Two-thirds of banks believe their payments infrastructure will need significant upgrade in the next three years, while almost three-quarters fully expect to replace or renew their payments systems in the same timeframe.

This is according to a new report from consulting firm Ovum and released by banking software company Temenos, which highlights that those delaying or deferring required investments risk falling behind the rest of the market.

David Bannister, principal analyst at Ovum, commented that payments are no longer confined to the back-office and are now considered to be a differentiator due to close customer proximity.

“To meet the growing challenges, banks must avoid a quick fix to regulatory issues and instead must think long term and build holistic, flexible investment cases that address a range of business priorities,” he stated. “Making a case for investment in modernised payments systems to address the challenges of the real-time Open Banking involves answering more complex questions.”

The report is based on in-depth interviews and a survey among payments leaders, which found that amongst other things, customer impact is now key to modern payments transformation.

Banks are recognising the need to improve customer service, and the essential role that new payment services can play here, with almost 90 per cent of executives interviewed saying that it is more challenging to win and retain new client business than it was a year ago.

Building real-time capabilities and adaptability for future innovation is also becoming increasingly important, according to the research, with new architectures need to leverage APIs and micro-services to deliver a foundation for future product and service innovation.

Shrey Rastogi, payments strategist at Temenos, said that digital is the new norm, and capabilities such as open APIs and instant payments are no longer differentiators; they are expected.

“A truly real-time payments hub, beyond just real-time processing, means that banks can support this customer requirement now,” he commented. “However, the payments market will evolve further, and banks need an infrastructure to adapt accordingly.”

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