The 5 Unavoidable Market Forces Driving Convergence in the Evolving Payments Ecosystem by Serena Smith

Payments convergence is presenting payment providers with new opportunities and pressures. Revenue is shrinking for many, but payment speed, volumes and processing complexity continue to increase. Payment providers must determine how to best streamline their legacy systems to stay competitive, manage rising regulatory burdens, accommodate standardization, open banking and APIs, and ensure they’re prepared for an uncertain future. All of this while reducing the total cost of ownership of the payments infrastructure.

To that end, we see five unavoidable market forces driving payments convergence that will determine how providers will adapt their payments infrastructure to respond to the current and future demands.

1. Payments revenue is under pressure; volumes are increasing.
   Payment providers must determine how to make payments more cost-effective. Real-time payments, APIs and value-added overlay services on real-time payment rails are driving volumes and new use cases at a staggering rate, while card growth remains strong.
2. Regulatory and compliance demands.
   The faster, more open and competitive payments ecosystem has made regulatory and compliance pressures more complex and expensive for financial institutions to manage independently.
3. Cost of upholding legacy infrastructures.
   High payments volume, speed, processing complexity and payment innovations that require card and non-card payments systems to seamlessly intersect require that payment providers have a platform designed to accommodate.
4. Changing customer expectations and an evolving payments landscape.
   Payment providers are in a new competitive landscape brought on by innovative fintech and non-bank services and changing customer demands and payment preferences. Those without systems that deliver the customer value needed to maintain and grow their customer base may lose their market position.
5. Time required to transition payments infrastructure.
   Payments convergence is happening now: Financial institutions cannot afford to waste time and money investing in outdated legacy systems. Modernization strategies can take years to implement but early benefits can be reaped now.