New research from RedCompass Labs, the global experts in payments modernization, reveals that two-thirds (67%) of US banks are struggling to keep up with the rapid changes in the payments industry. Over half (54%) have scaled down or delayed a payments project due to a lack of payments expertise. Almost half (43%) say delayed projects are causing payments outages.

The report, “On time, on budget and other fairytales - Payments modernisation”, is based on findings from a survey of 300 senior payment professionals in US banks and highlights four key systemic challenges slowing banks’ modernization efforts: keeping pace with change, the vendor gap, the scale divide, and the talent shortage.

Payments outages are a growing global concern. In February, the European Central Bank’s multi-trillion-euro operation was knocked offline for seven hours. The following month, the UK Treasury wrote to the chief executives of nine major UK banks and building societies, asking why, over the past two years, they had experienced a total of 803 hours - more than 33 days - of unplanned outages. Then in April, Citibank, which serves 200 million customers and manages $1.6 trillion in assets, was hit by a nationwide payments outage.

At the same time, banks are under immense pressure to modernize. With the ISO 20022 migration deadline fast approaching, the rollout of instant payments, growing cross-border demands, and expanding open banking requirements, banks must adapt quickly. 

Over a fifth (22%) say they are struggling to keep up. Most (83%) payments projects are delayed, go over budget (87%) and are not completed to the original spec (83%). The main barriers are regulatory pressure (41%), legacy systems (36%), and budget constraints (35%). Over half (55%) have delayed or scaled down a payments project in the past 12 months due to staffing and expertise gaps.

When payments modernization projects stall or fail, the impact is widespread. Delays impact other projects (47%), reduce customer satisfaction (47%), and damage reputations (38%). The financial costs are significant, with each troubled project delivering an average loss of $496,953.

Payments modernization demands deep expertise in compliance, technology, and real-time operations, skills that are becoming harder to find. Banks increasingly recognize that AI can bridge this gap, with three-quarters of respondents believing AI agents could help address payments expertise shortages. More than half (53%) are already using AI for payments operations. Three in ten (29%) plan to adopt the technology within the next 12 months.

To help, banks are looking for specialized support. Nearly two-thirds (63%) say they plan to work with specialist consultancies to support payments innovation and AI adoption.

Other key findings from the report include:

The gap between small and large banks is widening – Nearly every bank (95%) recognizes this. Over six in ten cite complexity (61%) and cost (61%) as key drivers, while a similar number (58%) blame a shortage of experts.

Large consultancies are losing ground – Two-thirds of respondents report negative experiences with large consultancies’ AI support for payments modernization. They blame generic approaches that are irrelevant to payments (26%) and talking extensively about AI but delivering limited impact (24%).

Larger banks are more cautious about AI - Among institutions with more than 50,000 employees, just over half agreed that AI agents could fill expertise gaps. Around three in ten (28%) said maybe, not now, but in the future. Over four in ten (44%) big banks said they are already using AI, compared with stronger adoption rates among mid-sized institutions. 

Tom Hewson, CEO at RedCompass Labs, comments: “There are almost no payment modernization programs that go live on schedule, on budget, with the original specification. The entire payments consulting industry exists because of this issue. And it causes big problems. What holds banks back? The same four systemic issues.

“The first is the rate of change in payments; banks simply cannot keep up. Second is that the gap between what banks need and what vendors offer is wider than ever. Third, smaller banks are disproportionately affected. Small banks and credit unions matter because some people don’t want to bank on their phone; a daily or weekly trip to a trusted branch is a key element of social interaction and a safe alternative to the endless scams that come through digital channels. And finally, there is simply a shortage of true payments experts to keep up with the change.

“While these four problems have not changed, the way to solve them has. AI can write and calculate faster than we can. It doesn’t need breaks, vacations, or childcare. It gives our experts more time to focus on what matters most, thinking and solving the most complex problems. It’s a new way of working, humans and AI, side by side. The question of our time is: how do we fuse the two? There’s no simple answer, but this is where it begins.”