Why Enterprise Banks Must Adopt Innovations in Payment Technologies

Blog· 8min June 28, 2021

The global rise of digital banks, including Monzo, Starling, N26, Volt, Airwallex and Revolut, has continued at pace and as a result, all have successfully managed to acquire sizable customer bases since their respective launches over the past ten years.  

Their success can be attributed to a mixture of extraordinary customer service, perfect timing and lightning-fast speed-to-market for new products.  

Incumbent banks are acutely aware of the detrimental impact to their businesses.  They have been relying heavily on their sheer scale and market dominance up to now, but this is slowly showing signs of erosion.  

In February 2018, Revolut announced that they had hit 1.5 million active customers, a figure that had grown to 10 million by February 2020. The incredible acceleration of new customers joining these online only banks has been mirrored by the Berlin-based N26, and fellow London headquartered Monzo. Looking at the number of active customers is perhaps the most accurate depiction of customer growth of challenger banks but are these primary customer accounts or just accounts? Much of the population using these digital accounts also have other primary bank accounts.

Nevertheless, for incumbent banks, payment infrastructure modernisation and adoption of new banking technology is a painstaking 2-3 year multi-million-pound project. This is perhaps one reason why they have been slow to adapt.  

The risk of standing still

In the last decade, new banking technology innovations and changes in regulation have brought a new set of challenges that cannot be ignored. The arrival of Covid-19 has proved that substantial change is possible, even amongst traditional banks. Suddenly, businesses that were once touted as being impossible to operate remotely found themselves with no alternative. 

The thing is: legacy banks don’t have an alternative to modernisation either.   

A 5-year+ banking infrastructure transformation investment plan has just been accelerated to half that time in order to adapt to the new normal. Covid has made sure that there has never been a more poignant time for incumbent banks to modernise their payments estate for the digital age.
But although this process is well underway at the front end, investing in back-office infrastructure is still some way off. The front-end transformation is inherently limited by the quality of the core/back-office processes. So why, when this is the key component, the core engine that handles the critical mid layer, the payment processing that gets overlooked. Core payment infrastructure done well has the power to turn an average bank into a highly agile, low risk, low cost, super-efficient, brilliant bank. 

Why do innovations in payment technologies matter?


Reduces interstitial anxiety


Gives customers control over personal finances


Creates consistency with other digital experiences 


Legacy technology


Real-time hits the big time


Future demand and a price-tag to match 


Cautious to a fault: The risk of avoiding agile banking


Selecting your payment technology transformation partner 

"Back-office infrastructure transformation is the swing in the pendulum for banks to beat digital challengers at their own game"


Why do innovations in payment technologies matter?

The short answer to this question is that customers care about real-time movement of money and real-time accurate information. Processing speed is only part of the solution; giving customers direct visibility into the payment status is also important (for all payment types). 

We’ve outlined a few of the reasons for this below: 

  • Reduces interstitial anxiety
    The ‘where’s my money’ effect. Customers without access to real-time payments will make sure to get in touch with your helplines, clogging up your customer service teams and draining resources. 

  • Gives customers control over personal finances 
    Real-time payments give customers better oversight of the health of their finances. 

  • Creates consistency with other digital experiences 
    Customers that are accustomed to instant services now expect to see funds updated in real-time. 
    Ask yourself how many banks have sent out comms to explain the difference between Account balance and Actual balance, and you can see how this phenomenon plays out.  
    In our opinion, back-office infrastructure transformation is the swing in the pendulum for banks to beat digital challengers at their own game. An overhaul in the back office will literally transform the ability to innovate at pace, scale on demand as payment volumes grow, keep operational costs super low and remove the burden of maintaining, upgrading and changing systems. 
    But legacy banks haven’t purposely sabotaged themselves. For the most part, they have been trying to roll out new banking technology innovations.  
    The reality is that incumbent banks have unique challenges that newer banks don’t have but they are far from insurmountable, especially given recent technology innovations. 

  • Legacy technology 
    Although incumbent banks have legacy technology, modern tech stacks at partner organisations have proven they can handle payment processing on a large scale and ensure future proofing as all scheme rules and regulatory changes are baked in.  Legacy tech stacks require frequent, costly upgrades, patches etc.  Modern stacks stay current and compliant with all schemes, taking the 'run the bank' challenge off the banks' plate. 

  • Real-time hits the big time 
    Financial regulators are pushing for real-time payments as a challenger to other POS solutions, particularly card markets.  Having a tap and go app that sends an instant payment rather than going through the card rails is a total game changer. The technology is already there but regulation is still playing catch up. For instance if there is problem with a credit card purchase, you’re protected.  With an instant payment, you’re not.  So industry and regulators have to do something to address that gap.  Maybe not so important for your weekly shop but definitely needed for buying a tv or a holiday. 

  • Future demand and a price-tag to match 
    Scalable platforms are essential. But tech executives within banks have been burned before with fully customised, configured systems and cost per volume pricing that lock in banks to a single provider that make it difficult to get out.  
    Expenses should be reduced over time, but as research firm Gartner reports the initial costs of cost-per-volume in the cloud can be more expensive, with savings coming later. 
    Partner companies like Form3 understand this, which is why the best payment technology solution providers enable growth without any customisation. 

  • Cautious to a fault: The risk of avoiding agile banking 
    An abundance of caution may have stood incumbent banks in good stead in the past, but as technology has moved on, there’s considerable evidence that these concerns have been eliminated since. 
    The risk of waiting to act doesn’t outweigh the consequences of losing ground to challenger banks. Especially as more and more banks are making headlines for the wrong reasons for outages, breaches and worst loss of data becoming major headline news. Modernising old technology to a more robust, highly resilient and secure solution is paramount. 

  • Selecting your payment technology transformation partner  
    Recent innovations in payment technologies allow legacy banks to be more agile and take away one of the differentiating factors challenger banks use to define themselves. They are no longer bound to manage infrastructure in-house but running the whole payments infrastructure as a service with a specialist provider makes sense from a flexibility, scale, resilience and cost perspective. This enables legacy banks to focus on their other strategic objectives and rival the challenger banks on their own terms. 

Change is coming. Act now

Whether you’re an emerging bank looking to capitalise on real-time payments and API connectivity into schemes or you’re a legacy bank wanting to bring your payments infrastructure to the next level, Form3 provides the critical payment infrastructure technology needed to de-risk, optimise efficiency, reduce costs and free up bank resources to innovate and deploy new products and services quickly. 

Chat with Form3 today to find out how moving to a cloud native platform will transform the way you manage payments in the future.  

Written by

Nick Middleton Head of Customer Success - UK

Nick works at Form3 as an Enterprise Programme Director and is responsible for the end-to-end relationship and delivery for the largest clients of Form3. In his spare time, Nick loves flying his microlight, riding adventure motorcycles, kayaking in the Mediterranean and spending time with his family, not necessarily in that order!

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