percent of customers want immediate service in payments, pushing banks in the MENA region to upgrade their outdated infrastructure.
72% of customers now expect instant payment processing, according to Finextra. This demand is straining banks across the GCC and wider MENA region, where legacy systems struggle to meet modern expectations. The shift has triggered rising operational costs as institutions invest in digital upgrades, regulatory compliance, and customer retention strategies.
Financial Implications for Banks
Outdated payment systems are becoming a liability for traditional banks. Maintaining legacy infrastructure requires ongoing maintenance, security upgrades, and compliance with evolving regulations such as open banking mandates. These costs are compounded by the risk of losing customers to agile fintech competitors offering faster, cheaper alternatives. In Saudi Arabia and the UAE, where digital adoption rates are accelerating, banks face pressure to modernize or risk declining market share.
The cost of inaction is also evident in customer churn. A 2026 regional survey by MENA FinTech Insights found that 38% of bank customers in the GCC have switched providers due to poor digital experiences. For institutions with aging payment platforms, the financial burden of retaining clients is growing, particularly as younger demographics prioritize speed and convenience. This churn not only erodes revenue but also increases acquisition costs, creating a double burden on banks already grappling with infrastructure overhauls.
Legacy systems, often built on decades-old mainframe architectures, are inherently ill-suited for real-time processing. These systems require extensive manual intervention, leading to delays in transaction settlements and higher error rates. The inefficiencies are amplified in cross-border transactions, where outdated infrastructure struggles to meet the demands of real-time clearing and settlement. As a result, banks are facing mounting pressure to replace or retrofit these systems with modern solutions capable of handling high-volume, low-latency transactions.
The regulatory landscape further complicates the challenge. Open banking directives in the UAE and Saudi Arabia, for instance, mandate interoperability between financial institutions, forcing banks to overhaul their APIs and data-sharing protocols. Compliance with these mandates requires significant investment in cybersecurity measures, data governance frameworks, and third-party risk management—costs that are often passed on to consumers through higher fees or reduced service quality.
The Role of Fintech Companies
Fintech firms are emerging as critical partners for banks seeking to bridge infrastructure gaps. Partnerships between traditional banks and digital-first providers are expanding, with solutions ranging from real-time payment gateways to AI-driven fraud detection. In Bahrain, for example, Al Bank recently partnered with PayTabs to integrate instant payment corridors, reducing transaction times from hours to seconds.
These collaborations are reshaping the ecosystem. Fintechs bring specialized expertise in areas like API integration, tokenization, and cross-border remittances—capabilities that many legacy banks lack. However, integration challenges remain, particularly around data security, regulatory alignment, and interoperability with existing systems. For instance, the lack of standardized protocols across the GCC has hindered seamless interoperability between banks and fintechs, requiring additional investment in middleware and compliance tools.
The rise of embedded finance further underscores the need for modern infrastructure. As non-financial firms increasingly offer payment solutions—such as e-commerce platforms integrating real-time payment gateways—banks must ensure their systems can support these use cases without compromising performance or security. This has led to a surge in demand for cloud-based payment platforms, which offer scalability and flexibility but require significant upfront investment in cloud migration and infrastructure upgrades.
Significance:
For the MENA fintech ecosystem, this shift underscores the accelerating convergence of traditional banking and digital infrastructure. The pressure on banks to modernize is creating opportunities for fintechs to expand their footprint, but it also highlights the need for regulatory frameworks that support seamless integration without compromising financial stability. As central banks in the region work to establish common standards for digital payments, the pace of innovation will likely depend on the alignment between regulatory goals and the technical capabilities of financial institutions.
For regional financial institutions, the practical question is whether legacy systems can be upgraded cost-effectively or if strategic partnerships will become a necessity. Until corroboration of the 72% statistic is available from additional sources, the development remains an infrastructure challenge to monitor closely.
