A study from IDC Financial Insights forecasts global banks are on track to spend $57.1bn on legacy payments technology in 2028.
This prediction represents a substantial increase from the $36.7bn spent in 2022. These increasing costs are projected to impact the banks’ profit margins and inhibit growth.
The study, backed by payments company Episode Six, reveals an alarming forecast. It suggests that if financial institutions fail to transition to more modern, future-ready paytech platforms, they stand to lose an additional 42% in payments-related revenue. This loss occurs due to the failure to exploit the numerous advantages of future-ready paytech, such as product creation capabilities, BaaS and PaaS revenue, and data monetisation.
The IDC study also forecasts potential legacy cost savings of up to 21% annually if banks upgrade to future-ready paytech platforms. The report details that these savings could result from retiring redundant legacy technology, orchestration cost benefits, reduced downtime, and development cost reductions.
Michael Yeo, associate research director at IDC, highlighted the urgent need for innovation, particularly outside the banks’ traditional operations. Yeo said, “Payments innovation is being driven largely outside of the banks’ walls. For banks and financial institutions that wish to be competitive in the next phase of payments, a future-ready payments platform will provide the core capabilities required, including quickly integrating a modern payments technosphere.”
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