Three forces pushing banks to modernize payments infrastructure

Customer expectations, technology and regulations demand that financial organizations update payments systems before the next wave of disruption.

Payments systems have always been complex and a critical part of the banking world. But over the past decade, dynamic changes within payments have created even greater challenges for financial organizations and driven the need for payments transformation. In particular, more complex regulation, advancing technology and demands from customers to create a consistent, seamless experience across multiple channels are pushing banks, FinTechs and payment processors to invest heavily in payments modernization. Upgrading infrastructure to address these challenges, while keeping costs under control, requires financial organizations to first understand the drivers of change.

But they aren’t ready to sacrifice security for seamless experiences. Customers have increasingly high expectations around strong authentication measures across payment channels, and they expect all fraud, risk management and exception management activities to be in place. They also value consistency of experience and information across channels.

Innovation 

Innovation is reshaping payments on a scale and at a speed seen in few other sectors. Within just a few years, advancing technology has not only changed how we pay, but also expanded the pool of payment players far beyond the financial sector. Many new providers bring superior understanding of the customer experience deployed in sectors such as retail, technology and entertainment.

The innovation transforming payments is also increasing the complexity of the payments environment. Systems must be able to layer in multiple vendors to facilitate certain payment capabilities. And nimble, modern and scalable architecture is needed to provide the “plug-and-play” experience required as the move to open banking and the emergence of the banking-as-a-service (BaaS) model drive further sector disruption.

Modern payments architecture

An end-to-end business perspective drives successful transformation

Customer demands, innovation and regulation have been reshaping payments since the very first transaction was made. But the impending disruption of BaaS is creating a new urgency for financial organizations to modernize architecture at speed to take advantage of emerging trends while controlling costs. With both existing and new rails requiring maintenance and updates, now is the time to build payments infrastructure with scalability and flexibility fit for the future.

But investing in new systems and processes before optimizing those already in place is a waste of time and budget. Modernizing payments starts with optimization of legacy systems through an end-to-end system analysis that identifies key metrics, including costs, transaction volumes, processing times and other key requirements that may vary across segments.

These costs and metrics will highlight priorities for improvement, and ultimately enable each bank to understand customers’ requirements along the entire payment journey and across every channel. This can allow financial organizations to develop shared infrastructure and processes to exploit commonalities across these paths and channels while building in flexibility to accommodate key differences. A proven framework that outlines how to modernize legacy systems can help financial organizations make improvements now and be ready to embrace the enhancements and technologies that help build truly differentiating customer experience.                                                                                                               

The primary authors for this article are Mike Chamas, Manager; Ritesh Kirad, Payments Technology Leader; and Patricia Partelow, Managing Director.