Invisible until they grind everything to a halt, legacy systems in banking have long been more assumed than examined. For decades, the industry treated its core infrastructure as proof of resilience. A costly badge, it turns out. Now, those very systems, the ones that ushered in the digital age, face intense scrutiny. Can they possibly support the next chapter of payments innovation?
This question drove a recent installment of the “What’s Next in Payments” series. Leonardo Collado, senior vice president and general manager of Pismo, a Visa solution, wasn't shy. He laid bare how financial institutions are now dissecting the very technology foundations beneath modern banking and commerce.
Collado, however, didn't simply trash the old ways. Far from it. He acknowledged the immense role legacy systems played. “It’s gotten us this far,” he quipped about the foundational tech. A fair point.
The real issue? Were they ever designed for the whirlwind now emerging? Real-time payments, AI-driven decisions, hyper-individualized customer demands – these are not incremental changes. This is a seismic shift.
And that distinction? It matters immensely. Competitive pressures are converging. Big banks, regional players, nimble FinTechs, digital-first startups – all face rising customer demands. Immediacy. Personalization. Flexibility. No one is exempt.
“The reality is that both incumbents and challengers are facing the same scenario and pressures coming from every direction,” Collado told PYMNTS. A level playing field, perhaps, but one filled with obstacles.
AI's Unforgiving Pace
Artificial Intelligence only amplifies this pressure cooker. It’s reshaping expectations around speed, personalization, responsiveness. Collado insists AI isn't some new software layer to simply glue onto aging infrastructure. It doesn't work that way. Instead, AI exposes the raw, structural limits of systems built for batch processing, for slower settlements. The old guard simply wasn't built for this.
“AI has reset the bar for everyone,” he noted. A stark declaration.
Consider “contextual personalization.” It's the holy grail now. Payment and banking experiences that continuously adapt to customer behavior, in real time. Such demands? They hinge on infrastructure capable of adaptive analytics, lightning-fast decision-making, and diverse settlement frameworks. Even emerging blockchain and stablecoin environments. The complexity is mind-boggling for traditional systems.
"The reality is legacy infrastructure cannot support those AI-driven cases. You can’t just place new tech on old stack."
The Boardroom Battle for Budgets
The economics? Impossible to ignore. Collado estimates that roughly 70% of IT budgets in many institutions vanish into maintaining outdated systems. Imagine: seven out of ten dollars just keeping the lights on. That leaves precious little for building innovative products, for creating those essential customer-facing capabilities.
This burden has propelled infrastructure modernization from the server room to the boardroom. It's no longer just an engineering problem.
“Modernizing infrastructure has gone from a technical discussion that only the technical people had to a C-level discussion,” Collado explained. “You’re now talking about how to deliver value, how to deliver unique experiences.” This isn't about code anymore; it's about competitive survival.
Collado kept circling back to a single, sobering truth: Stability, while necessary, no longer guarantees customer loyalty. Not in this climate.
“What customers value today is speed, simplicity, convenience, intelligence,” he stated. “Those are the new trust drivers.” A seismic shift in what earns consumer confidence.
This seismic shift forces incumbents to weigh their operational baggage. How much complexity can they truly afford? Collado framed it brutally: “Stability is an asset, but complexity is the tax.”
Over time, established banking systems became veritable archaeological digs. Layers of integrations, patches, workarounds. They still often perform, yes. Reliably, even. But engineered for always-on digital commerce? For AI-driven engagement? No. Not even close.
Modernization: A Strategic Imperative
Visa’s Pismo offers a lifeline. They champion incremental modernization, not the “big bang” upheaval. Collado emphasized the impracticality, even danger, of disruptive, wholesale replacements. Too much operational risk. Too costly.
Instead, a phased approach. Service by service. Operational continuity maintained. He cited T2P, a Thai FinTech, which migrated 320,000 accounts to a cloud-native platform in three months. Then there’s Denmark’s Lunar Bank, using Pismo’s infrastructure to support over a million users across Nordic markets. It can be done.
Still, Collado insists, the larger issue isn't just technology. Not really.
“I don’t think you start with infrastructure,” he offered. “I think you start with your customer, your consumer, what value and the value they’re trying to drive.” A pivot towards purpose, not just platform.
That distinction, this fundamental shift in perspective, might just be the deciding factor. It will separate those institutions that truly adapt from those left behind, as payments hurtle into real-time commerce, AI-assisted experiences, and increasingly complex digital ecosystems. Modernization isn't just a tech upgrade. It's a choice. A strategic one. And the clock is ticking.
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