Modernizing Payments: Tackling the Toughest Tech Challenges

Banks are racing to modernize their payments systems, as real-time payments surge and artificial intelligence begins to reshape every corner of the industry. What once seemed like a back-office upgrade is now a critical priority—one that can define customer relationships and market positioning.

In a PaymentsJournal Webinar, Scotty Perkins, Head of Product Management at ACI Worldwide, Tyler Pichach, Global Head of AI Strategy at Microsoft, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed what banks need to do to prepare for these changes—and the cost of falling behind.

Modernization Is Moving Quickly

A survey by ACI of 200 banks last year found that modernization is their top priority. Banks wants to bring new products to market more quickly and deliver innovative solutions to customers. True modernization goes beyond adding a new payment rail; it raises critical questions about readiness, cloud adoption, native architecture, risk management, and scalability.

Digital channels are advancing faster than payment cores can keep up. While momentum around APIs and cloud adoption is strong, execution remains uneven, varying significantly by region and use case.

AI further amplifies the urgency around modernization. Banks need to consider not only how AI will enhance the customer experience but also how it will optimize the back-office processes that underpin payments.

“Leveraging the new tools around AI, as well as understanding and rewriting code is a great place for folks to learn and for customers to understand how to use AI,” said Pichach.

Wester added: “It may be that one thing that hits everybody in the face and says, you really need to be doing a lot more to prepare for what’s to come.”

Smarter Payments, Smarter Banking

Selecting partners with a deep understanding of the payments space and strong credibility can be a vital first step. Partners who can leverage all payment types help prevent a fragmented infrastructure.

A single, cohesive infrastructure allows banks to deploy instant payments quickly and efficiently. It also creates opportunities to introduce new offerings, like FedNow and RTP, alongside wire and batch payments.

“What if yesterday a consumer was going to use debit rails for a payment and tomorrow they’re going to use FedNow instead?” said Perkins. “How does the bank cost effectively and operationally manage that transition and make it seamless for customers? That’s where you want to involve partners that have expertise in showing those historically different use cases, but using a common look and feel, with orchestration logic that can credibly manage those payment types.”

Building In Scalability and Resiliency

A cloud-native strategy cannot compromise scalability or resiliency when deploying new solutions. Dynamic scalability involves more than just handling traffic—it includes managing costs and expectations. For example, it eliminates the need for excessive on-premises infrastructure that must be over-provisioned to accommodate peak demand. There should never be any perception—by customers or the bank—that availability is limited.

Resiliency extends beyond uptime. It encompasses the ability to continue processing safely under stress, whether facing sudden spikes in volume, fraud attempts, or network outages.

“One of the things we talk about in modern payments is the idea that failure is inevitable,” said Pichach. “You want to design systems with the mantra that things are going to go down. We need to ensure that these always-on operational components can continue to work.”

The Risks of Missing Out

For decades, banks have relied on payment systems that, while reliable, are now showing their age. Legacy code and infrastructure are increasingly fragile, making outages, slow performance, and outright failures more likely. Maintaining COBOL applications and the layers of customization added over time is no longer just a technical challenge, it’s a strategic one.

At the same time, payments are accelerating. Real-time payments reduce reaction times, making fraud more difficult to detect and prevent. This accelerated pace requires not only payment systems but also operational systems that can respond as quickly as transactions happen.

“The next piece is really around customer trust,” said Pichach. “If you’re not highly available, if you do not have the right fraud controls, you’re going to lose customer trust. You’re going to erode your customers’ desire to participate with you as a bank in payments.”

Taking the First Steps

Modernization is more than just an infrastructure upgrade. It’s an opportunity to rethink what problems the organization is trying to solve—both internally, for operational efficiency, and externally, for customer experience.

Quick wins are important: reusable patterns that deliver tangible business benefits early build momentum and credibility for the broader transformation. And AI? It can help deliver these faster experiences.

Bank strategy leaders must ask themselves: where do we want to be in five years? Which trends should we embrace—whether it’s the shift from wire transfers to instant payments, or integrating stablecoins and crypto capabilities now emerging under the Genius Act?

The first step is adopting a platform that can evolve with the market, letting banks innovate quickly and compete with those already moving fast.

“We saw a very large firm earlier this week talk about getting a banking license in the U.S. to do lending,” said Pichach. “But all of them are coming to play, and banks are competing with a wider array of players. They need to be able to innovate, to be able to get new products to life.”

Looking Down the Road

Instant payments are just the beginning. Banks need resilient infrastructure and reliable data to scale them while staying compliant with anti-money laundering and other financial crime regulations.

“One additional trend that we at ACI see is the ability to use AI to interact with consumers,” said Perkins. “If I can use ISO 20022 to understand transaction histories and how and what consumer behavior looks like, it makes me much more able to provide meaningful experiences.”

For business, especially small ones, the goal is simple: serve their customers without worrying about payments. They want transactions to simply work. Banks and their partners are building toward that reality, but the journey is ongoing.

“We have seen so much change, and we have gotten to the point now where everybody feels sort of caught up,” said Wester. “But there is no catching up. There is only going to be continued change.”

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Tags: ACI WorldwideDigital PaymentsInstant PaymentsPayment ModernizationReal-time paymentsResiliencyScalability