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Over the past decade, financial institutions have undertaken various efforts to modernize their payments systems. Now with the emergence of COVID-19, the world is witnessing an accelerated journey toward digital transformation in the payments ecosystem.
In an interview with PaymentsJournal at the 2021 Money20/20 event, Soumya Johar, Director of Strategic Alliances & Partnerships at Opus Consulting Solutions, spoke about the need for financial institutions to accelerate payments digital transformation to drive success in the modern world.
The key drivers behind legacy payment system modernization
While many organizations began their modernization efforts prior to 2020, the pandemic made digital transformation an instant priority for all financial institutions. “They had to accelerate their digital transformation journey of legacy applications–and work towards making it more nimble, data-centric, customer-focused, and all of those good things,” said Johar.
Along with COVID-19, the limitations of legacy infrastructure, complex regulatory requirements, highly competitive marketplaces, and shifting consumer expectations are among the driving forces behind these efforts. Monolithic legacy cores do not provide the level of functionality needed to give customers the frictionless omnichannel digital experiences they have come to expect. These systems also struggle to keep up with emerging trends such as real-time payments. In other words, dated legacy applications simply cannot keep up with the needs of the modern world.
“Coming out of the pandemic, one of the lessons that most people learned was that legacy applications need to be transformed so that they can move quickly and nimbly to adapt to all of those changing trends,” said Johar.
To achieve scalability and drive innovation, financial institutions should take a holistic approach to payments modernization that covers the end-to-end payments value chain. Vendor integration via cloud-based architecture will enable financial institutions to build orchestrated payment capabilities that will further strengthen their modernization efforts.
Modernization is about the journey, not the destination
Organizations that once dragged their feet when it came to prioritizing digital transformation quickly realized the error of their ways when the pandemic emerged. “To keep up with the times, there is a pressing need for organizations to modernize legacy applications and architecture to deliver what the clients are looking for,” said Johar.
While payments used to be a discrete activity that happened in the background of a transaction, that is no longer the case. Now, payments are integrated into the entire end-to-end customer journey. As a result, they should be contextual and seamlessly embedded into the consumer lifecycle.
Modernization efforts can also address the negative elements of a digital world by keeping customer data secure and preventing fraud. “That is also one of the reasons companies have to embark on that modernization journey–to stay ahead of all those negative elements,” explained Johar.
Johar’s use of the word ‘journey’ is deliberate. Organizations that approach modernization as a customer-centric journey rather than a rigid end destination will likely be successful in adding value to customers and driving revenue. “I think what one needs to stay cognizant of is how to keep their applications and architecture nimble, innovative, and evolving to meet those needs. It’s not a destination that anyone is working toward, but rather a journey,” said Johar.
The challenges of digital transformation
Of course, modernization is easier said than done. According to Johar, there are two top challenges related to digital transformation: legacy applications and change management.
While internal teams typically have a deep understanding of the legacy systems already in place at their specific organization, they tend to lack hands-on knowledge of the modern technology and best practices needed to successfully digitize. On the other hand, a new team brought in from the outside with working knowledge of modern technology may lack the institutional knowledge of the organization’s specific legacy architecture, business problems, and areas for improvement. As a result, they fail to deliver, and the momentum of digital transformation is lost before it is even built.
The second challenge is change management. Technology modernization requires training during and after the process to ensure full adoption. If not, organizations continue to make investments without seeing any returns.
“This change management also has to be robust, and I think those are the areas where companies like Opus come in. Being in the payment space, we do understand legacy applications and infrastructure very well. We also understand modern applications and infrastructure and, having helped many clients, we have developed best practices. We understand where those pitfalls are, where those risks are, [and] how to mitigate those risks,” explained Johar.
Are you prepared for the future of payments?
Given the rapid pace at which organizations are implementing payments modernization efforts, it is safe to say that the payments ecosystem is undergoing an existential shift. This is only the beginning of what promises to be a massive technological disruption.
Knowing this, it is imperative for organizations to push forward with legacy modernization and future-proofed payments systems. Building scalable solutions in the cloud and integrating futuristic technologies will pave the path to make continuous enhancements and meet increasing customer expectations.
Ultimately, a secure, reliable, and interoperable real-time payments system powered by the cloud, mobile technologies, and AI, will take center stage in the digital payments landscape of the future. Organizations need to keep “in mind how to be lightweight and nimble and stay relevant to the customer needs so that as it shifts, they can easily make changes and stay aligned with the customers,” concluded Johar.