• Rowan Brewer, CEO at Paymentology


• 31.03.2022 10:00 am
#banking #digitalization

Traditional banks as we know them are at a crossroads. One that will determine their role for the next several years and decades. Established financial institutions today confront a significant uphill battle to stay up with the capabilities and agility of a new generation of digital-first competitors. All of this while juggling the additional responsibility of ensuring that existing systems continue to operate without interruption. 

As a result, the role of banks has evolved at an unforgiving and exponential pace. A new report found that “89% of banks surveyed agree that COVID-19 accelerated the implementation of new technology for the banking sector by five years”. This, amidst the wave of digital banks and fintechs already beginning to leapfrog traditional institutions in terms of innovation, speed, and capability, must come as a worrying omen for traditional banks.

Born digital, newer market entrants are unencumbered by legacy processes large banks have abided since their inception. This has brought intense competition across the banking industry, urged on by a new era of customer-centricity and product granularity.

Simply said, banks no longer have any room for inertia. There is no alternative but to fully embrace digital transformation. And, in the process, capitalize on the numerous corporate and societal benefits. Alternatively, confront the very real possibility of extinction. 

Of course, many banks have adopted some new technology, with varying levels of success. But, on an industry-level, systems overall remain far behind the technological standard immediately available to a fast-maturing neobank generation. A generation with an inherent ability to adapt, innovate and pivot – flexibly and quickly.

Traditional banking systems – however, you slice it, and however many incremental improvements you bolt-on each year – remain largely built on the rails of decades-old technology, badly overdue a bottom-up rethink. However, many practices appear simply too deeply woven into the fabric of traditional banking systems to be migrated without the perceived risk of a major disruption. Or at the very least, millions of miles of red tape.

Thankfully, whilst challenging and admittedly far-reaching in scope, the process of full-scale digital modernization, migration, and optimization, can be achieved smoothly, effectively, and – critically – while there is still time. In order for banks to achieve this crucial step-change, they must examine three critical components of their payment operations.

To begin, the capability to issue cards and items across several geographies. This is achieved largely through access to the best and most flexible API functionality, with which digitally native banks have carved out new USPs. For example, offering low to zero fees on services that big banks have historically used as valuable lines of revenue, such as international card-usage fees. Customers now have a choice, and can use a range of challenger banks for specific needs, whilst cutting traditional banks out of the loop.

The second objective is to digitize and data-rich the entire process as much as feasible. Today's most valuable corporate asset is data. Data is today’s most valuable business asset. Without the power to harvest, interpret and leverage key datasets in real-time, businesses miss huge opportunities to use customer card-spend data to innovate products completely tailored to individuals and their specific needs. “Digital” no longer just means “online” or “in-app”. It requires harnessing customer data to empower meaningful, decisive action.

Lastly, banks must ensure they can execute their vision at scale, for millions of customers, 24/7, at the highest levels of security and reliability. Like neobanks, who must think ahead in terms of their processors’ ability to handle the volumes, volumes that sudden success and exponential growth will require, traditional institutions need to adopt processors with the capacity and expertise to both migrate and scale their operations, smoothly.

By embracing the infinite potential and opportunity of a next-gen payment platform – one with the best APIs, scalability, migration expertise, and global reach - traditional banks need not fear their new challengers. Nor envy their opportunities, as there is still time. The only remaining barriers are vision and will.

Paymentology is the first truly global issuer-processor, giving banks and fintechs the technology, team and experience to rapidly issue and process Mastercard, Visa and UnionPay cards across 49 countries, at scale. Our advanced, multi-cloud Platform, offering both shared and dedicated processing instances, vast global presence, and richer, real-time data, set us apart as the leader in payments.