Eurozone entry: Time for Bulgarian banks to rethink and rebuild legacy systems

Bulgaria’s banks have a golden opportunity to leverage the momentum of eurozone entry for a more comprehensive transformation, not just a currency switch.

Entering the eurozone presents challenges as well as opportunities for the Bulgarian banking ecosystem. 

On the one hand, compliance with stricter regulations and convergence costs present new obstacles. On the other, it’s an opportunity to take advantage of a mindset of change to invest in updating outdated legacy systems.

Bulgaria is likely to enter the eurozone in the very near future—January 1, 2026, according to the latest forecasts. This is an exciting time for the banking sector, with many opportunities and benefits, such as a positive effect on lending and the development of the capital market.

At the same time, banks face serious challenges in the form of stricter regulations, convergence costs of IT systems and internal structures with eurozone standards, and others. The digital transformation demanded by the eurozone migration also means that Bulgarian banks may need to invest heavily in upgrading their online and mobile banking platforms to compete with the eurozone banking sector. 

Banks are preparing at their own pace, and some have already seized this momentum to get ahead of the competition. Meanwhile, other banks focus solely on compliance and ensuring the transfer of basic banking processes to the euro. 

“The biggest banks have long been ready as their headquarters are in the eurozone (such as Unicredit Bulbank and KBC UBB). As for domestic banks—I doubt there have been big challenges as Bulgaria since 1997 has a fixed rate to the Deutsche Mark and the Euro—so it is a matter of adjusting only the exchange rate,” says economist Evgeni Kanev.

While the transfer to the euro may seem straightforward, it’s fraught with technological risks stemming from outdated systems and processes. Let’s have a deeper look at what those risks are and why this is the prime opportunity to address them.

This is the right time to modernise legacy systems

Upgrading core systems is a strategic imperative for banks facing intense competition from fintechs and digital wallets. Approximately 70 per cent of bank IT budgets are currently allocated to maintaining outdated systems, hindering innovation and profitability.

Modernising these systems not only frees up funds for developing new revenue streams—such as tailored products for specific customer segments—but also positions banks for long-term growth.

Eurozone entry presents a unique opportunity for banks to modernise their operations. While losing income from currency exchange might initially impact profitability, the potential for increased transaction volumes and expanded market access within the eurozone is substantial. To capitalise on this, banks must optimise their systems and processes, ensuring they are equipped to handle growing transaction loads.

“Huge investments have been made to meet the ECB criteria since our Bank union joining in 2020 and these investments have not paid off due to the huge delay of our Eurozone entry,” Kanev explains.

Consolidating multiple legacy card systems into a unified, modern platform facilitates a smoother transition to the euro and positions the bank for future growth. By embracing technological advancements, banks can mitigate the challenges associated with currency conversion and emerge as leaders in the evolving financial landscape.

Planning for smooth card system migration 

Successful card system migration requires a well-defined methodology. This process typically starts with analyzing a bank’s objectives and existing systems. Next, a plan is created for the new system and data migration, including what data needs to be moved and how. 

Collaboration is crucial as banks determine data sources, migration scope (historical vs. current data), and the approach (phased for lower risk or big bang for speed).

Data preparation can be handled by the bank or a third party (vendor) to ensure a smooth transition to the new system.

Beyond the euro: A strategic approach to modernisation

Upgrading a legacy system is costly, with ongoing IT and vendor fees. Therefore, banks should seriously consider if they want to invest in outdated systems that they may want to replace after a few years. Alternatively, banks can request a combined euro migration and system replacement project. This would maximise their return on investment by tackling both issues at once.

Our experience executing euro migration projects highlights the process’s complexity. Without the benefit of a vendor’s expertise, banks may overlook critical considerations.

For instance, seamlessly transitioning ATM withdrawals from the old to the new currency or ensuring accurate account balances during the conversion requires meticulous planning and execution.

Banks have a golden opportunity to leverage the momentum of eurozone entry for a more comprehensive transformation, not just a currency switch. By going beyond basic adjustments to reporting and product calculations, they can optimize processes and modernise systems.

This proactive approach will ensure long-term competitiveness, positioning them for success well beyond the immediate transition.

Photo by Mika Baumeister on Unsplash.

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