By Cheryl Fitzgarrald
BHMI
Over the past couple of decades, many banks, merchant acquirers and payment processors have tried to keep pace with the rapid changes in the payments industry by adding point solutions and patches to their legacy back-office systems.
While this has kept many in the game, it has also delayed inevitable system upgrades. Mounting technical debt in the form of inefficiencies, rising maintenance needs and operational shortcomings have worsened over the years, putting these organizations at an operational disadvantage.
At some point, the only solution is to cut the cord and fully leap to a modern payments back-office environment. This eliminates technical debt and paves the way for innovation, agility and better business competitiveness.
Many merchants and financial services companies have incrementally added new functionality to their back-office environment over the years, leaving them with a complex mix of legacy and new systems. While this has partially enabled them to adopt new technologies, it has also left complex, fragmented systems that are becoming harder to manage and maintain.
Quick-fix solutions and workarounds may offer short-term gains, but they often come with long-term consequences, one of which is technical debt. The longer these legacy systems stay in place, the more technical debt accrues, often in the form of operational inefficiencies, high maintenance costs and security risks.
Additionally, legacy systems are increasingly difficult to modify as they don’t easily integrate with modern APIs and protocols. Even when developers do find workarounds, it adds complexity to the overall environment. Meanwhile, skilled personnel who maintain and have knowledge of these systems are focusing more on modern solutions or aging out of the workforce.
Many companies view technical debt as a temporary trade-off and postpone upgrades. However, doing so only raises costs due to technical challenges and maintenance.
The inflexibility of legacy systems also makes it more difficult to adapt to modern business needs and requirements, such as the ability to scale and support larger transaction volumes.
Additionally, antiquated systems often have more bugs and lag times, creating delays and impacting employee productivity as well as customer satisfaction. This can negatively impact employee morale and make it more difficult to retain customers in a highly competitive marketplace.
In many cases, legacy systems are so old that there is limited documentation, and the original software developers can no longer offer support. The lack of documentation and support means many systems cannot keep pace with new compliance standards
Finally, these systems lack advanced security features like encryption and firewalls, which make them more vulnerable and susceptible to attack.
Payment processing companies can start eliminating technical debt by weighing the debt and liabilities with the costs of upgrading. In many cases, the investment of upgrading to a modern back-office environment is often less than the long-term costs of retaining legacy systems.
Upgrading payments back-office systems reduces technical debt by offering companies a fresh start with a modern system built for today’s demands, not those of the 1980s. Modern back-office systems eliminate the high costs, hassle and pain points of patching or doing piecemeal upgrades every few months. This ultimately streamlines processes, enhances business agility and improves innovation potential.
A modern payments back-office environment significantly boosts efficiency by eliminating manual processes, reducing labor demand and enabling employees to focus on high-value tasks. It also allows companies to manage all payments in one place, including card-based, account-to-account and real-time payments.
This lets organizations respond faster by supporting new payment types, unlimited volumes and regular changes without the high costs of delays and code changes. Available analytics and data also offer insights to optimize operations and improve the customer experience.
Operating in this complex era of payments with a legacy back-office system is like hanging onto a decades-old version of Windows. Patches, updates and creative workarounds are only temporary fixes that only work to postpone the inevitable. They are not long-term solutions for successfully competing in the financial services sector.
By creating a strategic plan for back-office modernization, companies can eliminate years of legacy debt and start fresh with a modern back-office environment designed to support whatever payment types and changes come down the road. 
Cheryl Fitzgarrald is a Senior Program Director at BHMI, a leading provider of software solutions focused on the back office processing of electronic payments. She has been in the payments industry for more than 30 years and is currently leading back office modernization projects for large financial services companies. Cheryl can be reached at cheryl.fitzgarrald@bhmi.com or 402-333-3300.
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