Core Pressures and Shifting Clouds Disrupt Cross-Border Ecommerce

As digital payments move faster, decades-old core banking platforms are struggling to keep up with the pace of change. With the value of cross-border payments anticipated to hit $250 trillion by 2027, danger looms on the horizon for those institutions and merchants that are still shackled to antiquated systems draining them of time and money.

Why core banking systems need to move faster

Today’s digital commerce landscape is very different to the one that existed just a few years ago. It wasn’t so long ago that the biggest challenges for core banking systems were how to integrate new card products and new payment devices. Now, disruptive technologies like API microservices, AI and machine learning, blockchain - even the metaverse – threaten to overwhelm merchants and acquirers that stand woefully unprepared for more waves of digital transformation.

Core banking platforms are an integral cog in the payment ecosystem, conducting mission-critical payment processing functions that enable smooth transaction flows between consumers, merchants and acquirers.

However, more and more in-house core banking platforms, many of which were built several years ago, are rapidly becoming outdated, as the underlying technology is obsolete or can no longer be adapted to onboard rising transaction volumes from a fast-growing array of channels, devices and touchpoints.

Upgrading these traditional platforms is prohibitively expensive to do in-house, and while plug-and-play functionality has enabled some flexibility, the intensive data-driven demands and complexities of cross-border ecommerce processing means the continued use of such platforms threatens the efficiency and profitability of merchants and acquirers looking to expand their cross-border ecommerce operations.

So, it’s baffling that so many ecosystem participants appear frozen in terror, fearful of moving forward due to cost concerns or technical infrastructure barriers. But the risks of not moving could be catastrophic.

As transaction volumes escalate, operational costs soar. As fragmented data floods in from omnichannel commerce, monolithic legacy systems will creak under the strain, making it harder for merchants and acquirers to find the insights they need. The risk of doing business intensifies, and customer experiences will get worse. Reliance on core banking platforms fast approaching the end of their useful lives could in fact pose systemic risk for the entire financial system, according to the Basel Committee.

As of 2021, only 14% of banks stated they had managed to scale digital transformation and achieve desired results. Service innovation and seamless distribution need an agile, flexible core banking solution to unlock that transformation. Without it, banks can’t make the quick decisions needed to offer optimised customer or user experiences, omnichannel integration and the capacity to scale to cope with rising demands, like super-quick onboarding and payment funnel optimisation.

But these challenges are not limited to traditional banks, that are trying to transition from legacy to next-generation – fintechs too need to rapidly scale their digital infrastructure as millions of new consumers, and emerging payment use cases enter the fray.

Changes in business models are forcing pivots in pricing

All of these reasons are why SaaS and cloud-based core banking solutions could not have come at a better time – in fact, they will become mission-critical for the smooth processing of payments between consumers, merchants and acquirers. These solutions not only solve all of the operational challenges outlined above, they’re designed to help merchants and acquirers scale and adapt to the digital-first world in a cost-effective, configurable and customer-centric way.

With a cloud-based core banking solution, clients can seamlessly link customer service channels, onboarding processes, ID and KYC verification, transaction monitoring, and data insight generation for a complete overview of their customer base. They can also route funds to card schemes, processors, gateways and ACH or RTGS platforms, enabling clients to benefit from instant settlements. Additionally, risk mitigation is vastly improved. PCI DSS compliance is assured, and data can be encrypted and securely stored in dedicated data warehouses.

API integration is effortless, allowing clients access to a growing range of user-friendly, dynamic services, and empowering them to offer embedded finance and payments services much faster. And the real beauty is that all of these functionalities are run through a single platform.

Retrofitting a legacy core system is far more difficult and expensive than implementing a new one. Core banking technology is the best thing you can have in-house, but it’s incredibly costly and difficult for companies to develop by themselves. Outsourcing isn’t always the answer either, as third-party vendors may lack the flexibility and infrastructure to design solutions attuned to each business’s needs

But there are other cost issues that make cloud core banking solutions ideally placed to provide the enhanced value propositions that merchants and acquirers are looking. The upfront outlay for technology or software licences is giving way to flexible pricing options like subscriptions, that can be adapted as platforms are configured with more modules.

Any core banking platform worth its salt should give clients total control over what they do in line with their priorities, with the flexibility to build anything they want, in a cost-conscious, scalable way.

That’s why xpate’s new core banking solution has been designed and engineered to meet all these pain points, speeding up and simplifying merchant payment gateway integration with multiple acquirers. No longer do merchants and acquirers have to contend with complex, time-draining payment gateway integrations – it untangles the many integration tentacles between different acquiring systems that can strangle payment flows, giving merchants the widest possible access to seamless payment processing, powerful real-time data analytics, and intelligent transaction routing to ensure higher approval rates.

The launch of xpate’s core banking solution adds to our growing momentum over the past 12 months, fuelled by the launch of breakthrough services such as our acquiring platform Links, and the recent addition of 35 developers to our team to build out our agile cloud and API capabilities for ecommerce merchants and acquirers everywhere.

By removing the common obstacles that stand in the way of smooth transaction journeys, configurable cloud core banking solutions like these are giving merchants and acquirers the agility to tap into even more cross-border ecommerce opportunities.