You Can’t Teach an Old Tech Stack New Payments Tricks

The tech stack is the engine that keeps businesses running, but for many financial services firms, it remains a labyrinth of outdated systems and cumbersome processes.

These traditional systems are increasingly ill-suited to meet the demands of today’s fast-paced, digital-first economy, and the end users driving its growth.

As innovation advances, with legacy cores increasingly serving a lagging indicator of business opportunity, the latest PYMNTS Intelligence report finds that an ongoing shift from traditional mainframe systems to cloud-native microservice architectures is emerging. This tech evolution is not just a technological upgrade, rather it largely represents a fundamental rethinking of how financial institutions are positioning themselves to operate, innovate and compete in a financial services landscape that is growing ever more digital-first.

The migration of financial services to cloud computing platforms is already helping to spur a ground-up reimagination of payment ecosystems. After all, this first-principles shift is playing out against a backdrop where major players like AWS, J.P. Morgan Payments, FIS and Plaid are leveraging cloud technology to modernize payments, grow adoption of open banking and transform treasury management.

These are far from minor tech upgrades. Per the report, the shift underway is more akin to a $1 trillion transformation that’s turning historically staid financial institutions into nimble tech powerhouses, capable of providing customer-centric services and competing in a rapidly evolving landscape.

Read more: Making Sense of the Great ERP System Cloud Migration

Cloud-Driven Infrastructure Modernization

In business, growth is the goal, but it’s also unpredictable. Whether it’s scaling up during a busy season, expanding into new markets or downsizing during lean times, back-office systems must adapt quickly. Traditional solutions, constrained by physical hardware and fixed licenses, can struggle to keep pace with dynamic business needs.

The core idea behind many cloud migrations is moving away from clunky, monolithic systems to more agile and flexible tech platforms. Rather than simply lifting and shifting existing systems, forward-thinking institutions are breaking down monolithic architectures into microservices that can be deployed independently and scaled on demand.

Cloud technologies enable real-time transaction processing, enhanced fraud prevention and the creation of global data lakes — secure environments where vast amounts of data can be analyzed collaboratively. By adopting microservices-based architectures, financial institutions can trade in monolithic systems for modular, scalable and resilient frameworks.

Cloud migration also empowers financial institutions to adopt a “best-of-breed” approach. Instead of relying on a single vendor or technology, banks can integrate solutions from multiple providers, ensuring they remain agile and competitive. However, this flexibility comes with its own set of challenges. Legacy systems, often deeply entrenched in an organization’s operations, require careful planning to integrate or replace without disrupting business continuity. The stakes are high, but the rewards — greater speed, scalability and innovation — are even higher.

Read more: Build, Buy or Partner? CFOs Write Their Own Transformation Playbook

Rebooting the Back Office for Long-Term Growth

One of the most transformative trends in financial services is the rise of open banking. At its core, open banking aims to give consumers greater control over their financial data by enabling secure sharing with third-party providers. This movement has gained significant momentum with regulatory developments like the Consumer Financial Protection Bureau’s Rule 1033 in the United States, which aims to standardize data-sharing practices and empower consumers.

Cloud technologies are playing a pivotal role in this evolution, providing the infrastructure and APIs needed to facilitate seamless data sharing and integration. “Pay by bank” solutions, for example, are emerging as cost-effective alternatives to traditional card payments, offering lower transaction fees and faster settlements. These tech solutions are powered by cloud-based platforms that ensure scalability and security, making them attractive to both consumers and businesses.

Consumer adoption depends on trust — not just in the technology but also in the institutions that deploy it. Proactive players, however, view these hurdles as opportunities. By investing in transparent practices, robust cybersecurity measures and user-friendly interfaces, they can position themselves as leaders in this new era of financial services.

Read the report: From Mainframes to Microservices: Cloud Migration Ushers In New Era for Financial Services

At the same time, the treasury and payments landscape is undergoing its own revolution, driven by the twin forces of cloud migration and embedded finance. For corporate treasurers, cloud-based solutions are simplifying traditionally complex processes, from cash flow forecasting to risk management. Predictive analytics, powered by AI and cloud technologies, is enabling treasurers to make more informed decisions, enhancing both liquidity management and operational efficiency.

Embedded finance — the integration of financial services into non-financial platforms — is another area where cloud technologies are making a significant impact. By embedding payment capabilities directly into their ecosystems, businesses can offer seamless experiences to their customers while streamlining their own operations. For example, cloud-based treasury platforms allow businesses to automate accounts receivable and payable processes, reducing manual effort and improving cash flow visibility.

This transformation is not limited to large enterprises. Small and medium-sized businesses (SMBs), often underserved by traditional financial institutions, are also reaping the benefits of cloud-based solutions. By offering tailored tools that address the unique challenges of SMBs, FinTech companies are democratizing access to advanced treasury and payment capabilities.