How Issuers can build modular ecosystems for modern payments

The fast-moving digital payments market, driven by ever-increasing consumer demands, requires modular ecosystems that will keep pace with innovation. With legacy platforms no longer fit for purpose, pan-European processor Nets warns issuers about the pitfalls they need to avoid to implement a successful modern payment ecosystem.

In a new white paper, A modular ecosystem for payment services, Nets says that issuers are being continually challenged to deliver innovative services in the face of increasing competition from digital challengers and FinTech players.

But they are still relying on creaking, outdated legacy platforms that can no longer keep pace with fast-moving payments, increasing consumer expectations and changing regulatory requirements.

Monolith Systems Stretched to Breaking Point

Previously, issuers could simply bolt on new payment products and services to existing banking platforms, which are now light years away from today’s expectations of self-service and intelligent systems predicting the consumer’s next action.

The old monolith systems, stretched to breaking point to include payments and traditional banking, can no longer handle the complexity of payments in the back end and still deliver a smooth, frictionless consumer experience at the front end.

Nets points out some issuers are applying multi-speed architectures to legacy systems, enabling them to span existing and new technologies. Other issuers have launched legacy replacement programmes, breaking down legacy systems into microservices or using vendor lock-ins to overhaul entire platforms. These initiatives, however, are lengthy, complex and costly.

While it’s tempting for issuers to leapfrog legacy barriers in this way, issuers cannot afford to wait for a lengthy legacy transformation to be completed before launching new services to market. Their challenge is how to digitise and innovate while the technology change is taking place.

Delivering Intuitive, Low-Friction Payments With Modular Ecosystems

According to Nets, by following a simple recipe for success – collaboration, partnerships and a modular ecosystem approach – issuers can deliver the intuitive, low-friction payment services consumers use daily, with the capacity to handle increasingly complex architectures and processes behind the scenes.

Issuers can avoid legacy pitfalls by combining their own assets within a modular digital ecosystem, where multiple partners collaborate openly to unleash innovation power and drive true consumer-centric solutions.

Buying into modular payment ecosystem thinking means that an issuer can freely choose payment technologies from different vendors and have these technologies collaborate in the most optimal and synergistic way.

According to Nets, issuers can build optimal modular ecosystems by understanding what role the vendor or partner takes in the ecosystem. Issuers will also need to evaluate each vendor’s ability to serve as a true sparring partner for the issuer.

Issuers must also ensure that modular services remain flexible without becoming too cumbersome. Where lack of configurability can force an issuer to adopt vendor modules that may not be the best fit, too much configurability will create confusion and inevitably increase complexity.

Ultimately, Nets states that a highly modular ecosystem will give an issuer superior agility and a truly future-proof system that can be continually improved without putting the overall ecosystem reliability and stability at risk.

To download the White Paper CLICK HERE