Modernizing Payments Back-Office Crucial for Survival
- Modernizing back-office systems is now vital
- Outdated systems are harder to maintain
- A rapidly evolving industry means FIs need to keep up
BAI posted an article that first appeared at greensheet.com, discussing the fact that financial institutions must prioritize modernizing their payments back-office to stay competitive and defend against fraud. We see in report after report how legacy systems riddled with inefficiencies and high costs leave banks vulnerable to operational disruptions and missed opportunities.
Legacy back-office systems are proving to be an increasingly costly burden. Companies reliant on manual, labor-intensive processes are facing rising workloads due to transaction volume growth, while bugs and delays increase operational disruptions.
The article notes that back-office systems connect the front-line systems to create end-to-end payment processing. When either or both systems are utilizing outdated systems, operations fall behind -- leading to regulatory and financial issues.
Reasons to Modernize Back-end Systems
Outdated back-end systems drive up costs, as manual, labor-intensive systems rely on humans. Additionally, many developers who are familiar with the systems are retiring, making it difficult to find talent to maintain the systems.
“Most companies don’t realize the full cost of their legacy payments back-office systems,” says Jared Drieling, Chief Innovation Officer at TSG. “It’s not just the ongoing maintenance and labor costs—it’s the missed opportunities to grow and adapt.”
By modernizing back-end legacy systems, FIs can benefit from:
- Consolidated processes and automation -- reducing costly errors and lowering operational expenses.
- Increased agility -- ability to make changes quickly and reduce the need for frequent coding adjustments.
- Faster and more accurate transaction processing.
The post references a recent study by Deloitte, where "nearly 70% of payment processing executives believe their outdated payments back-office systems will negatively impact their ability to meet evolving customer and regulatory demands within the next five years.”
Pathway to Modernization
In order for FIs to head down the path of modernizing back-end systems, Anthony Serio, CEO of Serio Payments Consulting recommends that FIs assess their current payments back-office operations to identify bottlenecks and set clear goals for the project. This should be a continuous effort and not a one-time project.
Fortunately for FIs, they do not have to do this alone. Many of their fintech partners are working directly with core process providers and service bureaus to offer the latest innovations to streamline and automate payments. This enables FIs to leverage technologies like OrboAnywhere to effectively automate check processing, while reducing the internal resources needed for integration and deployment.
With the industry evolvingly rapidly and customer expectations rising, FIs need to act now to modernize their back-end operations -- or risk falling behind.