Aite-Novarica Group research reveals 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 capabilities. Almost half of banks surveyed say fintechs, which typically provide a smooth customer experience, have already taken at least 10% of their payments volume. Recognizing this trend, the majority of banks globally are investing in modern payments technology, with 94% of respondents considering varied levels of investment in the next 24-36 months. Of those respondents, 65% plan a significant or moderate level of investment in payments technology during the same period.
The ‘Payments Modernization and Technology: Priorities, Challenges, and Partnerships’ survey finds that Real-time payments are one of the largest drivers of payments modernization. Many financial institutions are somewhere in the process of deploying 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 modernization as a key differentiator and opportunity to innovate. Despite this shift to real-time payments, many banks experience implementation challenges, with 57% of respondents reporting that adapting legacy infrastructure makes modernization efforts extremely or very challenging.
Many banks report that they lack the resources for integrating legacy systems and modern technology, making modernization efforts even more complex and demanding. About 70% of banks believe that the technical 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 streamlined implementation.
The research was conducted amongst 108 banks in North America, Europe, and Asia-Pacific. It reports 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 significant challenges: For all banks, the biggest challenges around cross-border payments are compliance and security concerns. 56% of banks report compliance and security to be either extremely or very challenging.
- Positive views of the cloud are now mainstream: Banks are recognizing the importance and benefits of moving payments processing to the cloud, with only 9% of respondents having rejected the move altogether.
- Payments-as-a-Service (PaaS) reduces 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 surveyed reported that PaaS will enable them to launch new services faster.
“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 become more critical than ever before,” said Barry Rodrigues, EVP, Payments Business Unit at Finastra. “At Finastra, our mission is to be that partner and to help our customers successfully unlock new opportunities.”
“As businesses demand more efficient and advanced payment capabilities, banks across the world are recognizing that if they do not invest in more robust technology, they will quickly find themselves falling behind their competitors,” said Erika Baumann, Director, Commercial Banking and Payments at Aite-Novarica Group. “Our research shows the common global theme of creating 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 environment.”
This report is based on a survey of 108 global bank payments and product executives in North America, Europe, and Asia-Pacific. Aite-Novarica Group undertook the research in Q4 2022 and Q1 2023. Survey respondents represented a near-even distribution of FIs by size, including 36 lower-tier (US$3 billion to US$30 billion), 38 mid-tier (US$30 billion to US$100 billion), and 34 top-tier (over US$100 billion) banks. The FIs have commercial clients ranging in number from 2,000 to 350,000, with an average of 30,000. Respondents were all qualified senior leaders with significant knowledge of treasury, cash management, payments, product strategy, and products at their FIs. The report also leverages the author’s extensive knowledge of the payments industry.
This report and the survey on which it is based were produced in collaboration with Finastra. Aite-Novarica Group retains full editorial control over the findings, methodology, and data analysis.
Finastra is a global provider of financial software applications and marketplaces, and launched the leading open platform for innovation, FusionFabric.cloud, in 2017. It serves institutions of all sizes, providing award-winning solutions and services across Lending, Payments, Treasury & Capital Markets and Universal Banking (Retail, Digital and Commercial Banking) for banks to support direct banking relationships and grow through indirect channels, such as embedded finance and Banking as a Service. Its pioneering approach and commitment to open finance and collaboration is why it is trusted by ~8,600 institutions, including 90 of the world’s top 100 banks. For more information, visit finastra.com.
About Aite-Novarica Group
Aite-Novarica Group is an advisory firm providing mission-critical insights on technology, regulations, strategy, and operations to hundreds of banks, insurers, payments providers, and investment firms—as well as the technology and service providers that support them. Comprising former senior technology, strategy, and operations executives as well as experienced researchers and consultants, our experts provide actionable advice to our client base, leveraging deep insights developed via our extensive network of clients and other industry contacts.