Legacy technology is the biggest roadblock hampering innovation in payments, according to MoData CEO Darren Turnbull. He says that unless institutions modernise their infrastructure, move to cloud-based systems, real-time processing and API-driven platforms, they will fall behind in the race to offer the efficient, next-generation payments solutions that modern customers want.
He says: “Many of the game-changing trends in payments are being held back by outdated, inflexible legacy systems.“
Turnbull points to 10 key legacy stumbling blocks in the way of payments transformation:
1. Cash slows digital adoption
While governments and businesses are pushing for reduced cash usage, citing concerns over costs, financial crime and efficiency gains, many legacy banking systems still rely on cash-heavy infrastructure, making it difficult to transition to fully digital payments. In addition, poor interoperability between old and new systems slows down the adoption of cashless models.
2. Rigid infrastructure at central banks
Monetary authorities are playing a more active role in modernising national payment infrastructure, with a growing focus on real-time settlements and digital currencies. However, many of these central bank payment networks were designed decades ago, making real-time settlements and Central Bank Digital Currencies (CBDC) integration complex. Upgrading these systems is costly and time-consuming, leading to slow progress in payments modernisation.
3. Siloed payment systems
While tech giants disrupt the payments ecosystem, seamlessly embedding financial services into their platforms and challenging traditional financial players, many of the traditional banking systems are not designed for seamless application programming interface (API) integration, making it harder for big tech to embed these into traditional banking systems. This results in data fragmentation within legacy systems and prevents a smooth user experience compared to tech-driven platforms.
4. Geopolitical uncertainty and reliance on old networks
Sanctions, trade tensions and political and economic shifts are fuelling discussions around the weaponisation of payment networks, Turnbull says. In addition, legacy cross-border payment systems, such as SWIFT, are centralised and vulnerable to sanctions and political risks, while new alternatives like blockchain-based cross-border transfers struggle to integrate with these old infrastructures.
5. Scalability issues
Turnbull says digital payments are proving to be a powerful force for financial inclusion, especially in developing economies, helping to reduce poverty and expand access to financial services. As they become increasingly popular, many existing banking platforms cannot handle high transaction volumes, leading to slow processing speeds and outages. In addition, digitisation is driving lower average transaction sizes and the cost of processing these on legacy systems also reduces the ability to scale into lower income (LSM) markets. He notes that outdated core banking systems limit financial inclusion efforts, as they are not optimised for mobile-based financial services.
6. Rapid payments evolution vs lack of infrastructure
Once slow to adapt, emerging economies are now leapfrogging legacy systems, accelerating digital transformation in payments. In many developing economies, banking systems are still paper-based or rely on batch processing, preventing real-time transactions. In addition, poor internet connectivity and outdated financial infrastructure delay mobile payments adoption.
7. Stablecoins on the rise with regulatory and system constraints
Turnbull highlights Stablecoins, which are gaining traction in cross-border transactions and currency hedging, presenting both new opportunities and complex regulatory challenges.
However, most legacy banking systems do not support blockchain-based transactions, making Stablecoin integration difficult. He says central banks struggle to monitor and regulate Stablecoin usage owing to a lack of adaptable regulatory frameworks.
8. Sovereignty and security take centre stage
Another challenge is that governments are prioritising domestic payment systems to protect their economies from global financial disruptions and external control. Local domestic switches are typically more cost-effective and rich in functionality, such as tokenisation, rewards, instant payments, etc. Turnbull notes that many national banking systems still depend on foreign payment networks like Visa, Mastercard or SWIFT. He says legacy infrastructure makes it hard to develop independent, domestic payment solutions without massive investment.
9. The revenue squeeze and outdated business models
Shrinking payment margins are forcing providers to innovate new monetisation strategies beyond traditional transaction fees. Turnbull points out that legacy systems were built for fee-based revenue models, making it difficult to adapt to new fintech-driven, low-cost payment models. He says banks struggle to offer competitive pricing owing to high operational and maintenance costs tied to outdated infrastructure.
10. Regulatory overhaul and compliance bottlenecks
New payments legislation and licensing requirements are reshaping the industry, increasing compliance burdens while also fostering greater transparency, Turnbull says. In contrast, legacy systems lack automation for regulatory compliance, making it costly and time-consuming to meet new rules. Payment providers using outdated technology struggle to adapt to new licensing and reporting requirements, he says.
Turnbull says overcoming these challenges demands modernised infrastructure – and is the reason why more and more companies have turned to TANGO to replace their legacy payment systems.
He says: “Over the past several years, our TANGO platform has become the industry leader for replacing legacy applications like Base24, Postilion, and in-house developed solutions that are quickly becoming obsolete.”
Customers choose TANGO for its technology – a modern, open architecture with superior availability, scalability and data integrity as they look to the future. TANGO fulfils those demands. TANGO is built on a highly performant micro-service architecture designed to implement a transactional, mission-critical service-oriented architecture that is hardware and database agnostic. As a technology company, TANGO focuses on R&D, innovation, performance and time to market. TANGO has also made significant advancements in data science, artificial intelligence, FX trading, ISO 20022, fraud, crypto-currencies and blockchain.
Turnbull says they also choose TANGO for its ease of transition. With a versatile common architecture, TANGO removes issues regarding integration associated with disparate legacy systems and can be deployed on one hardware platform, or multiple hardware platforms that can be cloud, private cloud or traditional data centre deployments, from the same or different hardware vendors all running the same TANGO infrastructure and code base. TANGO’s unique design removes complexities and reduces migration timeframes. Off-the-shelf functionality and rapid development capability means that standard card types, international card schemes and devices, national switches and hosts can be deployed easily, within the standard product. TANGO’s proven migration scheme guarantees smooth operations with gradual on-boarding to the upgraded system.
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