Connectivity is a basic functionality for all payment systems – their purpose is to move funds from one system to another according to a set schema, involving banks, PSPs, merchants and intermediaries. The key difference today is the sheer number of stakeholders to consider. Following PSD2, the payment market has opened up to include third-party integrations, non-licensed institutions and a range of payment-adjacent services, all demanding data and access.
For legacy systems, their payment schemas are defined with the assumptions of their time – ones that are now increasingly out of date. The architecture, technology and service levels of these systems are increasingly out of step with the new demands of the market, creating new challenges for legacy providers:
Reduced agility: Payments increasingly operate as part of a larger value chain, with providers integrating with additional services to enhance the payment experience such as ID solutions, proxy services or loyalty schemes. These depend on the ability to easily exchange access and data with external systems, but legacy platforms can be slow and expensive to integrate with other parties. This makes it harder for these providers to add new functionality to their products, putting them at a disadvantage when it comes to competing with rivals who can offer additional value to customers.
Higher costs: All systems require maintenance and updates as they scale and age, but legacy systems pose additional problems. While newer platforms can outsource more of their system management to software tools, legacy systems depend on manual updates from a dwindling talent pool. Many are built on earlier forms of system architecture which have fallen out of common usage, meaning there are fewer developers with the necessary technical expertise to maintain them, which increases costs.
Limited scalability: With the rise of e-commerce and digital retail, payments are now increasingly international, forcing domestic schemes to expand beyond native markets. However, for platforms built for certain local specifications or markets, adding new connections for new issuing or accepting partners can be time-consuming and expensive, making it harder to grow and retain customer-bases.