Why Modernization Is Crucial To Deliver Value In The Digital Payments World

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Delivering value in a rapidly changing online payment gateway landscape is dependent on speed and efficiency. Modernization is critical to assisting organizations in meeting these objectives in the digital era.

It is more important than ever for financial institutions to embrace new technology and evolve in order to better serve modern consumers and businesses. Consumers prefer easier ways to pay in an online world, so digital payments rule the roost. Surviving in a highly competitive market requires the ability to support a changing payments landscape.

This consumer shift is easily attributed to the introduction of smartphones and contactless payments, which have made it easier than ever for consumers to purchase online with a single click. Then came the COVID-19 pandemic, which accelerated adoption even among traditionally less tech-savvy demographics like Gen X and older.

Most importantly, this shift is permeating all markets. People are not only buying clothes or tickets online, but they are also making everyday purchases.

Modernization has become a must-have as consumer spending shifts to digital ...
... payments. A slew of new FinTech companies have launched digital-first platforms to meet this demand, leaving legacy institutions in their wake. Modernization is required to keep up.

Why A Modern Capability Stack Is Needed
Surprisingly, companies that invested early and amassed significant technological assets may not be in the best position today, as they may be burdened by technical debt. According to a recent Accenture report, the cost of maintaining legacy technology was impeding the ability of up to 65% of bank executives to invest in new tools. This constraint makes it even more critical that executives choose the right areas to modernize.

There's a lot at stake: by 2030, $48 trillion in transactions are expected to shift from cash to digital payments. Businesses that embrace technology as a core capability, rather than a series of silos, will benefit from this shift. This entails transforming the financial institution's technology infrastructure and focusing on solutions that adapt and grow with the company, rather than simply patching existing problems.

If the FI is only innovating in response to new regulations, as 75% of executives surveyed by Accenture are, it may struggle to create a cohesive long-term plan. While regulatory compliance is critical for payment success, experts recommend developing a customer-centric mission that will drive technology investment across departments. A piecemeal approach risks creating technical gaps between teams, so businesses should consider how they can scale new technology — even if it means introducing it in stages.

Understanding Today’s Tech Basics
The first stage of modernization involves ensuring that payment platforms are up to date on today's standard technology practices. Omnichannel engagement is essential, combining a company's offline and online activities to form a complete customer picture. Consumers expect businesses to recognize them across all channels, which means financial institutions must enable data-sharing across platforms to provide this value.

Because of their ability to integrate third-party services within a platform, APIs are now a popular tool at any digital company. Payments companies can use APIs to share data in real-time with their partners, resulting in a much more comprehensive understanding of their customers. Complex data analytics are also becoming more prevalent, as they improve the quality and speed of critical services such as credit underwriting and loan approval, while also expanding opportunities for cross-selling.
If a FI understands these solutions, they will be able to provide customers with the fast, personalized service that they have come to expect. Next, they should focus on revolutionizing their stack with artificial intelligence (AI) in order to go above and beyond.

Becoming AI-Forward to Deliver Value
AI adds significant value to financial platforms that understand how to use it and have invested in the capability. This is due to the ability of artificial intelligence to analyze data and generate real-time insights and recommendations, which is critical in today's fast-paced environment. FIs can quickly adapt and thrive with a system that responds immediately to changes in customer behavior, eliminating the need for constant strategy overhauls. In short, AI allows businesses to make the most of the data and insights they already have.

The need for AI is obvious: According to a recent Accenture survey, 75% of banking executives consider accelerating the best online payment gateway modernization to be "urgent." However, capitalizing on it is more difficult. AI should be integrated holistically throughout the company's infrastructure, so planning is essential. It will be able to deliver customized products and highly personalized services at scale and in near real-time if done correctly.

Individual platform technology requirements will vary, but all will benefit from a detailed strategy for how AI will support each area of the business. Once a company's goals have been established, it is critical to create a practical roadmap for achieving them that keeps all teams connected and on track. Successful FIs will be those that can bring together innovation teams and engineering talent to put that vision into action; otherwise, they risk delays and disconnects.

Finally, FIs must ensure that whatever transformations they undertake do not jeopardize the quality of service they provide to their customers in the interim. It is critical to ensure the platform's and all of its digital services' uptime in order to avoid alienating the very customers they are attempting to please. The ultimate goal should always be to provide value to the end customer.