3 Major Legacy Modernization Challenges For Payments

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We examine the top three most significant legacy modernization challenges for payment companies — and how to overcome them.

Early adopters of technology may have had an advantage at the time, but they are now in a difficult situation: their systems are obsolete. Without compatible software, businesses will be unable to use new market features — and may struggle to keep up entirely.

In the online payment gateway industry, outdated technology can result in poor customer experiences as well as security compliance issues. And change is happening quickly; according to a survey, banking CEOs are the most concerned about the speed of technological change (81%). With such high stakes at stake, any payment company with an older technology stack should make modernizing legacy systems a top priority.

Modernize vs. Retire
The first stage of technology overhaul is deciding whether to modernize or retire existing technology, which means replacing it with an entirely new system. This decision will be based on two critical questions: How capable is your legacy system at handling day-to-day business operations, ...
... and how dependent is the company on this framework?

If the technology can support the fundamentals of payments (and does so well), then gradual modernization to support newer features may be the best option. Similarly, if the financial institution has proprietary technology that was developed specifically for the needs of the company, it may be more cost-effective to improve the current model rather than start from scratch. On the other hand, if technology is struggling on a fundamental level, retirement may be necessary. Even systems that function but add no specific value may be better off being replaced entirely in order to build a more dependable infrastructure in the long run.

Modernization can be done in stages, allowing for a cost-effective and minimally disruptive approach to operations. Even the most successful strategy will have a limited scope; the core infrastructure will remain and dictate which software features can or cannot be integrated. Retiring allows a company to start over and be as ambitious as it wants, but it is usually much more labor-intensive — and costly.

Slow & Steady vs. Rip & Replace
The debate over modernization vs. retirement is heavily influenced by the choice between a "rip and replace" method and a more systemic, phased approach. Payment companies will have the option, regardless of the scale of the technology overhaul, to make all of the changes at once, in what is sometimes referred to as a "Big Bang" move. Alternatively, they can proceed through a series of stages, gradually introducing new elements.
Despite its catchy name, the Big Bang approach is usually the less effective option. When a company decides to wait until everything is ready before migrating, there is a lot of pressure on each piece to be perfect. These projects are frequently overly ambitious in scope and can take years to complete — time that the company may not have if it is currently using outdated technology. Because of the longer timeline, the finished product may be out of date by the time it is released, especially with changing consumer preferences.

Instead, payment companies should consider a phased approach. Financial institutions can focus their modernization efforts on the areas of their business that stand to benefit the most from technological innovation by categorizing their efforts. These departments or teams can then serve as a test case for the larger business, allowing for the testing and refinement of modernization efforts. This prevents minor implementation errors from being replicated throughout the organization, which can happen when updates occur concurrently.

A systemic strategy also ensures that employees can keep using familiar technology even as new features are added to the system. The best online payment gateway companies can protect their daily operations and provide consistent service to current customers by providing this dependable infrastructure. As a result, knowing that these fundamental functions are safe should allow the company to be more daring in its innovation; the limited impact means they can take bigger risks.

Compliance and Usability
One of the primary drivers of payment modernization is the need for customer data to be accessible while also being securely stored. Due to the frequent updates and growing importance of digital formats, staying in compliance with current banking regulations can be nearly impossible with legacy technology. Add to that, from the customer's perspective, there is a desire to access private information with a single click while also keeping it safe from any potential cyber threat.

Getting both of these elements right at the same time is a delicate balancing act. It would be simple to implement a slew of impenetrable safeguards to protect customer data, but this would likely degrade the customer experience by requiring multiple steps before they could access their own data. Similarly, making everything accessible would be simple, but it would expose the company — and its customers — to online fraud.
Whichever approach they take, businesses must consider how they intend to extract customer data from old software and how they intend to store it in the future.

Building a Future Legacy
Companies that made early investments in technology may be frustrated by the constantly changing digital landscape. Fortunately, keeping up with the competition requires an innovative mindset. Payment companies can modernize their legacy systems by incorporating a few new curated features or introducing an entirely new software framework. They simply need to determine the best strategy for them — and then implement it.

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