Agility is the mother of payments innovation, but legacy is still a sticking point

Paul Chandler, sales director, Compass Plus

March 15, 2021 | Compass Plus

For the first time, we’re in a consumer-driven world. We once did our banking with whoever had the nearest branch and we shopped with whoever had the best price or with the local store. Things have changed. Consumers are now in control, driving demand for slicker, more convenient, more personalised services across retail, commerce and banking. All businesses must now remain agile and quick to adapt to customer demand – or risk their own survival.

Although customer demand for payments innovation is certainly there, many larger companies have been slow or reluctant to upgrade their platforms to enable these innovations. Those with the attitude of “if it ain’t broke, don’t fix it” are suffering today – their whole core, their business processes, are not fit for purpose. There is a slow realisation of this – that at the heart of their technology is an obsolete legacy platform which is perpetually suffering from downtime or needing maintenance. Downtime has an impact on the bottom line and could also be interpreted as a reflection of mediocrity – something consumers will no longer tolerate.

For banks in particular, the inability to change is hurting them. Many banks are sitting on platforms that were created 20-30 years ago. They weren’t made for today’s needs, they weren’t built with cloud or even a digital footprint in mind – and these systems only treat transactions as being card-based. That in itself is archaic when we think about payments today.

Consumers see the change in the market and if the banks don’t keep up, their customers will talk with their feet (or the click of a button) and move to an all-singing, all-dancing challenger bank that leverages real-time payments, personalised services and adapts in line with demand.

All of the disruptive changes we’ve seen happen in payments over the last few years are powered by next gen technology – and this is what banks and payments businesses need to embrace. The right technology is the only way they can deliver innovation at speed and be seen to be addressing customer needs.

Of course, they need to do this without bringing everything to a standstill, or starting again. While many are holding back because of the seemly impossible task of retiring legacy systems, ‘rip and replace’ is not the only option. FIs don’t need to scrap everything and start afresh, there are alternatives out there for them. They can bring in new lines of business on new technology platforms that sit alongside legacy, as a hybrid model. Or explore cloud solutions as a robust way to broaden capabilities and market agility.

We’ve seen a quantum leap in consumer adoption of digital services in the past year and this has pushed financial institutions to realise that they need to adapt – that their approach is indeed broken and they need do to fix it. Nextgen payments platforms are the answer – they can enable banks to embrace what’s happening today and respond to what tomorrow brings.

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