Exploring the limits, challenges, and opportunities of Agile in banking software development.

Across Europe, banks are under pressure to do more than just digitize – as digital banking transformation and fintech software development accelerate, they need to become agile in the truest sense. That means embracing fast feedback loops, iterative delivery, and customer-centered product thinking.

But here's the hard truth: Rolling out Agile in banking is one thing; sustaining agile transformation is another.

Despite the best intentions, many banks find themselves trapped in a cycle of "Agile theater" – where stand-ups and sprints exist in name only, but delivery timelines, governance, and mindset still belong to the waterfall era.

So, what's holding banks back from becoming genuinely agile – and what does it take to change that?

Why Agile Makes Sense for Banking – In Theory

The benefits of Agile in banking are well understood:

• Faster time-to-market
• Better alignment between business and tech
• Higher customer satisfaction
• Lower cost of change
• Empowered, cross-functional teams

These outcomes align perfectly with the digital ambitions of most banks today – especially in the face of growing fintech competition and increasing customer expectations.

Yet, turning those outcomes into reality in a highly regulated, legacy-heavy environment is far from simple.

The Harsh Realities: What's Blocking Agile in Banks?

Through interviews with transformation leaders and engineering executives in the banking sector, several recurring challenges emerged:

1. Outdated Tech Stacks

Agile thrives on quick iterations and continuous delivery. But many core banking systems and legacy software rely on monolithic architectures and decades-old mainframes. These legacy infrastructures aren't built for change – and can limit the speed at which teams can deliver and adapt.

2. Waterfall Residue

Even when Agile ceremonies are in place, the underlying mindset and planning structures often remain rooted in waterfall. Documentation-heavy governance models, rigid budget approvals, and sequential sign-offs create friction that undermines agility.

3. Complex Compliance Requirements

In banking, security, data protection, and regulatory compliance are non-negotiable. These concerns often lead to over-engineered governance models that slow down Agile adoption. Teams end up spending more time proving compliance than delivering value.

4. Scaling Agile Is a Struggle

Agile may work well in isolated teams, but scaling it across departments and legacy systems is where things tend to break down. Dependencies on back-end teams, lack of product ownership, and siloed functions make it difficult to achieve true end-to-end agility.

Can Banks Truly Become Agile? Yes – But with Conditions

The short answer is yes – but banks must rethink more than just process. Agile in banking isn't just about speed; it's about adaptability, ownership and sustainable delivery. Here's what's required:

✅ 1. Modernize the Tech Foundation

Start with platform readiness. Agile needs APIs, microservices, CI/CD pipelines, and modular architecture. If your infrastructure doesn't support fast and safe deployment, your teams can't be agile – no matter how many sprints you run.

✅ 2. Align Governance with Agile Values

Agile and compliance don't have to be enemies. Introduce lightweight, continuous assurance models that satisfy auditors without paralyzing teams. Shift the focus from upfront documentation to embedded, traceable controls.

✅ 3. Redesign Team Structures

Empowered, cross-functional product teams are the backbone of agility. Break down silos between business, development, QA, and operations. Ensure teams have autonomy and a clear product mission.

✅ 4. Commit to Long-Term Change

Rolling out Agile is not a one-off initiative – it's a cultural transformation. Leadership must model agile behaviors, fund product over project, and incentivize learning over perfection.

How a Software Development Partner Can Help Banks Succeed with Agile

While internal teams wrestle with change, an experienced  financial software development partner can provide the structure, momentum, and external perspective banks often lack.

Here's how the right partner accelerates Agile transformation:

Agile Squads That Deliver Fast

Partners offer plug-and-play agile teams trained in product thinking, DevOps, and modern delivery models – reducing startup friction and accelerating momentum.

Governance-Aware Agility

The best partners understand financial regulations. They help design Agile workflows that meet compliance needs – without undermining speed or innovation.

Expertise in Legacy Integration

Agile in banking often depends on navigating legacy constraints. A good partner brings the technical depth to modernize without breaking what works.

Scaling Agile Beyond the Pilot

It's one thing to succeed in a single team – it's another to scale across the org. Partners help banks operationalize agility at scale, build internal capability, and avoid regression to old habits.

Can Agile and Waterfall Coexist in Banking?

While full-scale Agile transformation is the ideal, the reality in banking is rarely binary. In many institutions, a hybrid approach – blending Agile and Waterfall methodologies – is not only practical, but necessary.

Why? Because banks must balance innovation at the edge with stability at the core. Agile excels in fast-changing environments like digital channels, mobile apps, and customer-facing platforms. But mission-critical systems – such as core banking, regulatory reporting, or payments infrastructure – often require predictability, compliance, and rigor, all of which are hallmarks of the traditional Waterfall model.

Here's how banks can make the hybrid approach work:

1. Define the Boundary

Not every project or system needs to be Agile. Segment initiatives based on risk, volatility, and complexity. Use Agile where speed and adaptability matter most; use Waterfall where stability and traceability are essential.

2. Bridge the Interfaces

Agile teams working in sprints may need to sync with waterfall teams operating on fixed milestones. This calls for tight coordination, integration planning, and clear inter-team contracts that define dependencies, timelines, and delivery formats.

3. Govern at the Portfolio Level

Adopt Agile governance at the portfolio level, allowing different delivery models to coexist under a shared set of strategic goals, KPIs, and risk controls. This approach keeps the organization aligned without forcing every team into the same mold.

4. Empower Agile "Islands" to Grow

Use successful Agile pilots or squads as lighthouses for broader change. Over time, Agile ways of working can expand deeper into the organization – moving beyond digital labs and into core product teams.

Final Thought: Agile Isn't a Method – It's a Mindset

Many banks can roll out Agile. Fewer sustain it. And fewer still reap its full benefits.

Becoming agile isn't about following a checklist – it's about building a culture of continuous improvement, shared ownership, and relentless focus on customer value. That's where the real transformation lies.

Need help navigating Agile, Waterfall, or both?
We specialize in building delivery models that blend speed and stability – helping banks evolve at the pace of innovation without compromising trust, governance, or control. Let's talk.

Schedule a discovery call with our team today!

From Project to Product: The Future of Software Engineering in Banking