The road ahead

Financial institutions, banks and credit cards companies, have invested billions of euros over the last 30 years on payments systems. However over time the complexity of the overall system architectures in place is proving hard to leverage to meet today's demands. But doing away with the old and start from scratch with the new will prove more difficult than meets the eye.

Financial institutions have often raced to be one of the first to market with new services. A new platform for the new service was often bolted onto the existing architecture. This led to complex systems with no unified market solutions, with old and new technology and with little room for scalability, flexibility or real-time processing. 

Consolidation and Globalization of the banking sector have also increased the complexity of the current payment system architecture of financial institutions. Larger institutions have acquired smaller independent financial institutions in their home market or in higher return geographies like Latin America, Asia Pacific or the Middle-East.  Whilst expanding into new markets and acquiring new customers, financial institutions have also added additional systems to their own infrastructure.  

Also, rapidly evolving regulations are bringing with it new requirements for compliance, audit, transparency and control, driving financial institutions to update platforms and processes necessary to issue and manage cards in this new environment.

Finally, customers' appetite for innovative and more convenient methods of payments (e.g.  mobile) has had a major impact across all aspects of financial institutions' payment operations which is a collection of independently run systems derived from the various external acquisitions of other smaller banks or the addition of new software bolted on the existing platforms.

It has long been argued that financial institutions need to take a long-term, cross-organization view for the future of their payment systems to use their existing IT budget more wisely. Only a few years ago this very idea was still debated. Now that there is consensus, it will be interesting to see how this transition will occur.  A market standard leaning towards a more modular, agile and unified system will invariably emerge but the pillars of the current payment systems will have to remain available, reliable and for the short-term at least scalable. Speed will be of the essence though as new entrants will have a significant competitive advantage as they have no legacy systems to migrate from or to maintain and invest into in "throw away developments".