The Record - Issue 18: Autumn 2020

122 www. t e c h n o l o g y r e c o r d . c om A watershed payments O ver the course of the last decade, banks across the globe havemade slowprogress in updating their back-end payments platforms which are appearing increasingly archaic compared to today’s requirements. “It would be wrong to say that banks are not innovative,” explains Peter Hazou, director of solutions for financial services at Microsoft. “Quite the opposite: banks have made huge progress in delivering new front-end payments applications that delight users.” Indeed, in a bid to compete with non-banks such as Google, Apple, Facebook and Amazon, and to meet customers’ increasing demands for ‘instant everything’, banks have poured much of their time and energy into delivering very mod- ern front-end payment applications that offer customer-centric experiences. Unfortunately, however, there is a significant disconnect between these modern customer fac- ing applications, and the back-end systems that they run on. According to reports by the UK’s Financial Conduct Authority (FCA), nearly 50% of banks do not upgrade old IT systems as soon as they should. Meanwhile, research from Reuters has found that 43% of US banks still use COBOL, a programming language dating from 1959. “All too often, banks are managing older gen- eration payments platforms that have built up incremental functionality over time for which they were not originally designed. They are inef- ficient to manage and expensive to maintain at a time banks are trying to reduce ‘run the bank’ costs.” Hazou explains. “Not only this, but they cannot cope with the copious data demands that are the heart of today’s data culture. Systems not only need to be able to process richer data, they also need to store, analyse and contextual- ise ever-growing quantities of information in a secure way.” For those banks that get it right, the opportu- nities are huge. According to Accenture’s recent Banking Pulse Survey, global payments revenue will likely grow at an annual rate of 5.5%, from $1.5 trillion in 2019 to more than $2 trillion by 2025. Only banks that change their business models to adopt the latest technologies and focus on providing value-added services to cus- tomers will capture a share of the $500 billion in incremental revenue growth. Get it wrong, however, and there’s a hefty price to pay. As much as 15% of banks’ global payments revenue, or $280 billion, will likely be displaced by the growth of digital payments BY L I ND S AY J AME S The Covid-19 pandemic, teamed with the adoption of ISO 20022 and upgraded messaging from SWIFT, has forced many banks to bring forward their plans for digitalisation. This momentum needs to continue if banks are to remain competitive, says Microsoft’s Peter Hazou F E ATUR E moment for