Payment Modernization Strategies for Mid-Sized Banks: Preparing for 2025 and Beyond
When it comes to modernizing payment infrastructure, banks face an unexpected hurdle: it's not the cost, nor competing projects, but the challenge of integrating with legacy systems that keeps financial executives awake at night. This insight emerged from a recent American Banker webinar in collaboration with Finzly called, "The Rise and Rise of Payment Hubs," where 69.3% of industry survey participants identified legacy system integration as their biggest concern in adopting a payment hub.
"Banks often underestimate the complexity of their existing infrastructure," said Laura McGortey, Director of Treasury Payment Solutions at Synovus Bank, during the webinar. "Even smaller institutions can have surprisingly intricate system landscapes that have evolved over decades." This complexity is compounded by the fact that many core banking systems are 30-40 years old, often running on technology stacks that few current staff fully understand.
The webinar, which brought together McGortey, Gareth Lodge, Principal Analyst Global Payments at Celent and Gene Neyer, Executive Advisor at Finzly, revealed that other potential challenges pale in comparison. Budget constraints worried only 14.8% of respondents, while competing projects concerned 9.1%, and scalability for future needs made up just 6.8%.
However, Lodge offered a perspective that challenges banks’ legacy integration concerns. "The fear of legacy integration often stems from the unknown," he explained. "Modern payment hubs have evolved significantly, with many now offering robust integration capabilities and pre-built connectors specifically designed to address these challenges." This evolution is reflected in the survey finding that 91.3% of respondents prioritize flexibility and composability when selecting a vendor – suggesting that banks understand the need for adaptable solutions that can bridge old and new technologies.
Finzly’s Gene Neyer emphasized that the key to successful integration lies in approaching it strategically rather than tactically. "Too often, banks focus on solving immediate pain points instead of thinking about how to use payment hub technology to maximum advantage," he said. This short-term thinking can actually make the integration challenge more daunting than it needs to be and prevent banks from benefitting from new opportunities.
The experts agreed that successful payment hub implementation requires a comprehensive approach. Banks should:
- Choose vendors with proven experience in similar legacy environments
- Document existing systems and interfaces thoroughly before beginning the integration process
- Consider a phased approach to transition different payment types gradually
- Focus on building a flexible foundation that can adapt to future needs
While legacy system integration remains the primary concern in payment hub adoption, the webinar experts emphasized that it shouldn't prevent banks from moving forward with modernization. With proper planning and the right partner, these technical challenges can be overcome, allowing banks to realize the full potential of modern payment hub technology.
