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What is Payment Modernization?
Financial Institutions have taken up various methods to modernize their payments systems over the past decade. While there was a consolidation effort of channels and customer-facing applications as part of Phase 1 of the modernization program through a “payment hub” approach, the next phase has been where institutions are embracing various global standards (i.e., IS020022, Open Banking) and adopting methods to achieve faster payments and leverage the most cost-efficient rail to settle a payment.
Institutions have now realized that any digital transformation should consider revisiting their core banking and payment systems by adapting core modernization principles and take a holistic look at the end-to-end payments value chain, looking at ways to simplify or isolate their core system of records, from client initiation to the clearing and settlement, targeting middle and back-office functions to enable innovation and connect to new networks and schemes
Drivers for payments modernization
Financial Institutions have realized that the key drivers for payment modernization are actually multi-layered and not mutually exclusive in nature. They usually fall under four main categories.
Envisioning the Target Payment Operating Model
Reimagining payments strategy to deliver real-time, frictionless payments experiences anytime, anywhere, creating an environment without boundaries and one that is accessible and scalable is a key element while building the next payments architecture and its ecosystem.
Strategies to overcome payment modernization challenges
Abstraction Model
Approach –
Use Case –
Challenges & Limitations –
Benefits & Key Success -
Value Chain Model
Progressive Modernization
Orchestration Based Modernization
Rip & Replace Approach (Big Bang Approach)
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Patrick Bermingham CEO at Adflex
29 August
Ben Lane VP of Colleague Experience Group at American Express UK
28 August
Alex Kreger Founder & CEO at UXDA
27 August
Luigi Wewege President at Caye International Bank
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