A recent study by Tietoevry reveals that 79% of European banks are in the process of migrating away from their current cards platforms. This significant shift reflects the growing need for modern, efficient, and secure payment systems. The migration trend has accelerated, with the figure rising from 60% just two years ago. Banks are increasingly recognizing that legacy systems are no longer adequate to meet the demands of today’s complex payments landscape, which includes account-to-account (A2A) payments, instant payments, and e-commerce.
The primary driver behind the migration from legacy cards platforms is the inadequacy of existing systems to support modern payment methods. According to the study, 60% of banks cited that their legacy systems were no longer fit for purpose. The rise of new payment methods such as A2A, instant payments, and Request to Pay (R2P) has created demands that legacy systems cannot meet. Additionally, the increasing complexity of the payments landscape, including the need for compliance with regulations like SCT-Inst and PSD3, has added urgency to the need for system upgrades.
Another significant factor is the rising cost of maintaining legacy platforms. A study by McKinsey found that some banks are spending up to 70% of their IT budget on maintaining these outdated systems. This financial burden is driving banks to seek more cost-effective and efficient solutions. The migration to new platforms is seen as a necessary step to reduce costs and improve operational efficiency.
Moreover, the need to replace manual processes with digital ones is a key motivator. Fifty percent of the surveyed banks reported that manual processes were a significant pain point, and transitioning to digital systems is essential for streamlining operations and enhancing customer experience.
Migration Strategies
Banks are adopting various strategies to manage the migration process. The majority (56%) prefer a gradual implementation of the new cards platform, rather than a complete overhaul. This phased approach allows banks to minimize disruptions and manage risks more effectively. By gradually transitioning to the new system, banks can ensure continuity of service and address any issues that arise during the migration.
In contrast, 37.5% of banks are opting for a “big bang” approach, where the entire system is replaced at once. This method can be more efficient in the long run but carries higher risks of disruption. Banks choosing this strategy must have robust contingency plans in place to handle potential challenges.
Collaboration with external partners is also a common strategy. Forty-five percent of banks are working with external experts to facilitate the migration process. These partners provide valuable support in areas such as certification from card schemes, advice on migration processes, and capacity planning for customized solutions. By leveraging external expertise, banks can navigate the complexities of migration more effectively and ensure a smoother transition.
Future Outlook
The trend of migrating away from legacy cards platforms is expected to continue as banks strive to meet the evolving demands of the payments landscape. The integration of advanced technologies such as artificial intelligence (AI) and machine learning (ML) will play a crucial role in shaping the future of payment systems. These technologies can enhance fraud detection, improve transaction processing speeds, and provide personalized customer experiences.
Regulatory compliance will remain a key focus for banks. As new regulations emerge, banks must ensure that their systems are flexible and adaptable to meet these requirements. The ability to quickly implement regulatory changes will be a competitive advantage in the rapidly evolving financial sector.
The migration to modern cards platforms is not just a technological upgrade but a strategic move to position banks for future growth. By investing in advanced payment systems, banks can enhance their service offerings, improve customer satisfaction, and drive innovation in the financial industry.
