The banking and payments landscape is changing at a great pace. Increasing consumer demand for quick and easy access to accounts has led to greater reliance on technology for banks and consequently innovations such as electronic invoicing, mobile payments and e-commerce are developing at breakneck speed.

According to Juniper Research, the value of international money transfers made via mobile phones will exceed $10 billion for the first time this year, while the IMRG Capgemini e-Retail Sales Index reports that September 2013’s sales figures represent the fastest monthly increase in the 13 years since the index began. This is without doubt an exciting time for the industry, however the increasing consumer demand for speed and ease of use in the finance sector also put banks under a great deal of pressure. 

Banks are required to ensure that m-commerce and e-commerce transactions run seamlessly, and take care of security, all the while facing growing competition from challenger banks, such as Marks & Spencer, Tesco, ING Direct and Metro Bank, as well as tech corporates such as Google and Facebook. According to a recent study by BIAN member Infosys, the average bank now typically views web companies such as Google as the biggest threat to its business, as they are able to quickly develop and bring to market innovative offerings such as the Google Wallet.

It is no wonder that banks fear competition from the likes of Google. Joining the race at a time of innovation and change, these newcomers have an unfair advantage. They are able to build IT systems specifically designed to deal with modern banking challenges and have the skill and flexibility to both adapt to the inevitable banking and payments changes of the future and drive further innovations in the industry. 

By contrast, traditional banks are relying on age-old IT infrastructure that was developed in an era far removed from the banking landscape of today. This is exacerbated by ever-changing regulatory demands, which put further pressure on banks as their outdated legacy systems strain under the force of ever-more stringent requirements. To overcome changing IT demands, banks are currently making isolated updates to systems as and when required, however with the underlying issue of old-fashioned core banking systems, this simply works to complicate the overall system further.

However, banks should not lose hope with competing against the innovative new players on the scene just yet. If the banking industry can join forces with both one another and also IT software providers, to define industry-wide standards for banking IT services, IT infrastructure complexity and integration costs would be significantly reduced. By relying on a service-oriented architecture (SOA) that separates these pre-defined services into core IT building blocks and identifying the necessary links between them, banks will be able to continue making updates as and when required, but without creating a tangled web of systems that will quickly be left behind.

The banking and payments industry is alive with innovation and shows no sign of stopping. Now is the time for banks to move their IT infrastructure back to the future and tackle the threat from alternative players head on.