The migration of core applications and processes to the cloud is top-of-mind for many financial institutions and payments companies. Here’s what you need to know about the future of payments. Migration to the cloud is not a new idea as sales and marketing departments have been shifting operations to the cloud for years. This movement has spread to other departments within organizations and today, cloud solutions have become frontrunner alternatives for core applications and processes. This “cloudification” of enterprise systems will continue, with payments being targeted as the next process set for migration. It’s no surprise, given many cloud-based payments providers (Adyen, Stripe, Payscout) have seen great success with this strategy.
Taking the plunge and migrating from legacy systems to the cloud is a major endeavor. It’s one that requires stakeholder buy-in and a significant investment in technology. Such an undertaking requires the promise of significant benefits — and there seems to be no shortage of these when we look at the improvements that await payments operations that take the leap.
Cloud or no cloud, payments infrastructure is in dire need of an upgrade. Digital payments were already on the rise, but the pandemic has turbocharged digital payments, triggering an even bigger wake up call to financial institutions and companies to modernize payments infrastructure. There are regulatory and standardization concerns like increasing adoption of the ISO 20022 standard, but the need to support new payments options like payments-as-a-service also serves as an impetus to invest in cloud infrastructure over on-premise systems.
Resilience, flexibility and scalability are also a top priority. The need is clear when one looks at recent system failures at the likes of Visa, Barclays and Royal Bank of Scotland. Given the increased reliance on online banking and the disappearance of banking branches, these system failures leave customers in a lurch. Payments can, at times, be volatile and move through a quick succession of peaks and valleys. Events like Black Friday are a testament to the need for resilience and the flexibility to scale up infrastructure as needed. Cloud enables this without the need for expensive and redundancy capacity.
The ability to be agile in a highly disrupted marketplace that requires continuous iteration and improvement is tightly coupled with resilience and scalability. This is another aspect of payments brought to the forefront by the pandemic. With many employees working at home, including in the financial services industry, it has become evident that back-office functions that support payments are constrained.
Current systems are not built for remote work and current, inefficient processes and integrations that lack fluidity are being stretched thin. Performance is taking a hit, making a solid case for migrating to a cloud infrastructure that supports more distributed workflows and remote work.
As more and more fintechs enter the market and disrupt the space, it will become imperative for financial institutions and other established payments players to adjust, pivot, experiment, and scale quickly. Those that are cloud-based will hold a clear competitive advantage over those who are not able to react as quickly.
Security and privacy are also key considerations. With bad actors rapidly taking advantage of new avenues to perpetrate fraud and with risk mitigation being a top priority, many are hesitant to move to a public cloud setup that threatens to broaden the potential attack surface. While financial institutions and payments companies must keep an eye on fraud and risk factors, the investment in security by cloud providers’ should ease some of those worries as the cloud is often more secure than its on-premise counterpart.
The ability to access reporting and data easily and across a number of devices also poses a significant advantage over traditional data collection, which is often limited by storage capacity on local servers, among other things. Cloud infrastructure presents the opportunity to capture transaction data in real-time and ensure that it is readily accessible. This is as key to gaining timely insights as it is to strengthening fraud detection, which relies on fast and accurate analysis of historical data.
The most pressing question for organizations looking to migrate to cloud infrastructure is “when?” While some may choose to wait until the choice is thrust upon them, the ideal timeline is to start today. Organizations that want to create an infrastructure built for the future of payments understand the urgency. Migration to the cloud is neither a straight nor simple path; however, it does promise exciting and lucrative opportunities in payments that, without the proper infrastructure, will be missed.