From mom-and-pop retail shops to the world’s largest companies, nearly every business is looking to offer the latest technology to its consumers. For many in the financial services world, though, implementing innovations is easier said than done.
So, what’s standing in the way of FIs, the largest of which come to the table armed with big budgets and endless resources? According to Bruce Parker, CEO of cloud-based payment utility Modo, the chief obstacles to implementing today’s innovations are those of yesterday.
Parker’s take is reflective of PYMNTS' latest Innovation Readiness Playbook research, which revealed that outdated IT infrastructure remains a significant roadblock for payments innovation. At least 35 percent of credit unions, commercial banks and community banks — including 40 percent of the top-performing FIs — cited integrating legacy technology with new innovations as the biggest hindrance to innovation.
But Parker believes he and his team may have found a solution to legacy technology woes by avoiding the integration process altogether. In a recent interview, he described how Modo works to make old and new technology interoperable, rather than integrated, through a range of APIs and other solutions.
“The [systems] that have achieved scale, the ones that we actually use every day, are in general pretty old,” Parker said. “When people try to do new stuff, they bump their heads on that and say, ‘How do I work with this so I can have my modern mobile app, my modern web server and my modern Internet of Things solution interoperate?’ That’s where we come in.”
Making Old and New Work Hand-in-Hand
Financial players of just about every size and scope need help making old and new technologies collaborate. That’s true for FIs and service providers alike, including giants such as Bank of America and Mastercard as well as newer FinTech players, like Klarna.
“All of these payment systems are requesting, consuming and producing data in very different ways,” Parker explained. “The definition of a transaction on a credit card system versus a loyalty rewards system, versus Alipay, versus the bank networks like SWIFT, are radically different from one another. Even simple things like when a transaction is officially started to when it is officially stopped are all different.”
Getting these systems on the same page is often nearly impossible, he added, making interoperability critical. It enables each generation of technology to work in the way it was designed to — and to do so together.
Modo offers an API- and cloud-based utility that stores and categorizes transaction data from legacy systems in the cloud, rather than forcing each system to store the data itself. This allows the solution to work with any payment processing system, new or old, to collect and store that transaction data.
“The old stuff can stay old, [and] the new stuff can say new,” Parker said. “We figured out a way to tie into any payment system, any ledger, any bank account, any system of value or accounting system, [and] represent the data it has or needs to receive in this one, universal form. We break everything down into its component or molecule parts in four categories of data.”
Preparing for the Unpredictable Future
Parker and his team are focused on interoperability rather than integration because of the speed of current-day innovations. While real-time and instant payment systems are now the latest and greatest, they won’t remain that way together, he said. What will remain — likely for decades or longer — are at least some of the legacy payment systems currently in use.
It’s important to make legacy technology interoperable with new innovations, Parker explained. Rather than trying to predict, anticipate and plan for the next wave of payments innovation, he and his team work to ensure that legacy technology can dovetail with new innovations in perfect harmony, no matter what new tech is introduced into the payments space.
“I’ll steal a quote from Jeff Bezos: ‘The more interesting thing to focus on in the future is what isn’t going to change,’” Parker said. “If we can continue to update what a modern interface means — and that’s an ongoing job — I can make existing payments stuff look modern, whatever modern means in the future.”
Moving forward, Modo is working to create an API-based solution that helps American companies accept payments via foreign payment networks, like Alipay. The checkout interoperability solution uses APIs to allow any point of sale (POS) system to accept almost any form of payment — even one it wasn’t built to accept.
After all, Parker said, the wheel of progress never stops turning. New payment systems are being created and developed on an almost daily basis, and as those new technologies debut in the market, having them work with the technology of the past will remain vitally important.
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