With rising demand for ubiquitous and convenient experience across the payments value chain and frictionless real-time payments, banks need to undertake payment transformation initiatives underpinned by legacy modernization. Modernization of core payment systems is key to delivering exceptional value for customers and preventing disintermediation from new entrants.
In our view, banks must adopt one of five distinct payment modernization strategies, or a combination, depending on existing architecture and modernization objectives to move to the target payment model:
Isolation approach: Enhancing the peripheral architecture to support digital channels
Value chain approach: Phased modernization approach with a holistic view
Progressive modernization: Shift to a new core payment system with coexistence of both new and old payment engines in the short-term
Orchestration approach: Leveraging microservices and API frameworks
Complete replacement: Adopting a cloud hosted payment-as-a-service model