6 Key Digital Payments and Banking Trends Changing Global Banking

Banking and payment systems modernization seen to be influencing shift to hybrid public and private multicloud digital infrastructure

Adrian Mountstephens
6 Key Digital Payments and Banking Trends Changing Global Banking

The global financial services sector faces significant pressure from rapidly changing consumer expectations, evolving regulations, increased competition and the financial impact of the global COVID-19 pandemic. In particular, new customer payment preferences are bringing acute forces to bear on financial institutions and the entire world of transaction management.

Recently released survey findings from Juniper Research suggest that over 50% of households are considering a move away from bricks and mortar-style financial institutions.[i] While that survey focuses on U.S. consumers, the same influences are bearing on European communities and financial institutions with the momentum for digital transformation gaining increased global traction.

Key trends in payments and banking infrastructure

The banking and payments ecosystem has evolved with the development of newer business models and backed by technical infrastructure that increasingly features greater connectivity, responsiveness, reliability and security.

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Businessman using mobile smartphone with data information banking network connection on screen, mobile banking and online payment. All on screen are design up.

Emerging use case trends drive evolution of banking and payment systems

The future of banking and payment operations is going to be instant, open and everywhere. Several trends have evolved based on the developments of newer business models and backed by technical infrastructure that increasingly features greater connectivity, responsiveness, reliability and security. These trends can be expressed as six key emerging use cases, which are explored in detail by our white paper “Key Trends in Payments and Banking Infrastructure.”

The interconnection between banks, service providers, fintechs and others in the financial services community is crucial to these emergent trends. When it comes to the integration of servers and networks, how and where you implement your infrastructure will be critical to your success.

Consider how these trends and underlying interconnections can influence the changing banking IT environment:

  • For both Banking as a Service (BaaS) and banking systems modernization, engaging with infrastructure providers that can enable secure, reliable and low-latency connections is vitally important—especially as cloud-based software and cloud platforms become more prevalent. With that in mind, local payment and real-time payment applications require localized infrastructure providers that can meet data sovereignty and latency requirements.
  • In contrast, open banking and cross-border payments benefit from infrastructure providers that can offer global access, and who adhere to procedural standards that will help reduce contractual delays and quickly bring partners on board. In addition, for service providers and users alike, colocation offers benefits that make the exchange and transmission of data easier, faster and more secure.

Modernizing core banking platforms

Now, let’s consider the one key trend that falls squarely in our area of expertise: the modernizing of core banking platforms. It’s in this specific realm that the relevance of hybrid multicloud infrastructures, with respect to the digital payment marketplace, is most clearly demonstrated. Traditional banking systems have relied on large, mainframe systems that have dated back to machines developed in the 1960s. These computers were cutting edge for their time and banks adopted them due to the significant increase in capability offered over older systems. These systems were monolithic and were expected to encompass all core functions required by a bank. Such systems were almost always hosted within a bank’s own IT data centers. Today, the situation is very different. Traditional core banking systems have left incumbent banks with a technological deficit.

While legacy banking systems have been on-premises deployments, cloud-based or cloud-ready systems have emerged as alternatives. Cloud-based computing brings its own set of challenges. The perception among banking executives and financial regulators has been that data security in public cloud computing is not as robust as the security found in traditional data centers. This bias is eroding as more banks adopt cloud resources for less critical systems.

The interconnection between banks, service providers, fintechs and others in the financial services community is crucial."

Still, most bank leaders are reticent to move to a completely public cloud-based approach. Hybrid cloud architectures offer an alternative that still has much of the scalability and efficiency of fully cloud-based solutions. With a hybrid cloud approach, banks can run specific core banking systems and other critical processes on their own private clouds, while other applications and services are deployed on public cloud infrastructure. This allows financial institutions to protect existing investments, while exploring efficiencies available in a variety of public cloud solutions.

Evolving financial landscape motivates shift to hybrid multicloud digital infrastructure

As discussed, banks face changing expectations, evolving regulations, increased competition and recovery from a global pandemic—all combining to amplify those pressures.

The modernization of banking and payment systems will be critical to banking operations if financial institutions are to address these challenges. Pivotal to any process of adaptation will be hybrid public and private cloud architectures. Hybrid multicloud infrastructure environments provide an important point of integration between legacy IT systems and more agile cloud-based resources. This is especially important for financial services providers because of the often non-negotiable need to retain legacy system support in the face of mounting demands to digitally evolve.

A hybrid multicloud architecture ideally achieves this integration within the context of a single platform that allows you to access multiple digital and business ecosystems either physically or virtually. The key is implementing a simplified platform that does not compromise performance, reliability, security or control.

Most bank leaders are reticent to move to a completely public cloud-based approach."

Equinix’s global platform embodies the right set of capabilities to meet this challenge. The choices of digital infrastructure offerings on Platform Equinix®—such as Equinix Fabric™, Network Edge and Equinix Metal™—capitalize on virtual capabilities at the edge and together simplify accessing and integrating the growing multiplicity of financial services provider and FinTech partner ecosystems via direct and secure private software-defined interconnection.

For more about digital payment trends, download our white paper “Key Trends in Payments and Banking Infrastructure.”

To learn more about how the hybrid multicloud digital infrastructure fits into an accelerating digital transformation, download the IDC white paper “A Blueprint for DX Success: Start with Hybrid Infrastructure and Connected Ecosystems.”

For insights into Paypal’s digital payments journey, watch this video from our Amsterdam Interconnect 2021 event:

You may also want to read:

Key Trends and Innovation in Real-Time Payments Ecosystem | Equinix E-Book

 

 

[1] Juniper Research, “Digital Commerce Survey: [US & UK] Consumer Attitudes to Mobile Banking, mCommerce & Contactless.” James Moar, 8 February 2021.

The modernization of banking and payment systems will be critical to banking operations."