The Power of Modern Card Technology for Banks

The banking industry is undergoing rapid and substantial changes due to the increasing popularity of digital payments, shifting consumer expectations, and intensified competition. Consequently, banks are confronted with a critical choice: whether to adapt to modern card technology or risk falling behind.

The Urgency for Transformation
Outmoded systems present a significant threat to the revenue and flexibility of banks. Datos Insights Group reported that banks failing to update their systems may face a potential loss of 10% to 15% of retail bank payments revenue annually, equating to a staggering $100 billion to $150 billion globally. While the urgency of modernization is evident, the decision to make such a substantial shift presents a challenge to numerous boards. The risk of disrupting traditional workflows must be balanced against the potential benefits.

A Framework for Creating Value
The next generation of card processing involves more than merely adopting new technology; it is about facilitating new business models and launching innovative products that cater to the demands of today’s consumers. This value creation framework outlines how the 10 dimensions of next-gen issuer processing can assist banks in achieving 5 key value outcomes.

The Advantages of Next-Gen Issuer Processing
The concept behind next-generation issuer processing is simple: it allows banks to evolve into truly digital-native organizations capable of cultivating stronger customer relationships, generating more revenue, and substantially reducing IT and operational costs. Unlike legacy systems, which lack the agility and scalability of modern technology, next-gen issuer processing systems are inherently connected, scalable, and composable. This enables rapid innovation of products and seamless connectivity with the broader financial services ecosystem.

Value Outcomes
Next-gen issuer processing possesses the potential to drive significant cost savings, expedite time to market, enhance customer satisfaction, increase revenues, and ensure stronger compliance for banks. For instance, McKinsey reports that the operating costs of fintech banks powered by next-gen core platforms are approximately 10% of the operating costs of traditional banks. This is achieved through increased productivity, reduced legacy debt, and enhanced automation.

Advancing Innovation
The modernization of banks’ technology infrastructure can also have a transformative impact on the time to market for new products. As per McKinsey, modernization of technology stacks can reduce the time to market for new products by half, thanks to quicker product conceptualization, owned product roadmaps, and faster integrations with third-party surround systems.

Enhancing Customer Experience and Boosting Revenue
Attaining the status of a ‘Customer Experience (CX) leader’ can result in a 72% higher total shareholder return than ‘CX laggards’. Next-gen processing platforms drive customer satisfaction through hyper-personalization and integrated, seamless customer journeys. Furthermore, they enable banks to increase revenues by delivering exceptional digital experiences, building a dynamic ecosystem of distribution and partnerships, and improving upsell, cross-sell, retention, and top-of-wallet use.

A Path to Stronger Compliance
The architecture of next-gen systems allows banks to adopt an ‘always-on’ posture on compliance, guaranteeing efficient compliance at reduced costs. This is particularly critical at a time when compliance costs are increasing, and banks are under mounting pressure to comply with evolving risk norms.

Securing Card Revenues Over The Next Decade of Innovation
Given the pressing need for digital transformation in the financial industry, the time to act is now. Prominent experts such as Geoffrey Moore are underscoring the importance of embracing the next generation of technology solutions. Accenture argues that modern cloud-native platforms not only dramatically reduce the timeline for transformation but also minimize the risk. The return on investment for banks has improved significantly, making the adoption of modern card technology a compelling choice for any bank looking to secure its future in an increasingly digital world.