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Legacy-fintech collaboration for

back-office transformation

ing to data silos, inefficiencies, and security risks," said
Marcia Klingensmith, CEO of FinTech Consulting.

Both fintech solutions and legacy systems have strengths
and weaknesses. Traditional payment processing organi-
zations and systems are more structured, have operational
governance and are risk-averse. As a result, they are typi-
cally more trusted. However, these systems are also slow
to adapt to client demands and changes, such as new rails,
messaging formats and innovations.

A recent report by IDC (see https://tinyurl.com/musstprz)
found that the hidden costs of legacy platforms, which in-
clude maintenance, fixes and integrations, could cost the
financial services industry more than $57 billion by 2028.
By Casey Scheer This doesn't include the cost of lost market share.
BHMI On the other hand, fintechs are technology-driven with
egacy systems have served banks and payment fresh product ideas and agile solutions. Recognizing they
processors well for decades, but it's clear they are slow-moving ships that can't make fast turns, many or-
can no longer keep pace with new technologies. ganizations have looked to fintechs in recent years to adopt
L As consumers and businesses often want access new channels like P2P, digital wallets and buy now, pay
to new payment methods as soon as they come to market, later (BNPL).
spending months or even years in coding and process
changes is no longer viable. However, these fintechs can be less risk-averse and lack a
regulatory mindset. In fact, the FDIC recently issued guid-
ance about risk in third-party relationships (see https://ti-
While traditional banks and processors have typically nyurl.com/33cezkv9) and has hit a few banks with fines and
viewed fintechs as competitors, it's time to embrace their penalties when a partner didn't comply with regulations.
offerings of flexibility and agility. By collaborating with
the right fintech, companies can quickly adopt the latest Gaining the Benefits of Both Through Collaboration
payment systems while preserving security and operational
oversight. While legacy systems may be the bedrock of payment pro-
cessing, they lack the flexibility and agility required in to-
Legacy system trust versus fintech flexibility day's fast-paced environment.

For decades, banks and payment processors have operated However, not all fintech vendors operate alike, and they
with legacy back-office systems that are proven and may have different mindsets about compliance. Anthony
specifically designed to support the unique needs of the Serio, founder and CEO of Serio Payments Consulting,
financial services industry. However, new technologies, said, "Banks and processors can often leverage fintech for
fintech companies and changing consumer preferences payment agility while maintaining secure operations and
have disrupted the entire payment processing model in oversight in a strategy that harmonizes innovation with
recent years. Driven by new technologies and automation, risk management."
new payment methods like P2P, mobile payments and real-
time payments are increasingly exceeding the capabilities A collaborative approach with the right fintech enables
of legacy systems. them to retain their inherent strengths while leveraging
shared knowledge, resources and expertise to modernize
As the industry slowly moves from card-based pay- infrastructure. This allows companies to meet evolving
ments to digital payments, banks and processors can no client expectations and secure their place in the changing
longer rely solely on long-held systems and in-house ca- payments world.
pabilities. In general, the more outdated the system is,
the more difficult it will be to modernize. "Legacy sys- "It is important for an organization to choose a fintech part-
tems lack API/modern integration capabilities, mak- ner whose program shares the same views and objectives,
ing them difficult to integrate with new solutions, lead-
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