Spending on traditional pay technology is growing rapidly, negatively impacting the growth prospects of banks around the world.According to new research IDC Financial Insights organizer Episode 6is a global provider of enterprise-grade payment processing and digital ledger infrastructure.
Financial institution (FI) spending on outdated payment systems is expected to rise globally, costing banks and financial institutions $57.1 billion in 2028, up from $36.7 billion in 2022. It has increased significantly, with an average annual growth rate of 7.8%.
According to an IDC study,A future-ready payment platform that enables the next stage of growth for banksIt also uncovered some of the hidden costs of traditional paytech, making it impossible for banks to compete for new payment-related revenues. Financial institutions could miss an additional 42% of payments-related revenue and up to 21% annual traditional cost savings if they fail to migrate to a future-ready pay technology platform.
A future-proof paytech offers additional features that improve your bottom line. This includes creating new products such as:
- Postpay or digital wallet platforms (22%)
- Banking-as-a-Service (BaaS) and Payments-as-a-Service (PaaS) Revenue (12%)
- Data monetization (8%)
Annual savings are also available from:
- Eliminate unnecessary legacy technology (8%)
- Cost benefits of orchestration (5%)
- Reduced downtime (4%)
- Reduce development costs (4%)
Overall, 40% of respondents to IDC’s 2023 Banking Survey cite legacy technology as a key pain point in their digital transformation efforts. This is why banks and financial institutions around the world are actively searching for future-proof payment technology that will enable the next phase of growth and innovation.
“A real driver for consolidation and simplification of technology assets”
Ian BradburyCTO of Financial Services for IT Solution Provider Fujitsu UK&IWe’ve covered the next steps traditional banks need to take.
“Even though they are much younger than traditional financial institutions, digitally native companies have leveraged their unique capabilities to serve their customers with greater agility. It is clear that it promotes competition in the banking sector with challengers. sterling bank drive profitability. But thankfully, traditional players want to invest billions in fintech to catch up,” said Bradbury.
“However, efforts to new technology do not necessarily eliminate the old, and over the years mainstream players have acquired a number of legacy systems, and the longer these old processes are maintained, the more transitions away from them. becomes more difficult.
“We are already seeing a real move to consolidate and simplify technology assets, but banks want to modernize efficiently and reduce escalating support costs over time,” he said. If so, this needs to be further accelerated.”
What factors are driving change in the banking industry?
The IDC report also explains some of the key factors accelerating the transition from outdated payment systems and moving banks to future-proof payment technologies.
- Consumer demand: As payment options become more important to consumers, 70% of retailers will add at least two new payment options such as QR code, contactless or alternative payment methods by 2024 intend to do something.
- Infrastructure: Rising technical complexity and increasing number of payment rails will drive 50% of global banks to focus on cloud-based payment processing by 2028, with some or all payment processing workloads We plan to adopt PaaS.
- Business model innovation: Global B2B BNPL is expected to reach $500 billion by 2026, with BNPL platforms competing with traditional financial institutions to provide working capital loans to SMEs.
According to IDC’s analysis, moving to a new future-ready paytech platform will bring new product and service innovation to banks and financial institutions. Currently, only 5% of his global financial institutions have future-ready pay technology, highlighting how much room there is for growth.