Tipping the balance – is there a future for legacy platforms in payments?

Bethan Cowper

Head of Global Marketing at Compass Plus

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Tipping the balance – is there a future for legacy platforms in payments?

22.04.2016 10:30 am

Discussions around legacy payment platforms always generate heated debate. Whilst these antiquated systems were not built to fare the pressures of today, the fact that so many high-profile and successful financial institutions continue to build upon infrastructure first implemented in the 1970s can go far in illustrating the longevity of this technology.

The debate over the shelf-life of legacy has been rife for nearly a decade. Has the time finally come for the scales to no longer be balanced in their favour? Whilst the old adage “if it ain’t broke…don’t fix it” has become the tagline for older technology, there is only so long that the cost and inconvenience of maintaining legacy systems outweighs the cost and advantages of replacement.

Out-dated systems have continued to survive the battle for numerous and very relevant reasons. The cost, risk, time (not necessarily for implementation, but certainly to retrain end-users), size and complexity of these projects have led FIs to continue with their stable, tried-and-tested mainframes, or at the very least, to look for alternative solutions whilst keeping these systems at the core.

In recent years, FIs have begun to invest more heavily in new technology, however, this money is primarily budgeted for maintenance and new innovations, and very little in between. FIs must be seen by both their customers and their competition to be keeping up with the latest payment trends, whilst under the serene surface of the pond, the poor metaphorical duck is paddling like crazy. Innovation is constrained within the means of the technology in use; not only effecting how easy it is to develop and launch new products and services, but how long it takes and how much it costs in the long term.

Alternative solutions like wraparounds offer FIs the opportunity to squeeze another couple of years out of their legacy systems, but are these shorter term solutions worth it? Wraparounds essentially offer the same advantages as sticking a plaster on technology to see how long it holds. Whilst an added standard access layer enables easier integration and offers the advantage of XML-based web services and portal frameworks, the fundamental constraints of legacy still apply; from communications through to security.

Historically, the less costly methodology of quickly ‘enhancing’ legacy systems has only added operational complexity to these environments leading to spaghetti-like systems that are more intricate and harder to navigate than ever before. Add to this, instances of acquisitions and mergers between FIs over time, and the architectural integrity of the systems is put under more pressure. High profile system crashes splashed across the pages of both industry and international newspapers only add fuel to the fire. It is reasonable to state that these platforms are no longer getting the job done as well as they used to.

Ultimately the lifespan of legacy systems is intrinsically linked to the staff that maintains them, and when those employees retire, their replacements will be unfamiliar with this technology and not have the correct skillset for legacy to continue to be a viable option. CIOs are currently undergoing a skill shortage and according to a recent survey carried out by Vanson Bourne, 61 per cent of CIOs believe this will result in severely reduced productivity and increased application risk that will leave businesses more vulnerable to external attacks or system crashes. However, nearly half of these CIOs admit they have not devised any formal plans to tackle the impending issue and IT teams are left to deal with the inherited consequences of their FI’s technology.

Payment system modernisation can reduce processing costs, significantly reduce operational risk and help with compliance. New systems offer more flexible workflows and the opportunity to collect and analyse big data which, if used properly, can lead to increased customer acquisition and retention. Whether or not to replace, wraparound or even outsource an FI’s business involves some serious consideration. In order to make the optimal decision, FIs need to analyse their options versus requirements, and the value versus cost so as not to start a repetitive cycle of rip and replace as technology continues to evolve.

Regardless of the path an FI takes, this decision is not to be taken lightly. Instead of seeing the issues and costs, it would be beneficial to view the experience as an opportunity. This shouldn’t be a simple like-for-like replacement, upgrade or outsource, it is the strategic transformation of systems into future-proof, revenue growing assets. What is becoming abundantly clear is that the debate to move away from legacy is no longer about should we, but when should we. FIs need to have a strategy in place and be in the process of actualising it before the scales finally fall out of favour with legacy and tip in the opposite direction with dire consequences.

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