Page 7 - Issue 3 2023

INFRASTRUCTURE

Traditional banks struggle to keep

pace with fintech innovations, ceding

market share to new players

By Chris Wood, regional managing director, Southern Africa and PALOPS at Network International.

he combination of fintechs, retailers and telcos pivoting to find new lines of
revenue, as well as the growing impact of open banking practices, should have
Tmade it clear to banks that they can’t adopt a business-as-usual approach.
Payments in particular have gone through rapid change and, unless traditional banks
pay careful attention to their supporting infrastructure, they are unlikely to remain
relevant in an increasingly competitive environment.
Traditional banks have, in many cases, clung to outdated back-end technology,
either for the sheer cost and size of what a modernisation programme entails, or for
fear of the perceived risks to the status quo of starting these programmes. However,
by trying to own and maintain all parts of their technology stack, banks are almost
certainly missing out on the opportunity to unlock rapid scale and growth through the
integration of niche capabilities that can be found in the now very broad technology
market.
The latest insights from PWC’s Payment’s 2025 & Beyond survey of banking,
fintech and payments organisations, shows that a full 89% of respondents believed Chris Wood
the growing shift towards e-commerce would continue to increase, but said it would
require significant investment in online payment solutions. In addition, 97% expect
there will be a shift towards more real-time payments. meaningful modernisation. When
The rapid shift in the payment landscape, however, will require a significant change we talk about the modernisation of
to the current infrastructure in order to support new payment models, and the same payments, that doesn’t just refer to
report puts forward an “evolution of the front and back-end parts of the payment new digital ways to pay, it also refers
system” as well as a parallel “revolution involving huge structural changes to the to the systems on which they run. It’s
payment mix and ecosystem.” about how easily payment systems
can scale and provide consumers and
Payment modernisation doesn’t just mean new ways to pay businesses with ways to interact at
South African financial services are certainly part of these global shifts. Locally, speed. When we talk to banks about
fintechs and neo banks are designing and deploying new services based on what their modernisation, we’re not just looking
customers want, unburdened by the stiff regulatory requirements of licensed banks. to deliver new payment products,
In an effort to compete, many of the older banks are rolling out new digital services. we’re talking about how the payment
However, while they may look different, they have often been built on ageing core platform is set up and ensuring it can
infrastructure. be used to deploy any new payments
This is not a particularly sustainable route because no matter how nice the user that might be required down the line.
interface is, if the substance of the service doesn’t deliver what the customer actually It’s about building resilience into their
wants, banks risk losing them, often to the newcomers, whose services they are trying digital future.
to stay abreast of. Fortunately, traditional banks can
The curse of legacy technology means that many of the traditional banks have deliver top-tier digital offerings without
spent decades building and customising a large portion of their systems themselves, starting over.
with the result that enterprise projects take longer and cost significantly more due to Banks should concentrate on
the need for bespoke development and testing. understanding their customers,
In order to deliver new digital services, traditional banks will need to consider servicing them and designing products

SUBSCRIBE FREE EngineerIT Issue 3 | 2023 | 7