Cliché or not, payments transformation is a force that cannot be ignored. Take your eyes off it for a moment, and disruption can happen overnight. The new Finextra paper, featuring interviews with top payments professionals from across the global banking industry and produced in association with EPAM, finds that it is this nature of the payments landscape that is keeping banks awake at night, and demanding that they maintain a close watch of where they stand in relation to payments regulation, changing customer expectations and the technology needed to survive in this ever-changing industry.

From a technology standpoint, there is no shortage of innovative new solutions banks can harness to help them on their payments transformation journeys – from the flashy and possibly tactical “facilitators” such as chatbots and wearables, to the much-hyped but probably critical “game-changers” like APIs and blockchain. But as the new paper points out, technological innovation is not without its boundaries.

Based on in-depth interviews with a wide range of market participants from banks all over the world, the paper explores how banks find the balance between satisfying customers’ demands in the race for digital victory, and adhering to regulation, such as PSD2, and security standards.

As George Doolittle, Head of Global Financial Institutions Payment Services, Wells Fargo, points out in the paper: “We start with the customer first,” he says. “We have an enormous customer base and from a demographic perspective we have millennials who want the latest in technology, and we have a massive baby boomer population looking for safety and security. It’s a continual balancing act.”

While PSD2 is critical, it is not where the story ends. “A lot of other regulation, especially around data privacy, which has a huge impact on what banks and non-banks can and cannot do with customer data,” says Eric Tak, Global Head of Payments, ING. As the paper shows, this certainly has an influence how banks will manage their technology in the future of payments.

Whatever they do, banks need to be careful, as Kevin Brown, Senior Advisor, Global Payments, points out “Transformation is good – but payment systems need to be robust and resilient, because they are core to the economy of any country.”

Entitled ‘From legacy to innovation: Transforming the role of banks in the payments industry’, the paper also identifies the ways in which some banks are struggling in their responsiveness to change in the payments landscape due to the issue of legacy.

On this topic, Martin Walder, Head of Payment Product Management, Credit Suisse, says: “There will always be people who say, my system is working well, there is no need to change it now. Market initiatives – like ISO 20022 – are a good opportunity to force this change.”

The paper further explores how banks plan to tackle the problem of legacy, and what their options are in terms of business model renovation and future innovation in an effort to win in the payments business of the future.

The main message of the paper is summarised well by Alistair Brown, Global Head of Payments EPAM, who says: “If the banks fail to respond strategically to the fundamental changes enabled by these changes in payments, they run a real risk of losing their natural advantages and sleep-walking into irrelevance.”

To find out more, download the paper here.