Banking: Legacy paytech has reached its twilight

Financial institutions (FIs) are facing a critical period. As modern technology advances, the shortcomings of legacy technology will hamper the competitiveness of these established organizations that have been diligently providing financial services for years. It’s a common challenge acknowledged by FIs worldwide, but finding a solution has proven to be tricky.

Many FIs find that transitioning from a legacy infrastructure to newer and more efficient technologies is a laborious and complex process. Moreover, it’s expensive. According to IDC, global FI spending on existing payment technology is predicted to double to US$80.3 billion in 2030, up from 2020’s US$39.7 billion. This status quo is crippling FIs capabilities to innovate and meet rapidly changing customer demands, which weakens their ability to stay relevant in an increasingly competitive market. So how can FIs break free from the grip of legacy payment infrastructure to future-ready paytech?

The digital transformation dilemma

While we can critique FIs for being resistant to change, in truth, keeping the status quo shelters banks from unknown risks and challenges. Navigating a digital transformation project requires confidence in the FIs partner, the paytech and the strategy.

Additionally, outsourcing the solution, whilst beneficial, does require FIs to rigorously select their paytech partners and ensure they’re capable of implementing what is required. It’s often the case that FIs are left frustrated by technology providers that fail to deliver on lofty promises. Still, going solo has resulted in even less success for FIs. IDC estimates banks wasted $900 billion on digital transformation in 2018, with 70% of these projects not achieving their objectives.

These are all valid reasons for caution, but to respond to evolving trends, launch innovative products and remain competitive, banks will have to advance their technological capabilities one way or another.

Finding the right solution: Progressive modernization

While successfully overhauling legacy systems across the entire organization is not impossible, if it is carefully planned and executed, it can be a challenging and costly undertaking for FIs.

Thankfully, there are more viable solutions. As far as payment technology is concerned, this comes in the form of new paytech providers, who can support FIs to progressively modernize their capabilities. These paytech provide cloud-based products which enable FIs to be extremely flexible and introduce new features and products to the market, without needing huge investment or vast technical expertise. It also becomes easier for organizations to assess what systems work for them in a measured manner with reduced risk.

From here, FIs can enter a new dawn. A globally distributed paytech solution can bring new opportunities for FIs - there’s room to enter new markets and service customers with products in any location. Legacy systems won’t be able to keep up with evolving trends and respond to niche customer demands. This is why, for FIs to remain competitive, modernizing their services and tech infrastructures should be a top priority.

Knowing reliance on legacy payment infrastructure hampers innovation and migration of technology to the cloud, FIs will have to move on and explore their options to develop a modern paytech stack. One that supports them in responding to fast evolving expectations of customers. FIs are already looking for ways to progressively modernize, and a quality partner can serve this need through providing modular and customizable technology for them to become future-ready and grow their market share.