How Financial Institutions Can Help Push Payment Modernization to Businesses
- Payment modernizations are becoming common
- Some businesses, however, have not taken advantage of new technologies
- Collaboration between financial institutions and businesses is important
Over the past few years, financial institutions, along with fintech vendors, have taken the initiative in pushing innovation and new technologies to modernize payments. While new payment rails get a majority of the attention, we can't forget that this also includes modernizing legacy payments like checks -- where AI and machine learning are streamlining and automating processing of paper checks.
Unfortunately, according to a new Forbes article, businesses are still managing payments like it's 2005. Legacy payments like checks are still heavily utilized, with 63% of businesses reporting no plans to eliminate checks in the next two years, according to AFP.
Even those business who take on the challenge of modernization often fail as "businesses underestimate the challenge of integrating it into existing operational frameworks," according to John F. Rubinetti III, President of B2B Payments.
Five Rules for Successful Modernization of Payments for Businesses
In order to be successful, Rubinetti offers up these five rules for successful payment transformation:
- Complexity is the enemy of ROI. Integrating new payment technologies like real-time payments and ISO 20022 into legacy systems can be time-consuming and costly. Focus on what's operationally absorbable, not just what's technically possible.
- Integration beats innovation. The most successful businesses don't try to out-innovate each other - they out-integrate. Prioritize middleware solutions that reliably connect banking, ERP, and internal workflows.
- Don't build expertise you don't need. Payment modernization is highly specialized. Outsource the complexity so your team can focus on core business functions.
- Modernization must be invisible to the customer. Your customers don't care about your back-office upgrades. Build systems that modernize behind the scenes, accepting outdated inputs without disrupting internal processes.
- Don't confuse digital with done. Going digital isn't enough - true transformation means eliminating payment-related friction entirely, with data flowing automatically into core platforms.
How Financial Institutions Can Relieve the Burden
There is a significant issue missing from the Forbes article: The role of financial institutions. Many businesses may feel that they are going at this alone -- which should not be the case. Financial institutions should act more as a partner to businesses, assisting clients with their payment modernization goals.
This is particularly true when it comes to integration. Financial institutions have worked tirelessly with their core partners to integrate new payment technologies into their systems, enabling their end-users to receive the benefits of technologies while minimizing resources needed for integration.
However, many businesses aren't aware of these capabilities.
What should financial institutions be doing?
They should be educating their clients so they can best leverage their technology into current business operations. Additionally, FIs can also help businesses understand that efforts to modernize legacy payments like checks are already built into their systems. The days of manually entering data and reconciling payments are a thing of the past, as check recognition with AI has achieved 99.5% accuracy rates -- enabling businesses to scan a check and retrieve payment data in real-time, including payee.
FIs play a major role in payment innovation. They need to ensure that their corporate clients understand that they have a partner ready to assist in the modernization journey.