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Modernizing Payments

The push to the modernization of payments is not a recent phenomenon. Financial institutions and intermediaries have regularly been moving through rounds of improvement; but, this time, the pace of transformation, its scope, and impact are unprecedented.

Drivers of the Modernization

We have noticed two primary drivers for this dramatic movement.

We are already witnessing how the pandemic has accelerated the digital adoption of consumers and businesses to a new level as they are exploring digital channels to learn new ways of making and receiving payments. This massive adoption presents another opportunity for the financial institutions to increase usage and expand their customer base further with timely investments in modernizing their payments infrastructure according to customer needs and market trends.

Understanding Modernization

Traditionally, modernization meant improving user experience through channel-specific offerings based on multichannel strategy. Then followed an era of consolidation of channels and client-facing applications, and the platforms came with API gateways and enterprise bus technologies. 

But today, it means a much more comprehensive approach to payments that includes:

  • Omnichannel and hyper-personalized, frictionless user experience 
  • The 24/7 real-time faster payment processing, its gross settlement, liquidity management, and tracking 
  • Adopting standards like ISO 20022 and Open APIs 
  • Opening consensual access of customer data to third-party technology players 
  • Employing advanced data analytics
  • Cloud delivery models like payments-as-a-service

Approach to Modernization

EY believes the financial institutions can capitalize on the opportunity at two stages: (1) optimizing and redesigning the end-to-end payment process and (2) building payment platforms with a coherent vision of the long-term future.

According to them, the underlying principles governing the changes on the platform and technology side are:

  • Maintaining ownership of end-to-end system while adding services as separate vendor components
  • Moving to microservices architecture enabling components that can add business services on demand
  • Connecting various ecosystem business components via APIs
  • Enabling faster and more accurate data transformation by adopting standards like ISO20022
  • Targeting on-demand provisioning and scalability through cloud-based deployments
  • Building systems keeping continuous delivery and independent testing capability in mind for the individual components 

Accenture suggests that taking the more holistic approach to redesign the payment systems instead of just complying with new regulatory requirements is essential to capture returns while advancing along with the disruption within the industry.

Benefits to Stakeholders

The modernization effort has multiple benefits for all parties involved:

  • For consumers, payments become more accessible, faster, and embedded in their day-to-day lives, for businesses improved liquidity management and cash flows, and for governments faster and secure social disbursements
  • On the other hand, financial institutions will experience increased customer loyalty, cut down costs, and faster time to markets for new and responsive products and services

Promising Outlook

Long-term investments into modernizing payments are a significant undertaking, particularly under the current uncertainty and risks associated with the pandemic. Nevertheless, the survey organized by Finextra earlier this year concludes that an encouraging number of financial institutions worldwide expect to invest in new solutions and modern infrastructure within the next six months.

Summing it all, the modernization drive has something for everyone and is already in motion, stimulated by the excellent opportunity and a massive challenge to financial institutions. 



  1. Accenture. “Payments Modernization Strategy for Banks - Accenture,” November 17, 2020.
  2. KPMG. “Payments Modernization,” September 20, 2019.
  3. Finextra. “PAYMENTS MODERNISATION: THE CLOUD IMPERATIVE.” Finextra, May 14, 2021.
  4. EY. “Payments Modernization 2020.” EY, April 4, 2020.
  5. Deloitte. “Payments Modernization: Balancing the Risks and Rewards.” Deloitte, September 20, 2018.
  6. StockSnap. “Free Image on Pixabay - Ecommerce, Shopping, Credit Card,” August 6, 2017.

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Muhammad Faizan Siddiqui

Muhammad Faizan Siddiqui

Head of Strategy


Member since

22 Jul 2021



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