Bridging the gap between new and old payment methods


Payment experiences have changed dramatically over the past decade as more consumers and merchants expect payments to be made in real time and in the currency of their choice.

Banks and FIs need to bridge the gap between new and old payment methods

The payments landscape is constantly changing around the world. For example, digital wallets have been adopted as much of the world follows what is happening in Southeast Asia. Buy Now, Pay Later (BNPL) is growing rapidly and contactless payments continue to soar as we accelerate the transition to mobile-first and online payments. Governments around the world are even exploring use cases for central bank digital currencies (CBDCs). China may be the global pioneer of CBDCs, but central banks in the US, Norway and the UK are also exploring the concept.

Take the chance

What is now considered an “alternative payment” method is likely to become mainstream soon. A recent survey by Cornerstone Advisors found that a quarter of Gen Zers are crypto investors, and nearly three in ten plan to invest in 2022.

By 2030, 60% of global consumers will have transacted using an asset class other than fiat currency, according to IDC. This suggests that in eight years, hundreds of millions of consumers will be actively using alternative digital payment methods such as crypto, stablecoins and digital assets to conduct their daily transactions.

The current market offers a great opportunity for banks, fintechs and brands to support these new payment methods. FIs currently compete with e-commerce, fintechs, brands, telcos and others for share of wallet.

To win, incumbents must think differently, respond quickly to market demands, and keep pace with changing end-user behaviors. But with a growing number of asset classes such as the aforementioned digital currencies, in-game currencies, and even brand loyalty points driving new digital commerce, how will traditional FI payment technology track and enable the innovation needed to maintain market share?

Break free from legacy technology

In 2020, 40% of global consumer payments were handled by FIs and 60% by non-FIs. While the fintech disruptors of the world are rapidly advancing and taking a large share of the market, financial institutions are constrained by legacy technology.

The payment workflows and technology design of legacy platforms are rooted in traditional definitions of value, which creates enormous challenges when researching new, innovative payment methods. Often, new payment methods may require additional integrations and technology. Legacy technology often requires the extensive use of piecemeal systems, wrappers, and processes to build solution sets and update products and services.

In fact, according to IDC, more than 70% of traditional paytech infrastructures are not designed to handle the payments of the future. In turn, these traditional financial institutions are prevented from offering innovative payment solutions that not only cover real-time payment systems, but also various digital asset options.

Maintaining legacy systems is expensive and often influences the budgeting process away from new technologies. Global FI spending on legacy payment technologies is expected to double to $80.3 billion in 2030 from $39.7 billion in 2020. Financial institutions are clearly investing, but they are investing in maintaining their outdated platforms – and this is impacting their ability to innovate and compete in an increasingly competitive industry.

All of this has led to a convergence between fintechs and FIs. A convergence that is expected to continue, whether through partnerships or acquisitions, until primary technology stacks enable the innovation needed to maintain and grow market share.

Have the technological know-how

Technology platforms that offer a flexible approach to optimizing payouts across a wide range of existing and future asset classes are currently in demand. This includes platforms that can quickly configure new payment products and seamlessly interact with other ecosystem services, such as data and security, across any asset class. By updating their ecosystem, FIs will be able to adapt and upgrade and thus enable the innovation needed to meet consumer demand.

Integrated finance is increasingly in demand and the industry needs new tools and technologies to provide the solutions that will allow businesses to retain and gain market share. Moving to a highly fluid and customizable payment platform and collaborating with innovative fintechs will allow institutions to create payment propositions of the future.

Bridging the gap

If ‘traditional’ FIs are to compete effectively with the financial services land grab we are witnessing around the world, their payment platforms will need to be value-type agnostic and bridge the gap between new and old methods of payment. payment.

Interoperability and integration of capabilities are essential to the development of flexible payment products and an efficient payment infrastructure. While non-FIs have taken a share of the current market, incumbents, which are tightly regulated and compliant, have the essential assets needed to operate. Breaking free from legacy systems and adopting future-ready payment technology will allow these institutions to compete for greater market share and create rapid time-to-market offerings.


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