By Rowan Brewer, Paymentology’s new CEO

Traditional banks find themselves at a crossroads. One which will define their role for years and decades to come. Established financial institutions now face the challenge of keeping pace with both the capabilities and agility of a new generation of digital-first competitors. All whilst managing the added obligation of ensuring existing systems continue working, with no disruption.

As a result, the role of banks has evolved at an unforgiving and exponential pace. A new report found that “89% of banks surveyed agree that COVID-19 accelerated the implementation of new technology for the banking sector by five years”. This, amidst the wave of digital banks and fintechs already beginning to leapfrog traditional institutions in terms of innovation, speed and capability, must come as a worrying omen for traditional banks.

Born digital, newer market entrants are unencumbered by legacy processes large banks have abided since their inception. This has brought intense competition across the banking industry, urged on by a new era of customer-centricity and product granularity.

Simply put; for banks, any opportunity for inertia has now evaporated. There is no choice but to embrace full-scale digital transformation. And, with it, harness the myriad business and societal benefits in the process. Or, face the very real threat of extinction.

Of course, many banks have adopted some new technology, with varying levels of success. But, on an industry-level, systems overall remain far behind the technological standard immediately available to a fast-maturing neobank generation. A generation with an inherent ability to adapt, innovate and pivot – flexibly and quickly.

Traditional banking systems – however you slice it, and however many incremental improvements you bolt on each year – remain largely built on the rails of decades-old technology, badly overdue a bottom-up rethink. However, many practices appear simply too deeply woven into the fabric of traditional banking systems to be migrated without perceived risk of a major disruption. Or at the very least, millions of miles of red tape.

Thankfully, whilst challenging and admittedly far-reaching in scope, the process of full-scale digital modernisation, migration and optimisation, can be achieved smoothly, effectively, and – critically – while there is still time. In order for banks to achieve this crucial step-change, they must examine three critical components of their payment operations.

First; the ability to issue cards and products in multiple regions. This is achieved largely through access to the best and most flexible API functionality, with which digitally native banks have carved out new USPs. For example, offering low to zero fees on services that big banks have historically used as valuable lines of revenue, such as international card-usage fees. Customers now have choice, and can use a range of challenger banks for specific needs, whilst cutting traditional banks out of the loop.

The second to make the entire process as digital and data-rich as possible. Data is today’s most valuable business asset. Without the power to harvest, interpret and leverage key datasets in real time, businesses miss huge opportunities to use customer card-spend data to innovate products completely tailored to individuals and their specific needs. “Digital” no longer just means “online” or “in-app”. It requires harnessing customer-data to empower meaningful, decisive action.

Lastly, banks must ensure they can execute their vision at scale, for millions of customers, 24/7, at the highest levels of security and reliability. Like neobanks, who must think ahead in terms of their processors’ ability to handle the volumes, volumes that sudden success and exponential-growth will require, traditional institutions need to adopt processors with the capacity and expertise to both migrate and scale their operations, smoothly.

By embracing the infinite potential and opportunity of a next-gen payment platform – one with the best APIs, scalability, migration expertise and global reach – traditional banks need not fear their new challengers. Nor envy their opportunities, as there is still time. The only remaining barriers are vision and will.