Why EMEA Banks Must Update Their Payment Systems
The banking industry across Europe, the Middle East and Africa (EMEA) is undergoing a crucial transformation as it adapts to the technological advancements that have defined the modern financial environment.
Emerging fintech sectors, notably start-ups and neobanks, have captured public attention with their cutting-edge applications and seamless payment methods.
Meanwhile, traditional banking institutions are engaged in substantial modernisation efforts to stay competitive in this evolving landscape.
Research conducted by Volante Technologies provides a comprehensive view of these developments.
A notable finding is that 99% of banks in the EMEA region are setting plans into motion to revamp their payment systems over the next year. This is far from a mere trend—it's a decisive strategy to engage in widespread modernisation.
These banks are preparing to allocate substantial funds, averaging nearly US$1.5 million each, aimed at modernising their payment infrastructures over the next 12 months.
While this figure may seem modest in a sector characterised by vast financial flows, it highlights the commitment even smaller institutions are making in this new era of banking.
Modernisation: A Survival Strategy
Many traditional banks have long relied on legacy systems, which, despite their state-of-the-art status in the past, now seem outdated.
Many institutions are still dependent on technology deeply embedded within their core banking systems, or on a combination of internal and vendor-supplied solutions that date back five to ten years.
Vijay Oddiraju, Co-Founder and Chief Executive Officer of Volante Technologies, says: "The fifth edition of The Big Survey shows banks recognise that modernising payments is crucial to survival in the evolving payments landscape."
This observation highlights the urgency with which banks are approaching the need to upgrade, driven by evolving customer expectations and the rapid advancements by fintech innovators focusing on mobile-first payment solutions.
Key Motivations Behind the Shift
The push for enhanced payment solutions is driven by several key factors. Cost efficiency and operational resilience are primary motivators, as banks look for systems that offer reliability and reduced operational costs.
However, the competitive edge allows traditional banks to match the nimbleness of fintech companies and neobanks, which is equally pivotal.
The survey by Volante highlights several significant concerns that influence banking executives' strategies:
- Vendor selection anxiety: 38% of banks are primarily concerned with choosing the right technology partners, surpassing worries about cybersecurity and budget limitations.
- Legacy system burden: A substantial portion of banks are hindered by outdated technologies that impede operational efficiency.
- Skills gap worries: Nearly a third of banks are troubled by the potential lack of in-house expertise necessary for managing these complex transitions.
Cautious Adoption of Cloud Solutions
While exploring new technologies, banks exhibit prudence, particularly concerning cloud adoption.
A hybrid approach is favoured by 58% of banks, integrating both cloud-based and on-premises solutions. Conversely, a quarter of banks remain primarily on-premises while evaluating their options.
This cautious stance stems from banking's heavily regulated nature, which prioritises security and compliance, posing additional challenges for system modernisation compared to agile fintech competitors.
As the deadline for regulatory compliance approaches, the pressure mounts for these institutions to align with forthcoming mandates like SEPA Instant Payments and SWIFT ISO 20022.
"It's not only market competition and changing customer expectations that are impressing this urgency upon them: 2025 is a pivotal year for regulatory deadlines," adds Vijay.
This highlights the dual pressure of compliance and staying competitive, underscoring the necessity for banks to choose the right technological partnerships to succeed.