Aite Novarica analyst says payment interoperability threatened by legacy technology

Tech and regulatory hurdles stand in the way of a fully interoperable payments environment in the U.S. Consumers increasingly expect an interoperable — seamless and friction-free — payments ecosystem, with several banks and fintechs leading the charge through embedded data sharing and real-time payments (RTP). However, the growth in payments digitization has left many financial institutions and their customers struggling to keep up, Ginger Schmeltzer, strategic advisor at research firm Aite-Novarica, tells Bank Automation News in today’s episode of “The Buzz” podcast.
Tech and regulatory hurdles stand in the way of a fully interoperable payments environment in the U.S.  

Consumers increasingly expect an interoperable — seamless and friction-free — payments ecosystem, with several banks and fintechs leading the charge through embedded data sharing and real-time payments (RTP). However, the growth in payments digitization has left many financial institutions and their customers struggling to keep up, Ginger Schmeltzer, strategic advisor at research firm Aite-Novarica, tells Bank Automation News in today’s episode of “The Buzz” podcast.  

“Most of us who have worked at banks have lived this: legacy technology,” Schmeltzer says. “The payments spaghetti infrastructure that so many banks have — with 40- and 50-year-old core systems that have been added on to and added on to as new technologies and payments come along — make it difficult to introduce new payment technologies.” 

Technology is only one barrier, Schmeltzer adds. Reticence from both consumers and banks to support data sharing, regulatory concerns from government entities and the hypercompetitive nature of financial services in the U.S. make true interoperability an ongoing challenge for market players.  

Schmeltzer sees new technologies playing a part in increasing interoperability in the United States.  

“The growth of application programming interfaces (APIs) over the last five or six years has made a huge difference in the ability for various players to work together,” Schmeltzer tells BAN. “QR codes have really jumped up in visibility during the pandemic, as people are looking for contactless ways to interact. That is really helping to drive more interoperability in a lot of areas.” 

Listen as Schmeltzer explains what interoperability means for payments systems and explores how financial institutions can move towards facilitating the environment.  

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