Banks Move Payment Modernization From Separate Rails to Shared Hubs

A commercial customer asked its bank for a direct connection to instant payments and encountered an 18-month wait.

The bank needed to rebuild its architecture before onboarding the client, Robert Mancini, partner at SRA Consulting, recalled during a PYMNTS On Air discussion. The customer was ready to transact; the bank’s systems couldn’t accommodate the request.

“Modernization means you can say yes to your customer’s next ask fast without a two-year project,” Mancini told PYMNTS.

Joining Mancini were Radha Suvarna, chief product officer for payments at Finastra, and Rob Noon, senior director of treasury services at Atlantic Union Bank. The wide-ranging discussion examined how banks can move from separate applications for individual rails toward a payment hub, with common functions for routing, controls and operations.

A bank can complete its scheduled upgrades and still lack the connections needed to accept new business. Management must then approve another project before the customer can use the service.

Customer expectations start with an accessible interface and extend through every step required to move money, Noon said.

“Over the years, banks invested in the ‘front door’ to the organization, the client-facing applications,” Noon said.

A simple digital experience carries an operational commitment. A business submitting payroll needs its employees paid on time, regardless of how many applications process the instructions behind the screen.

“They like the look and feel,” Noon said. “They want it simple on the front end, but they rely on us to move their money. They trust us to guard their money, protect their money, help them use their money wisely.”

Banks must fulfill that commitment while introducing new services, maintaining controls and working through inherited systems. The financial justification for retaining these systems looked different when routine releases supplied the functionality customers needed.

“You could make an argument five years ago, maybe 10 years ago, that the legacy applications you had worked,” Noon said. “There wasn’t a lot of change.”

Investment reviews now need a five- to six-year horizon, accounting for revenue and future projects a bank could avoid alongside near-term savings, Mancini said.

“Banks don’t get to re-platform every two to three years anymore,” he said. “They need to buy once and buy for the next decade.”

A hub approach doesn’t require simultaneous replacement of every payment application. Mancini described a cooperative bank that began with wires, added instant payments and then moved ACH, using the same underlying platform.

The panelists agreed that banks still need evidence that a proposed design can handle their operations. Suvarna emphasized delivery for actual customers, particularly across wires and ACH. Mancini offered three questions for prospective vendors. Can the bank call a comparable customer? Who answers during a failure? Who pays for the next rail and future AI capabilities?

Mancini called the hub “table stakes.” Suvarna qualified how much of its functionality banks currently use. Advanced routing according to cost and other criteria remains an area where adoption hasn’t caught up with available capabilities.

Slides presented and discussed during the interview included disaster recovery among the considerations governing payment routing, alongside currency and customer preference. The architecture presented would allow a bank to establish routing criteria beyond price and delivery speed, bringing continuity of service into the decision about how a payment should travel.

What Banks Must Carry Through the Migration

The work begins with the applications already in place. Mancini described banks running the FedNow® Service through one vendor, ACH through another and wires through a third.

“That’s three contracts, three supporting teams, three upgrade cycles,” he said.

Suvarna described separating payments from the banking core as the first architectural decision, followed by common orchestration across rails. Consolidation can give employees the same screens for payment repairs and pending transactions, along with consistent connections to sanctions screening and fraud detection.

At a former employer, Suvarna said, three payment systems had accumulated different fraud detection vendors. Similar duplication can extend into operations and contact centers.

Modernization of underlying payment platforms is “the need of the hour,” Suvarna said

Data presents another reason to examine these arrangements. Banks already possess the records needed for many operating decisions, but employees may encounter them in separate systems or interpret them differently.

“Data is one thing every bank is full of,” Noon said. “But how is that data actually translated into information to perform actionable outcomes or decisions?”

Screening, audit documentation and customer insight are among the critical considerations when it comes to data, Noon said. Access to records alone doesn’t establish whether employees can trace a payment, explain a control or help a customer reconcile an invoice.

Competition adds a deadline even when a particular regulatory requirement doesn’t. Banks beginning earlier can introduce capabilities while others are evaluating their options, Mancini said. Implementation still requires staff, testing and time for old and new applications to operate together.

ISO 20022 gives banks richer structured payment information to carry through that process. Suvarna warned that institutions relying on translators to satisfy format requirements can lose information useful for later services.

The appropriate implementation path depends on the bank, the panel said. Suvarna cited an Australian institution prioritizing cloud deployment and a Japanese bank replacing internally developed legacy applications with a third-party hub. Noon suggested receive-only instant payments as one possible starting point.

“Get everything around the payment hub, the individuals and the processes understood,” Noon said. “How do you feed into your fraud management? How are your clients connecting in and seeing this?”

Fraud detection and reconciliation are early uses for structured data, Mancini said. Payment details can help tools identify activity that doesn’t fit expected behavior and help commercial customers match incoming funds with invoices.

APIs connect those customers to the bank, while modular components allow routing, validation and other functions to change separately. Finastra uses packaged configurations to limit implementation complexity, Suvarna said.

Some executives have asked the vendor to resist requests from their own employees.

“Please be the gatekeeper and push back on anything that’s non-standard that we ask for, even if that was the older system,” Suvarna said, with a nod to clients’ requests.

Employees must also help test the replacement. Bankers should be involved from the outset, and the old system should be retained until the new one proves itself, Mancini said. Tested controls and visibility from payment entry through departure should be required, Noon said.

“You never, ever trade speed of a migration and the cost of a migration at the expense of your client,” Noon said.

Watch the full interview with Robert Mancini, Radha Suvarna and Rob Noon to learn more about:

• How banks can evaluate a vendor’s implementation record.
• Which costs belong in a longer-term investment review.
• How teams can prepare for payment exceptions after launch.