What is behind the shift to a platform-based approach to payments, and how can this trend accelerate the pace of banking modernization? Answering these questions , Miriam Sherrill, head of product at Form3 in the US, recently participated in a webinar called Rethinking the Platform Approach to Payments.
Alongside Miriam is Peter Gordon, founder and managing partner of Atlantic Fintech Advisors. said James Wester, his director of research for technology and infrastructure at Javelin Strategy.
Panelists engaged in a lively and insightful discussion centered around how traditional payment gateways have hindered innovation and acted as a constraint to payments modernization. Webinars are available on demand.
Evolution of payment gateways
Until now, banks have relied on basic gateways with limited functionality to process payments. This approach had no flexibility, with consumer payments being batched on a fixed schedule. The system architecture used to facilitate this was built around large mainframes, hosted on-premises, and maintained by in-house engineers.
This traditional infrastructure was built to serve a clear purpose, but over the years it has become clear that these systems are hindering the evolution of payments rather than enabling it. I did. Bankers became dissatisfied with these back-office systems. And these complaints are a big part of why Form3 exists today.
As the panelists outlined, modern consumers demand 24/7 service, highlighting the need to develop real-time payment models. However, banks with limited mainframe-based architectures cannot adopt RTP and FedNow without taking a fundamentally different approach.
Platform approach to payment processing
Therefore, moving to a platform-based approach allows banks to integrate additional functionality directly into the payment initiation process without the constraints of traditional gateway systems. This is a more realistic way for banks to achieve their goals of commercializing “value-added services” and developing more customer-centric service models.
A platform-based approach leverages technologies such as cloud computing, APIs, and microservices to build agile, scalable payment gateways that easily connect to a growing number of payment types and rails, such as FedNow and RTP. Masu. The flexibility of this approach allows banks to better serve their customers by making implementation faster and payment processing cheaper.
“The most notable evolution in payments over the past decade is how disconnected the entire payments ecosystem has become from end to end. For decades, payments existed in a fixed way. In short, consumers had a consumer-issued top-of-wallet payment method.”Banks used large mainframes to batch millions of transactions across a small number of payment rails. , was simply the way things were done. ”
“Over the past decade, there has been a shift towards flexibility in all aspects of what payment types are available, how those payment types are issued and processed, and even how the systems themselves are deployed. , which has increased complexity in many ways, but has also led to payment systems becoming more open, faster, and cheaper.”
james wester
Javelin Strategy Research Director, Technology and Infrastructure
Flexibility and customer-centric service
Panelists discussed how a platform-based approach allows banks to add a variety of value-added services and tiered capabilities at the payments initiation stage, opening up a world of possibilities.
Banks that modernize their approach will have the flexibility to add products and features to their services that their customers truly value. In addition to instant payments on the RTP and FedNow networks, you can also connect to other financial services such as cross-border payments, peer-to-peer payments, and loans to develop more customer-focused service models.
Orchestration and decision making
Through a platform-based approach, banks can now make informed decisions on behalf of their customers regarding payment types, timing, pricing, and beneficiary considerations.
This means customers can pay all their bills and make other payments without worrying about when payments will occur. They can keep their books balanced, and the bank chooses the mechanism to use, such as whether payments are made immediately, through credit, or in installments. Customers have the flexibility to make transactions as needed, while the bank handles everything behind the scenes.
Benefits of a multicloud approach
Cloud-based payment processing offers flexibility, scalability, and speed at a lower cost, but ensure your platform-based approach is resilient enough to guarantee 24/7 service to your customers. Banks that want to do so need to think about multi-cloud.
By leveraging a multi-cloud architecture, banks can ensure continuous availability while eliminating the concentration risks associated with a single cloud provider. It is the best option for payment services that truly meet the needs of modern customers.
Dive deeper into the discussion by watching Form3’s on-demand webinar here.
