As digitisation continues apace, many prominent financial institutions (FIs) are choosing to carry on running their core business on outdated payments technologies that can’t sustain the ever-increasing pace of progress nor maintain the partnerships needed to compete in today’s payments landscape.
This failure to address systemic weaknesses is leaving FIs at risk of limited customisation and an inability to integrate with modern payments applications, which in turn means FIs find themselves tied-in and restricted by their vendors.
In a new white paper, Compass Plus Technologies explain some of the pitfalls financial institutions can face when selecting a new payments platform.
In the white paper Don’t be locked-down, locked-in or locked-out, we identify three major risks faced by financial institutions that choose to continue with outdated payment platforms to underpin their technology stack.
These include:
VENDOR LOCK-DOWN: FIs must differentiate to survive. However, many FIs still run on software built in the 80s which offers little to no customisation capabilities.
This limited ability to innovate on their underlying platform means FIs resort to innovating on the fringes using integration layers. Alternatively, they acquire FinTechs to provide modern, revenue-earning products and services.
To take advantage of industry advances such as Open Banking, Faster Payments or Buy Now Pay Later, FIs with legacy systems have to partner with a wide range of FinTechs.
However, partnering with so many FinTechs means FIs have no single view of their overall system.
What’s more, true omni-channel experiences are unachievable, the system has ever-increasing points of failure, costs keep rising and the attention of an FI’s technical team is taken away from their core business.
VENDOR LOCK-IN: FIs have strategies to grow their business or move into new sectors or geographies.
The vendors and technologies they choose to achieve these objectives can lead to challenges further down the line.
When choosing an underlying enterprise-level issuing and acquiring system, FIs aren’t just investing money into technology, they are investing into a long-term partnership with a vendor that will directly influence the success of their core business.
Many FIs forget that they will be locked-in to these enterprise level systems for an average Return on Investment (RoI) period of 7-10 years.
The danger is that FIs partner with vendors which, whilst currently fit for purpose, do not offer a range of deployment options, meaning the FI has limited flexibility for future change.
VENDOR LOCK-OUT: In today’s interconnected world, APIs are reshaping the future of payments.
Most vendors claim to have fully flexible and “open” Application Programming Interfaces that allow for easy integrations and dialogue. However, not all APIs are created equal.
APIs can either add significant value or be a major liability. The danger of investing in pre-2000 systems is that they were built code-first and became API-rich at a later stage.
Adding APIs ad-hoc, rather than developing solutions based around APIs, risks creating redundancies, lack of consistency, poor maintenance practices and limited transparency.
In turn, this can lead to longer development cycles, unplanned rework and a higher defect rate, cancelling out many of the potential benefits. Ultimately, any FI that is not API-first is not putting their customer first.
Our new white paper explains how to avoid these pitfalls and outlines why FIs should dig deeper into what the market has to offer to avoid replacing one legacy platform with another legacy system that includes just as many intractable problems.
To find out more, download a copy now
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