Jan-Willem Weggemans, Vice President, Commercial Payments Lead at Publicis Sapient on the outlook for payments modernisation

The payments industry is transforming rapidly, driven by customer demand shifts, regulatory developments and technological advances. Payments players need a tailored innovation approach for each value opportunity, based on their strategic position and ambition and each driver of change.

Understanding the drivers of payments modernisation

Driven by technological advancements, shifting customer expectations and regulatory developments, banks and financial institutions must adapt their offerings. They must modernise their payments to remain competitive in this ever-evolving landscape as we start this new year.

Customers expect real-time, seamless and personalised payment experiences that are now standard expectations across financial services. Not only that, but users are demanding frictionless cross-border transactions, alongside advanced features like biometric authentication.

Massive advances in technological capabilities drive customer expectations. Cloud computing, data platforms, Artificial Intelligence (AI), and Application Programming Interfaces (APIs) enable faster, scalable, resilient, and more secure payment solutions. These enable opportunities to innovate customer propositions and experiences. Moreover, supporting the modernisation of processes and technologies can lower costs and improve resilience.

Regulatory developments are a key factor. From new (instant) payments schemes to ISO standards to KYC/AML requirements, there is an ongoing need to change/modernise the payments operating model. And possibly innovate client solutions.

For these reasons, legacy banks can struggle with the pace of change and inefficiencies. Including enabling FinTech disruptors to gain a competitive advantage. So, how can banks examine these learnings and implement better change?

Progressive modernisation and the impact of GenAI

Banks and financial institutions can take a tailored approach to payment innovation and modernisation. In all of these approaches, modernising an incumbent player with significant legacy challenges is generally a process of progressive modernisation. Big bang approaches and the building of neo banks to move a legacy bank forward have generally not delivered success.

Progressive modernisation enables a bank to move in a controlled way from the legacy to the modern state. This requires running the legacy and modern services in parallel. Meanwhile, the integration is enabled by decoupling the hardwired systems top and bottom (integration and data). Only then can you spin up the modern enterprise and core services and progressively direct more clients/transactions/products over the new stack.

Progressive modernisation is becoming more attractive and suitable for many clients. Furtherore, GenAI can materially alter the cost and duration of these programs, offering lower risk and a significantly improved business case. With new and innovative solutions that utilise GenAI at their core, the whole journey can be greatly accelerated. Including Legacy system discovery, Target state design, Backlog creation, and Building and Testing.

Three key approaches when facing the need to modernise Payments

Payments players are facing an ongoing modernisation need, driven by changing client behaviours, technology innovation and regulatory activism. 

Broadly, we recognise three approaches to payment modernisation, including:

Fix the edge – either top of the stack or bottom, a small fix, without touching 90% of the existing tech. 

Incremental uplift – installing a modern solution (but not fully end-to-end). For example, a new core system for a set of products/customers.

Move to native build – setting steps on the progressive modernisation journey, after investing in decoupling the hardwired legacy systems.

To select the right approach, we consider two key factors: the event and the players. The event looks at the size of the opportunity (or materiality of the threat) and the size/complexity of the change. The player looks at the performance of the existing operating model, whether payments are core, and whether the ambition is to be a leader in payments or to be part of the majority of players.

How a player’s participation strategy drives modernisation choices. A client offers white label card processing services, and in their market, they need to offer the most modern solution and lead with modern technology, AI, and embedded compliance/risk solutions. A major incumbent bank decided to invest primarily in customer value propositions, driving value from the broader client relationship. The bank opted for a processing-as-a-service model when it needed to modernise the processing platform.

Looking at the two extreme options, we see that fixing the edge works well for players where payments are not core, when they do not need to be the first mover, or when their existing operating model is performing well. From an event perspective, it fits when the opportunity is small and/or the change is minor in effort and complexity.

At the other end of the spectrum, moving on the journey to native build is most suited for players where payments are core. Where they want to be the first mover in the market, and where the existing operating model is facing major challenges. From an event perspective, it is more suited when the event supports a significant value opportunity (or threat to the business) and requires a significant change.

Making payments progress real

Many new payment options, including A2A payments and instant payments, offer incremental benefit cases for many players. These are not large enough to kick off the incremental modernisation journey. Thus, most players will opt for a “fix the edge” or “incremental” modernisation approach and wait for another event for a full modernisation.

Regarding regulation. The new ISO20022 standard is due to come into full force in November 2025. However, less than a third of messages were exchanged using the new standard in late 2024. An often cited reason for delays in implementing regulatory changes is the edge approach replanning required to keep up with the evolving set of rules regarding the ISO standards. The evolving set of rules is inevitable, as the regulator is responding to market experiences and feedback from trying to implement the initial rules set. Thus, in regulatory change with this level of impact, a cloud-native approach would be better, enabling a more nimble/agile response to continuous changes.

What is the next move?

Faced with the inevitable need to invest in payments, we suggest taking a portfolio approach and looking 2-3 years ahead when evaluating individual modernisation events. And your strengths/weaknesses and strategy. Modernisation is not just a technical upgrade but a strategic enabler that can drive efficiency, resilience, and innovation. You can ensure that each modernisation effort contributes to a cohesive, future-ready payments ecosystem by aligning your investments with long-term business goals. This approach will help you avoid costly short-term fixes. And build a scalable, agile infrastructure that supports evolving customer expectations, regulatory requirements, and competitive pressures.

  • Digital Payments

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