Legacy banking infrastructure serves serious limitations to banks providing new payment technologies; new research puts forward.
Banks must funnel investment in new technologies if they are to keep abreast with business customers’ demands for more robust payments; as supported by the Aite-Novarica Group‘s latest research.
The research was conducted amongst 108 banks in North America, Europe and Asia-Pacific. It reports on the payment strategies, priorities and challenges that these banks are experiencing in both the short and long term.
The research identifies payments as an important area of growth and innovation within the commercial banking space, yet determines that legacy systems cannot effectively support end-user demand for better payment capabilities.
Almost half of the banks surveyed as part of the group’s recent ‘Payments Modernisation and Technology‘ report have admitted to losing a least 10 per cent of their payment volume to fintechs.
In response to this, the majority are investing in modern payments technology, with 94 per cent considering varied levels of investment over the course of the next 24 to 36 months.
Of this figure, 65 per cent plan a significant or moderate level of investment in payments technology during the same period.
Powering new payments
The survey pinpoints real-time payments as one of the largest drivers of payment modernisation with 72 per cent of financial institutions either having completed a project to deploy new payment rails, have one in progress or have plans to implement one in the future.
These findings indicate that most banks are welcoming modernisation as a key differentiator and opportunity to innovate. However, it also goes on to show that despite this shift to real-time payments, many banks still experience implementation challenges.
Fifty-seven per cent of respondents report that adapting legacy infrastructure makes achieving modernisation ‘extremely’ or ‘very challenging’.
Many banks report lacking the resources for integrating legacy systems and modern technology, making efforts to modernise even more complex and demanding.
About seven in 10 banks believe that the technical challenges of integrating with legacy systems are either somewhat of an obstacle or a major obstacle, highlighting the need for technology partners that offer agility and streamlined implementation.
“As we can learn from the survey findings, the payments industry is facing a perfect storm of challenges, but with it comes new opportunities for growth,” explains Barry Rodrigues, EVP of the payments business unit at Finastra, which supported the production of the report.
“As businesses demand more efficient and advanced payment capabilities, banks across the world are recognising that if they do not invest in more robust technology, they will quickly find themselves falling behind their competitors,” adds Erika Baumann, director of commercial banking and payments at Aite-Novarica Group.
“Our research shows the common global theme of creating a better, more innovative suite of payment services built on the right infrastructure with the right partner is crucial to success in a real-time environment.”
The research also highlights the significant challenges encountered by banks when facilitating cross-border payments.
In this, ensuring compliance and security are seen as frequent and pronounced challenges, with 56 per cent of banks deeming them to be either extremely or very challenging.
More positively, however, the research also concludes that banks are recognising the importance and benefits of moving payment processing to the cloud, with only nine per cent of respondents having rejected the move altogether.
Many are adopting cloud technology in tandem with payments-as-a-service (PaaS) to reduce time to market. The research cites a clear perception that PaaS can help reduce time to market and offer businesses more robust payment capabilities, with 73 per cent of those surveyed reporting that PaaS will enable them to launch new services faster.