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Re-imagining the Core: Bank Payments Systems


Fearless imagination.  This is how Fortune magazine recently described the #1 needed competency of all business leaders.  And this is exactly what bank executives need to transform their payment systems in today’s digital and mobile age.  This post explores the pressure on legacy bank payments systems and how they must be re-imagined for their successful transformation.


Payments systems need transformation

Accenture has called banking legacy payment infrastructure “dinosaurs in a digital world.”  Boston Consulting Group regales the need for payments systems transformation and warns:  “financial institutions must differentiate themselves, refine their strategies, and raise their execution game if they want to remain competitive.

Beyond consultants, leading practitioners have recognized this need to transform core payments systems.  BNY Mellon Bank’s 49-page report, entitled, “Global Payments 2020:  Transformation and Convergence,” describes how the global payments landscape is in a state of fundamental transformation.  They warn:

“Banks in particular will need to move swiftly if they are to take advantage of the opportunities on offer in the global payments business, or risk losing out to nimbler competitors.”

Lastly, it is recognized that consumer expectations—especially younger demographics—are changing and driving greater demand for the increased convenience and security of newer mobile solutions.  It is clear that banking legacy payments systems—developed decades ago to primarily handle the card processing and aligned around bank operational silos—and their corresponding business models are ripe for re-imagining.


Next steps for re-imagining the core

Although payments systems business models have generated significant bank revenues, there are increasingly more competitive alternatives (which are detailed in the Accenture and BCG reports).  As BNY Mellon has recognized, payments systems must be viewed strategically as a value-added platform for evolving your bank’s brand value and improving your customers’ experiences.

During the process of re-imagining bank core payments systems and considering how newer digital and mobile technologies may be leveraged, bank executives should ask the following questions:

  • What is the impact on the institution’s economics?
  • Does it provide real value to consumers and merchants?
  • Does it scale?

Successful bank leaders with “fearless imagination” will be those who:

  • Take a strategic view of payments and payment-proximate activities to devise and offer new value-added services
  • Identify technology partners to ensure bank technology can deliver solutions to meet customer expectations, as opposed to internal operational silos
  • Target high-growth and traditionally poorly served customer segments
  • Explore non-traditional alliances and partnership models (such as mobile operators, next-generation payment providers, etc.) to enable access to new client bases


In closing, U.S. President John F. Kennedy said:  “Those who make peaceful revolution impossible will make violent revolution inevitable.”  Bank leaders need to take action to ensure this “peaceful revolution” takes place within their organizations… and that their core payments systems are re-imagined.

That said, re-imagining banking payments systems takes courage and is both exhausting and exhilarating.  In this brave new digital and mobile age, banks need to fail fast, learn from their mistakes and keep moving toward their new business objectives.  There is no turning back.  Let us know what you think.




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