Payments Modernization Can’t Be Delayed Anymore

The PaymentsJournal Podcast

Money 20/20, one of the largest financial conferences in the world, has become a must-attend for payments, fintech, and banking professionals. This year, hot topics included instant payments, cross-border payments, and the integration of AI into fintech. However, the acceleration of payments innovations has also caused a decided shift in the show’s tone.

In a recent PaymentsJournal podcast, Oscar Munoz, Vice President of Sales at Euronet Worldwide, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed their experiences at Money 20/20, their insights on the payments industry, and the factors driving payments modernization.

The Next Guy

Thousands of companies at Money 20/20 showcased innovations spanning everything from cards to account-to-account payments. Alongside these advancements, there was just as much emphasis on fraud prevention and risk management.

As payments continue to accelerate, security has become a pressing priority. One of the most talked-about topics discussed at Money 20/20 was the incredible growth of instant payments. The rising adoption of real-time payments has driven a demand for modernized platforms capable of supporting them.

At past conferences, financial services firms often adopted a “wait-and-see” approach, observing how innovations might impact the industry before diving in themselves. However, that mindset has shifted. The industry is already embracing next-generation payment solutions, including instant payments, cross-border payments, and stablecoins.

“There’s no more waiting and seeing, because to take advantage of any of those payment options for your customers, you must have a modernized payment infrastructure,” Wester said. “The assumption is you’ve used the last decade to modernize your payment infrastructure. If you haven’t, you had better get going, because everything that’s going to happen from here requires that you have gotten to that point.”

McKinsey conducted a recent study about the costs of delaying a payments modernization project, which found that keeping and maintaining legacy systems was draining roughly 70% of organizations’ IT budgets, and it would only become more expensive as time goes by.

“Many have thought that modernization projects are something for the next guy to do,” Munoz said. “When you see what is happening today, which is you have 30-year-old code that was great and built for purpose, but then that updates are coming out twice a year, minimum. People are realizing that you have to go through (payments modernization). It’s no longer the next guy, you are the next guy.”

Orchestrating Options

Despite the various alternative payment methods available, cards are expected to maintain their dominance. The card market is projected to grow at a compound annual growth rate of 7.9% from 2023 to 2028, driven by an increasingly digital landscape. In three years, Euronet estimates that 95% of card payments in developed markets will be contactless, while virtual cards continue to gain traction.

While cards remain a staple, instant payments are experiencing impressive growth, especially in markets outside the U.S. For example, instant payments are growing at a CAGR of 30% to 40% in countries like India and Brazil. However, the appeal of instant payments extends beyond speed—they also play a pivotal role in accelerating financial inclusion by reducing costs and expanding access for underbanked populations.

As the array of payment options proliferates, payment orchestration is becoming essential. Recent studies show that 60% of enterprises with revenues exceeding $500 million are considering payments orchestration platforms. These platforms can improve rates by up to 20% while increasing security and scalability.

“It’s all about that optionality for businesses and consumers,” Wester said. “You have to support all those options, but then you have to be able to support them across the scale. You also have to think about risk and compliance across that scale, because there are no oopsies in payments. You have to be able to do it correctly from day one.”

The increasing number of options might be one of the factors that have some institutions on the sidelines. For instance, there are two instant payments rails in the U.S.—RTP and FedNow—and both are growing rapidly.

“Organizations might be waiting to see which one is going to win, but both are going to continue to grow,” Munoz said. “It’s important that you’ve got to have a foot on both rails. If you look ahead, at some point the ecosystem is going to converge in a way that it won’t matter if I pay from my bank account or if I pay from a card, I’m the same consumer no matter which form of payment I use.”

The Path to Innovation

As the payments infrastructure converges, consumers expect real-time information and access wherever they are in the world.

“When you ask a consumer what they want in terms of payments, oftentimes they can’t tell you what they want, but they know they want it,” Wester said. “What’s interesting is how quickly things become expectations, where consumers didn’t even know what they wanted until they experienced it. Once they experience, say, tap-to-pay, now they want it every time.”

Organizations that build payments products will have to anticipate customer expectations and design products with that in mind. To meet these demands, solutions should be cloud-native to maximize the flexibility and usability. They should also leverage modular microservices, with 100% API availability, enabling seamless integration and scalability.

Additionally, the platform must incorporate a distributed architecture to guarantee uninterrupted operations and ensure the organization remains always on.

“To make the switch, a lot of institutions are doing a phased approach,” Munoz said. “How do you do modernize when you have real traffic? A company can’t go from the ground to the cloud by flicking a switch, they need a platform to ensure their business today is taken care of. Then they are creating this day one, day two, day three path to innovation, without putting their current business at risk.”

The Rhythm of the Dance

The risks to institutions have been well-documented, and they are one of the main reasons that lawmakers have begun to implement a regulatory framework around fintechs.

“The first generation of fintech was more tech than financial,” Wester said. “There was that sense of move fast and break things, and that’s the way you come at a technology problem, but that idea doesn’t work in financial services. Tech is great, innovation is great, but when a customer goes into a store, they want to pay, the merchant wants to receive, and everybody wants to be whole at the end. That is a financial services arrangement, not a technology relationship.”

To modernize to today’s standards, an organization needs a platform that can speak the language of financial services. They also need a platform that can be a single technology stack for the myriad of payment types. However, just as important as the technology is the expertise of the company that provides it.

“Experience makes all the difference,” Munoz said. “It’s extremely important to be able to (modernize) with a company like Euronet. We have the robust, established organization to be able to manage these projects, not just at the rhythm we choose, but at a rhythm where we can dance with the client that is doing the modernization project.”

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