# Why payments have become the next battleground for banks Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-02-22 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: UK Banks Embrace Digital Transformation for Contactless Payments Meta Description: Discover how the pandemic has driven a surge in contactless payments, leading to banks needing to innovate and modernise their infrastructure to meet new URL: https://financedigest.com/why-payments-have-become-the-next-battleground-for-bankshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/untitled-design-66-1736838558198-compressed.jpg) _By **Ian Johnson,** SVP, Managing Director Europe, at_ [_Marqeta_](https://www.marqeta.com/uk) The COVID-19 pandemic kick-started a huge shift in consumer behaviour, forever changing how people pay for goods and interact with their bank. According to [Capgemini’s World Payments report](https://www.capgemini.com/gb-en/news/capgeminis-world-payments-report-2020/), 38 percent of people started using a new payment provider during the lockdown. This led to a surge in contactless payments, with nine-in-ten card transactions now [contactless](https://www.computerweekly.com/news/252495222/Nine-out-of-10-UK-card-payments-in-2020-were-contactless). The UK’s proposed £100 limit for contactless card payments will no doubt be welcomed by many more, offering consumers less friction on larger transactions. And with [84 percent](https://www.finder.com/uk/mobile-internet-statistics) of UK adults owning a smartphone, any increase in the contactless limit will also drive more people towards digital wallets offering more security when making a payment. For banks, these trends are creating the perfect storm. They need to be able to innovate at pace and launch new [payments experiences quickly to keep](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG") up with customer expectations. But while many banks already offer digital services, recent research from Marqeta highlighted key challenges, with 85 percent of senior banking executives believe they must overhaul banking infrastructure if they are to deliver the new types of payment experiences made essential by the pandemic. **Payments becoming a technology** [arms race](https://www.financedigest.com/quantum-computing-in-finance-the-next-digital-arms-race.html "Quantum Computing in Finance: The Next Digital Arms Race?") In the wake of COVID-19 it has become more important than ever to innovate. Today, this means meeting consumers where they are – the [digital world](https://www.financedigest.com/six-reasons-why-digital-world-classtm-finance-organizations-outperform-peers.html "Six Reasons Why Digital World ClassTM Finance Organizations Outperform Peers"). But [banks often face](https://www.financedigest.com/analysis-u-s-banks-face-trillion-dollar-reverse-repo-headache.html "Analysis: U.S. banks face trillion-dollar reverse repo headache") barriers to innovation. In the same research, 84 percent of banking executives said that legacy infrastructure is restricting them, making it almost impossible to innovate. It also makes developing new [services more costly](https://www.financedigest.com/is-ai-taking-quality-and-cost-optimization-of-enterprise-services-to-the-next-level.html "Is AI taking quality and cost optimization of enterprise services to the next level?"), risky and time-consuming – particularly in areas like payments. As a result, [launching new services or even adding new features to existing programmes](https://www.financedigest.com/uk-to-launch-new-billion-pound-home-insulation-programme.html "UK to launch new billion-pound home insulation programme") becomes much harder. Adding a feature that, for example, uses real-time data to offer discounts and loyalty rewards, or a [service offering](https://www.financedigest.com/any-business-can-now-offer-their-customers-financial-services-how-embedded-finance-is-reinventing-the-wheel-when-it-comes-to-banking.html "Any business can now offer their customers financial services: How embedded finance is reinventing the wheel when it comes to banking") financial management tools and spending controls, can be a very long process. It could take up to three months to add new features to legacy platforms, as can expansion of services into a new territory. By that time, banks could have missed their [perfect market](https://www.financedigest.com/the-perfect-storm-of-growth-and-success-for-the-restech-market.html "The Perfect Storm of Growth and Success for the ResTech Market") moment to launch a new digital wallet or a modern debit card programme. With 94 percent of executives believing that payments have [become a “technology arms race,” it is clear that banks](https://www.financedigest.com/banks-need-to-become-a-lifestyle-brand.html "Banks need to become a lifestyle brand"), regardless of their digital maturity, need to boost their ability and deliver the payments experiences users are demanding. **Acknowledgment is the first step** Banks are aware of the need to modernise and it is interesting to see them recognise [legacy infrastructure](https://www.financedigest.com/achieving-a-smooth-transition-from-legacy-infrastructure-to-hybrid-cloud.html "Achieving a Smooth Transition from Legacy Infrastructure to Hybrid Cloud") as a problem, something they might not have acknowledged too long ago. However, modernisation is no easy task. [Today’s banking](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") infrastructure is incredibly complex. The average financial service offering on the market today could consist of up to 2,000 applications and systems. Lately, we have seen more desire from banks to build new payments and [banking services](https://www.financedigest.com/the-gmp-cell-banking-service-market.html "The GMP Cell Banking Service Market") from scratch, to start the process of replacing that legacy technology. One method becoming increasingly popular is building their own ‘Greenfield Bank’. This involves the creation of a fresh-faced [digital bank](https://www.financedigest.com/key-considerations-for-building-an-inclusive-digital-banking-experience-fit-for-the-future.html "Key considerations for building an inclusive Digital Banking Experience fit for the Future"), built on modern core banking and payment platforms – instead of taking on the risk of full migration or hollowing out certain services. These Greenfield Banks typically have the look and feel of a challenger bank or fintech, but ultimately they are underpinned and [supported by a multimillion-pound bank](https://www.financedigest.com/why-now-is-the-time-for-banks-to-use-their-data-to-support-customers.html "Why now is the time for banks to use their data to support customers"). For example, Goldman Sachs’ digital bank, Marcus. This approach [enables banks](https://www.financedigest.com/the-open-banking-revolution-enabling-accessible-and-inclusive-finance.html "The open banking revolution – enabling accessible and inclusive finance") to develop and launch services to market much faster. Instead of spending time trying to modernise systems picking apart and migrating a complex web of legacy technologies, banks can build their own agile infrastructure from scratch, upon which they can create new [payments experiences](https://www.financedigest.com/how-netflix-justeat-and-uber-raised-the-bar-for-the-payments-experience.html "How Netflix, JustEat and Uber raised the bar for the payments experience"). This allows banks to [keep pace in a payment’s technology arms race](https://www.financedigest.com/winning-the-security-race-how-financial-services-can-keep-pace-with-cybercriminals.html "Winning the security race: how financial services can keep pace with cybercriminals") and become more agile in responding to changes in consumer behaviour. **Modern platforms have a vital** [role to play](https://www.financedigest.com/advisors-must-play-a-bigger-role-in-unlocking-scale-up-potential.html "Advisors must play a bigger role in unlocking scale up potential") Banks can clearly see the way people pay has drastically altered following the global pandemic, and they recognise the need to double down on digital to create new [payments technologies](https://www.financedigest.com/why-payment-technology-will-be-the-backbone-of-the-uks-retail-recovery.html "Why payment technology will be the backbone of the UK’s retail recovery"). To put themselves in the best possible position to seize this opportunity, [banks need to embrace more agile systems built for the digital](https://www.financedigest.com/people-need-people-humanising-the-digital-banking-experience.html "People need People – Humanising the digital banking experience") era. This means taking advantage of modern core banking and payment platforms to help quickly launch new payments experiences with extensive control, flexibility, and customisation. Not only will modern core banking and payment platforms help banks stay ahead of the curve today, but they put banks in the best possible position to innovate [moving forward](https://www.financedigest.com/life-is-moving-forward-china-declares-new-covid-phase.html "‘Life is moving forward’: China declares new COVID phase"). For the banks who can seize this opportunity and meet the increasing demand for digital services, they have a rare chance to gain a [competitive advantage](https://www.financedigest.com/turning-the-burden-of-compliance-into-competitive-advantage.html "Turning the burden of compliance into competitive advantage") over rivals by offering greater choice and flexibility to customers. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---