94% of banks are looking to invest in modern payment technology to keep pace with fintech innovation

by James · March 8, 2023

Research by the Aite-Novarica Group, supported by Finastra, indicates that banks need to invest in new technology as corporate customers demand more robust payment capabilities

LONDON, March 8, 2023 /PRNewswire/ — Aite-Novarica Group research reveals that payments are a key area of growth and innovation within commercial banks, and legacy systems cannot support end-user demand for better payment capabilities. Almost half of the banks surveyed say fintechs, which typically provide a smooth customer experience, have already taken at least 10% of payment volume. Recognizing this trend, the majority of banks globally are investing in modern payments technology, with 94% of respondents considering varying levels of investment over the next 24-36 months. Of these respondents, 65% plan a significant or moderate level of investment in payment technology in the same period.

The survey ‘Payments Modernization and Technology: Priorities, Challenges and Partnerships’ finds that real-time payments are one of the biggest drivers of payments modernisation. Many financial institutions are somewhere in the process of deploying new payment rails, with approximately 72% of respondents having completed a project, have one underway or with plans to implement. This suggests that most banks welcome modernization as a key differentiator and opportunity to innovate. Despite this shift to real-time payments, many banks are experiencing implementation challenges, with 57% of respondents reporting that adapting legacy infrastructure makes modernization efforts extremely or very challenging.

Many banks report that they lack the resources to integrate older systems and modern technology, which makes the modernization work even more complex and demanding. About 70% of banks believe that the technical challenges of integrating with legacy systems are either somewhat of an obstacle or a major obstacle, underscoring the need for technology partners that offer agility and streamlined implementation.

The survey was carried out among 108 banks in North America, Europeand Asia-Pacific. It reports on payment strategies, priorities and challenges that these banks experience in both the short and long term.

Other insights include:

Cross-border payments present significant challenges: For all banks, the biggest challenges surrounding cross-border payments are compliance and security considerations. 56% of banks report that compliance and security are either extremely or very challenging.
Positive views of the cloud are now mainstream: Banks recognize the importance and benefits of moving payment processing to the cloud, with only 9% of respondents rejecting the move entirely.
Payments-as-a-Service (PaaS) reduces time to market: There is a clear perception that PaaS can help reduce time to market and offer companies more robust payment options. 73% of respondents reported that PaaS will enable them to launch new services faster.

“As we can learn from the survey findings, the payments industry is facing a perfect storm of challenges, but with it comes new opportunities for growth. Choosing the right partner to navigate these challenges has become more critical than ever before,” said Barry Rodriguez, EVP, Payments Business Unit at Finastra. “At Finastra, our mission is to be that partner and help our customers succeed in unlocking new opportunities.”

“As businesses demand more efficient and advanced payment options, banks around the world are recognizing that if they don’t invest in more robust technology, they will quickly find themselves falling behind their competitors,” said Erika Baumann, Director of Commercial Banking and Payments at Aite-Novarica Group. “Our research shows that the shared global theme of creating a better, more innovative suite of payment services built on the right infrastructure with the right partner is critical to success in a real-time environment.”

See the full report and findings here.

Research methodology

This report is based on a survey of 108 global bank payments and product managers i North America, Europeand Asia-Pacific. Aite-Novarica Group conducted the survey in Q4 2022 and Q1 2023. The survey respondents represented an almost even distribution of FIs by size, including 36 lower level (USD 3 billion to 30 billion dollars), 38 intermediate layers (30 billion dollars to 100 billion dollars), and 34 top teams (above 100 billion dollars) banks. The FIs have commercial customers ranging in number from 2,000 to 350,000, with an average of 30,000. The respondents were all qualified senior managers with significant knowledge of treasury, cash management, payments, product strategy and products at their FIs. The report also utilizes the author’s extensive knowledge of the payment industry.

This report and the survey it is based on have been created in collaboration with Finastra. Aite-Novarica Group retains full editorial control over the findings, methodology and data analysis.

About Finastra

Finastra is a global provider of financial software applications and marketplaces, and launched the leading open platform for innovation, FusionFabric.cloud, in 2017. It serves institutions of all sizes, offering award-winning solutions and services across lending, payments, finance and capital . Markets and Universal Banking (Retail, Digital and Commercial Banking) for banks to support direct banking relationships and grow through indirect channels, such as embedded finance and Banking as a Service. Its pioneering approach and commitment to open finance and collaboration is why it is trusted by ~8,600 institutions, including 90 of the world’s top 100 banks. For more information, visit finastra.com.

About the Aite-Novarica Group

Aite-Novarica Group is an advisory firm that provides mission-critical technology, regulatory, strategy and operational insights to hundreds of banks, insurance companies, payment providers and investment firms – as well as the technology and service providers that support them. Our experts consist of former senior leaders in technology, strategy and operations, as well as experienced researchers and consultants, and provide practical advice to our client base, leveraging deep insights developed through our extensive network of clients and other industry contacts.

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SOURCE Finastra