Why banks get payment modernization wrong 

Payments is one of the biggest revenue opportunities for banks. According to recent market forecasts, the global real-time payments market is expected to grow at a compound annual growth rate of around 35.5% from 2023 to 2030, reaching nearly $193bn by the end of the decade. 

There’s large opportunity, and there’s also the risk of not moving fast enough. Banks that can’t deliver modern payment experiences and explore payment trends such as stablecoins, deposit tokens and instant payments, stand to lose customers and cede ground to competitors. Already, 30% of micro businesses, 22% of small businesses, and 13% of medium businesses prefer fintechs and nonbanks for cross-border payments, according to McKinsey. 

The urgency isn’t lost on banking leaders. A KPMG banking survey found that 95% of banks are undertaking initiatives to focus on instant cross-border payments.  

And yet progress remains slow. Decades-old legacy systems make a full rip-and-replace overhaul too expensive, risky, and complex to justify. Instead, many settle for patchwork fixes that drain budgets and fail to future-proof infrastructure.  

There’s a smarter way forward. True modernization isn’t about catching up to today’s instruments and standards – it’s about acknowledging that legacy systems have reached the end of their patch runway. Incremental fixes no longer keep pace with new rails, data formats, and compliance demands. Modernization must now become part of the core infrastructure itself. In this article, we’ll look at: 

• What’s stopping banks from payment modernization
• The key factors in modernizing
• How Payment Central lets banks modernize payments without operational disruption
• Case study: How a UK neo bank modernized payments with Payment Central

What’s stopping banks from payment modernization 

Banks know they need to modernize payments, but several challenges slow progress. Based on KPMG’s survey of UK banks, those challenges are: 

• Dealing with technology change
• Managing regulatory requirements
• Maintaining data and cyber security

Let’s take a look at these barriers and why they continue to hold banks back. 

Budgets can’t keep up with compliance and economic pressures

Payment modernization budgets can’t grow forever, and the latest numbers show that momentum is slowing.  

Securing long-term funding has always been a challenge. Few organizational leaders can get approval for multi-year budgets. Most are limited to two-year windows at best, making it difficult to plan for large-scale infrastructure overhauls.  

82% of the banks surveyed by KPMG had plans to launch a payments modernization program in the next 12 months, with the average investment being £27 million. On average, respondents shared that it would take two years to complete the program.  

Banks recognize the need but are stretched to apply the budget. The difference reflects the realities of today’s economic climate: Budgets can’t keep expanding indefinitely, even as banks recognize the need to invest in modernization. 

Compliance costs further eat into resources. Supporting multiple payment formats and instruments is unavoidable and expensive – with more than 60% of banks’ IT budgets now tied up in maintaining legacy systems and meeting regulatory requirements, leaving little room for innovation. 

Concern over service disruption and degradation due to legacy system overhauls 

Even when budgets allow for modernization, banks also have to consider the operational risk that comes with replacing legacy infrastructure when it comes to payments.  

Any extensive overhaul or migration has the potential for unplanned downtime, integration challenges, and failure to match existing service levels. 

Decision-makers worry about missing deadlines, underdelivering on service, and disrupting critical payment flows – concerns that are amplified in a 24/7 payments environment which puts payment managers in a bind. These risks have made patchwork fixes feel like the safer choice. Incremental updates keep familiar systems running, even though they fall short of long-term modernization goals. 

The difficulty with selecting the right vendors and tech partnerships

Banks face a crowded market and are looking for partners who are reliable, trustworthy, and capable of helping them stand out from the competition. They need the ability to evolve in an agile environment because they are facing an evolving payments landscape while continuously having to remain compliant and allocate budget to compliance. But it’s not only about offering the latest payment capabilities – banks need vendors that prioritize compliance and security. 

Getting this wrong is costly. For example, penalties for violating EU Instant Payment Regulations can cost up to 1% of a bank’s annual turnover. Meanwhile, EY analysts have highlighted that the risk of fraudulent transfers in instant payments can be up to 10x higher than with standard credit transfers. Finding software that helps you defeat this is the vendor selection challenge. 

That’s why selecting the right vendors – and having the internal expertise to manage them – is critical. Banks need partners that can execute modernization initiatives while maintaining operational resilience, compliance, and security. 

One key approach to modernizing correctly: sidecar projects 

Replacing an entire payments infrastructure given all these challenges is unrealistic, but relying on incremental fixes to legacy systems often delays progress and drains resources. 

One of the most effective strategies is implementing sidecar projects that deliver immediate market benefits without the need to overhaul existing infrastructure. This approach lets banks modernize step by step, gaining speed and flexibility without disrupting daily operations. 

For example, a bank could implement a sidecar that enables instant payments. The solution that is used as a result of the sidecar plugs directly into the legacy architecture, so the bank doesn’t have to rebuild its core systems. This means they can get the offering up and running within months, prove value, and then integrate additional modernization efforts over time. 

Modernization done this way becomes less costly, more efficient and enables a faster response to market than a one-off project. It reduces risk, improves responsiveness, and encourages a culture of agility. However, success will depend on having the right partner and platform. 

How Payment Central lets banks modernize payments without operational disruption 

SAP Fioneer’s Payment Central is a modern payment hub built to handle every type of transaction – local, cross-border, or real-time – through a single, compliant, and resilient platform. 

Designed for scalable operations, Payment Central is 24/7 and adapts to each bank’s architecture, strategy, and pace without disrupting your already working payment infrastructure until you are ready. Whether starting small with one payment rail or rethinking the entire setup, banks can modernize step by step, without disrupting critical operations. 

Control costs without overhauling legacy infrastructure with Payment Central’s core-agnostic, modular architecture 

Banks can’t all at once rebuild their infrastructure to make significant progress. Payment Central’s core-agnostic, modular architecture gives banks the flexibility to start small and expand at their own pace. 

The platform easily connects with different upstream and downstream systems via APIs, so banks can plug it into their current setup without disruption. It integrates with both SAP Fioneer Core Banking and third-party cores, as well as external systems like fraud detection, FX, or liquidity management tools. Plus, it’s pre-integrated with networks such as Bacs, EBA Clearing, PAIN, PACS maps, SWIFT, VISA and Mastercard. 

Banks can gain access to over 160 connectors through SAP Business Technology Platform (BTP), streamlining integration across ecosystems and partners. And with multiple deployment options–SaaS, on-premise, or cloud of choice–they’re in control of their tech stack. 

It’s one platform, any setup. Instead of committing to the cost and the time of an expensive overhaul, banks can phase their investments while still rolling out new offerings quickly via sidecar projects. 

This approach reduces upfront spend, spreads costs over time, and avoids the disruption of a full-scale replacement. In fact, banks using Payment Central report experiencing a 65% reduction in operating expenses, proving that modernization doesn’t have to come with financial strain. 

Maintain service quality with a system built for resilience 

The risk of service degradation is a concern when it comes to modernization. Payment Central addresses this head-on with a system built for high performance and resilience. 

Built for high speed and scalability, Payment Central processes over 20 million payments per day and more than 10,000 transactions per second within a single installation. It delivers real-time visibility and zero-downtime operations, supported by geo-redundant infrastructure and 24/7 reliability. Running natively on SAP S/4HANA, it combines performance with the resilience and security of enterprise-grade architecture. 

Compliance and error handling are also built in. Payment Central adapts automatically to evolving standards, such as ISO 20022. Meanwhile, features like automatic repair, pattern detection, and rule-based automation help reduce manual interventions.  

The system uses AI molded to each bank’s environment – learning from past errors to prevent and fix recurring issues automatically. Embedded AI agents can be applied where they add the most value, accelerating investigation and resolution while improving accuracy over time. 

The result is ultimately peace of mind: Banks can modernize without sacrificing reliability or service quality. 

Stay ahead with built-in compliance and low-code tools 

Compliance and security are top priorities for banks when it comes to selecting vendors. Payment Central treats regulatory and security controls as core capabilities, so banks can move quickly without sacrificing safety. 

Features like real-time sanctions screening and automated push-payment scam protections help reduce annual fraud exposure. Screening, audit trails, and real-time rule checks for PSD2, ISO 20022, AML, and sanctions are automated and built into every transaction. And because the system operates 24/7 without waiting for batch windows, transactions can be checked for security risks in real time. 

By reducing manual touchpoints for compliance and security, Payment Central frees banks to focus on innovation. Its low-code / no-code tools empower business teams to design, test, and launch new offerings with limited IT involvement, enabling up to 4x faster time-to-market for new rails, products, and formats. 

How a UK neo bank modernized payments with Payment Central 

A neo bank in London, part of a major financial services group based in the UK, set out to transform and simplify global clearing and transaction banking. Their vision was to become a market leader in cash management and payment transactions for corporate and institutional clients. 

To do this, the bank needed a technology platform that could be a cornerstone building block for a borderless economic infrastructure. The bank implemented SAP Fioneer’s Payment Central.  

The solution ensured smooth connectivity across the entire digital core platform and introduced state-of-the-art data analysis, improving the self-service experience through faster, more informed decision-making. 

At the same time, its API-first architecture empowered customers to fully leverage open banking opportunities – connecting seamlessly with partners, fintechs, and new digital channels to expand their ecosystem reach. 

The transformation led to significant outcomes, such as: 

• Stronger market position. As one of only six clearing banks in the UK, the bank offers corporate cash managers richer insights to maximize working capital.
• Scale at speed. Corporate and institutional clients could launch faster, with scalable account and transaction services for their customers.
• Smart domestic payment options. Clients could choose the right method–like Faster Payments, Bacs, or CHAPS–in real time to align with specific business needs.

With Payment Central, the bank built a payments foundation that can keep pace with today’s demands, as well as tomorrow’s opportunities. 

Modernization is no longer a technology decision, it’s a market position.

Banks that continue patching legacy systems will fall behind faster than they expect. Those that treat payments as a strategic capability and not a maintenance cost will own the future of cash management, instant payments, and embedded services. 

SAP Fioneer’s Payment Central provides that foundation. Its modular, core-agnostic architecture lets banks launch sidecar projects and offer new payment types, rails, or channels without disrupting operations. With built-in security and compliance, as well as low-code tools for rapid product launches, banks can reduce costs, maintain service quality, and innovate faster. 

Request a demo today to see how Payment Central can help turn modernization from a costly challenge into a sustainable, future-ready capability.