Despite being around since the 20th century, card payments are set to grow at just 4% per year between now and 2030. Why? Because there are new ways to pay.  

Whether its Buy Now, Pay Later (BNPL) or contactless payments, consumers are finding new preferences for payments and maintaining pace for financial institutions (FIs) is a challenge.

Aging Stacks: The bottleneck to Financial Institutions

The industry is transforming at a rapid speed. As such, financial institutions need to quicken their pace and respond to market trends quicker. However, legacy technology is slowing these financial incumbents and draining their current resources.

Agile development models are needed to transform payments to suit new market realities and pace of innovation. Instead, FIs are struggling with too much legacy mass. IDC found that 73% of FIs have payments infrastructures that are ill-equipped to handle payments for 2030 and beyond. By upholding legacy stacks, FIs are unable to make rapid changes and deliver transformation with the speed needed to create new products.

Due to this, much time and money is spent maintaining legacy infrastructures instead of building new solutions to compete with the growing market.

A rise in alternative innovators

An increasing number of innovators in the payments sphere are rapidly acquiring market share through superlative payment experiences. A fact which has hastened FIs to try and reposition themselves in the payments ecosystem.

For example, fintechs have notably catered to consumer choice by offering new and convenient ways to pay with solutions driven by modern technology stacks.  Additionally, growing solutions involving Open Banking, domestic real-time payments schemes, and Central Bank Digital Currencies (CBDCs) are adding pressure to FIs by shaking up traditionally safe revenue streams. 

IDC estimates that 74% of global consumer payments will be handled by non-traditional FIs by 2030. The top reason being that innovators, fintechs and non-FIs are supporting more and more ways to pay every day. However, not all is lost. Incumbent banks still have the opportunity to take the lead and be the primary provider for payments technology of the future.

Changing the tide

With the global digital payment market size expected to reach $361.3 billion by 2030, there’s a great deal to be won. Aging payment technology may be holding FIs back, but the tides can change with a shift in focus.

Incumbent banks must be quicker to respond to market demands and changing end-user behaviour. This is where collaborating with non-FIs can prove beneficial. By working with partners that provide specialised solutions allowing for product development at a quicker pace and at a lower cost, FIs will be able to drive efficiencies and accelerate the speed to market. Both FIs and non-FIs are part of the same payments ecosystem, and they can collectively excel if they find a way to collaborate and create new value for customers.

It's time for FIs to become future-ready. By shifting their mindset, enhancing legacy tech stacks and collaborating with specialised partners, FIs will be able to compete in the financial services land grab and claim their role in the payments landscape of tomorrow.