"In 2008 the hubris of the financial sector that we serve finally caught up with itself.  Mountains of consumer debt that had been packaged, re-sold and deferred turned out to be unserviceable and the whole edifice came tumbling down." I wrote this in a blog sometime ago - it is still true!  Now commentators are wondering whether the cycle will repeat itself as personal, corporate and national debt climbs around the world in response to the COVID19 Pandemic.

I think there are parallels in the technology business that underpins financial services.  In the years after 2008, many financial institutions deferred system upgrades and application refreshes as they struggled to rebuild capital.  But it is clear that technical debt compounds over time just like financial debt.  The compounding of technical debt leads to ever increasing costs of maintenance and compliance, reducing the money available for new business change.

However, at the same time as the technical debt increases, financial institutions face increasing competitive pressure that forces them to manage change in their business systems at ever increasing speeds.   The rate of change in consumer behaviour has accelerated again in 2020, driven by remote working, contactless payments adoption and other side effects of the pandemic. For many, they see the only way to fund that business change is to defer yet more technical debt.  I do not believe that this is sustainable.

At the same time as they accelerate change to achieve or maintain competitive advantage, these organisations are aware that high profile system failures increasingly cost them huge sums, both in lost revenue and in the negative impact on market capitalisation.  These failures occur because organisations defer strategic transformation of their infrastructure in favour of tactical, quick fixes.

The resolution of this technical debt in the payment switching domain requires the replacement of 25 and 30 year old applications designed for the pre-internet era.  But in making such replacements, financial services organisations are rightly reluctant to give up on the performance pillars of those legacy platforms that have served them for so long – those pillars are Reliability, Scalability & Availability (the RSA Factor).

The challenge for most such organisations appears to be an inability to consider a new way of delivering the RSA Factor.  Traditional payments processing platforms relied on the intrinsic qualities of platforms such as IBM zSeries and HP NonStop (fka Tandem).  The option to achieve the required RSA Factor by utilising the capabilities of the cloud and cloud-native applications should be considered by any operator of an aging payments infrastructure.