The Banking Executive Magazine - March 2023 Issue

the BANKING EXECUTIVE 50 ISSUE 171 MARCH 2023 FinTech and AI Chornicle The majority of banks globally are in- vesting in modern payments technol- ogy with 94% of respondents considering varied levels of invest- ment in the next 24-36 months, says a research study. Aite-Novarica Group research re- veals that payments is an important area of growth and innovation within the commercial banking space, and legacy systems cannot support end- user demand for better payment ca- pabilities. Almost half of banks surveyed say fintechs, which typically provide a smooth customer experience, have already taken at least 10% of their payments volume. Of those respondents, 65% plan a significant or moderate level of in- vestment in payments technology during the same period. REAL-TIME PAYMENTS The ‘Payments Modernisation and Technology: Priorities, Challenges, and Partnerships’ survey finds that real-time payments are one of the largest drivers of payments moderni- sation. Many financial institutions are somewhere in the process of de- ploying new payment rails, with about 72% of respondents having completed a project, having one in- progress, or with plans to implement. This suggests that most banks are welcoming modernisation as a key differentiator and opportunity to in- novate. Despite this shift to real-time payments, many banks experience implementation challenges, with 57% of respondents reporting that adapting legacy infrastructure makes modernisation efforts extremely or very challenging. Many banks report that they lack the resources for integrating legacy sys- tems and modern technology, mak- ing modernisation efforts even more complex and demanding. About 70% of banks believe that the tech- nical challenges of integrating with legacy systems are either somewhat of an obstacle or a major obstacle, highlighting the need for technology partners that offer agility and stream- lined implementation. CHALLENGES The research was conducted amongst 108 banks in North Amer- ica, Europe, and Asia-Pacific. It re- ports on the payments strategies, priorities, and challenges that these banks are experiencing in both the short and long-term. OTHER INSIGHTS INCLUDE: • Cross-border payments present sig- nificant challenges: For all banks, the biggest challenges around cross-border payments are compli- ance and security concerns. 56% of banks report compliance and se- curity to be either extremely or very challenging. • Positive views of the cloud are now mainstream: Banks are recog- nising the importance and benefits of moving payments processing to the cloud, with only 9% of respon- dents having rejected the move al- together. • Payments-as-a-Service (PaaS) re- duces time to market: There is a clear perception that PaaS can help reduce time to market and offer businesses more robust payment capabilities. 73% of those sur- veyed reported that PaaS will en- able them to launch new services faster. PERFECT STORM “As we can learn from the survey findings, the payments industry is facing a perfect storm of challenges, but with it comes new opportunities for growth. Selecting the right partner to navigate these challenges has be- come more critical than ever be- fore,” said Barry Rodrigues, EVP, and Payments Business Unit at Finastra. “At Finastra, our mission is to be that partner and to help our customers successfully unlock new opportuni- ties.” "As businesses demand more effi- cient and advanced payment capa- bilities, banks across the world are recognising that if they do not invest in more robust technology, they will quickly find themselves falling be- hind their competitors,” said Erika Baumann, Director, Commercial Banking and Payments at Aite-No- varica Group. “Our research shows the common global theme of creat- ing a better, more innovative suite of payment services built on the right infrastructure with the right partner is crucial to success in a real-time en- vironment.” 94% OF BANKS EYEING INVESTMENT IN MODERN PAYMENT TECH