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Evolution or Revolution? Choosing the Right Path for

your Legacy Payments Solution

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Executive summaryIn this paper, we examine the challenges facing many financial institutions as they struggle to compete using legacy payment platforms.

We look at the options for protecting and future-proofing these businesses, and why the decisions that are made now, are critical to future success.

Who should read this guide? Senior payments decision makers in banks and financial institutions.

The payments technology specialistsBPC is a global banking technology specialist, with 20 years’ real world experience in helping financial institutions to choose and implement the right solution. Our highly skilled consultancy teams can support you through the decision process, providing clarity around the comparative benefits and drawbacks of enhancement versus replacement, specifically tailored to your current payments platform and the commercial requirements of your business.

Once a decision to enhance or change is made, we provide full support to our clients to ensure the solution meets their immediate business needs and has the flexibility and agility to keep pace with changing market demands.

Contact us now to arrange a free Discovery Workshop to help you to assess your best option.

Contact us now

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There are numerous instances of consumer businesses whose unwillingness or inability to change have led to their failure. Former major players have been sidelined as new, disruptive operators have all but destroyed their business models.

In the finance sector too, technology-driven innovators are mounting an ever-growing challenge to established payment solutions.

Introduction

So why is there a need for change? Strategic, industry wide themes continue to emerge, and are without doubt, driving banks and financial institutions to adapt. Immediate payments are becoming commonplace worldwide, innovation is changing the way merchants operate, while the advent of PSD2 regulation across Europe and the swift emergence of new fintech businesses into the value chain are placing further pressure on the industry.

It’s worth at this point clarifying what we mean by ‘legacy’. If current systems deployed and maintained across a business are not capable of delivering this future payments strategy, or are unable to address these strategic industry shifts, it’s clear that there needs to be a change. For the purpose of addressing this challenge, these systems can be defined as ‘legacy’.

So is ‘change or fail’ overstating the position? Not really. Businesses such as Paypal have been breaking into establish value chains for sometime and creating genuine competition and threats to the established order.

But despite the pressure to modernise, the decision to enhance an existing system, or entirely replace it, isn’t clear cut.

This paper brings clarity to this decision making process, acting as a checklist for any bank or financial institution ready to make the upgrade.

Face up to the challenges If you are held captive by a complicated and inflexible legacy system, with significant investment already sunk into your platform, enhancement can certainly seem a more attractive proposition when compared to full ‘rip and replace’.

But commercial reality and the limits of available resources require a payments technology capable of delivering state-of-the-art applications quickly, while keeping pace with market demands and change.

How do you make the right choice?

As legacy payment platforms become ever more resource-hungry and expensive to upgrade, it can be a tough call, but choosing the right path between an enhancement or a replacement strategy is critical.

It’s important to weigh-up financial and market requirements against the performance of an existing platform, then determine if it can be enhanced to compete effectively or if money is being poured into a ‘dead end’ solution that will never be competitive.

For many FIs, this is not a simple decision. After all, who wants to be the person to tell the CFO and Board that the investment into a highly customised legacy payment system needs to be written off?

Flexibility is the key to future success. Whatever the chosen strategy, it is clear that to compete every FI needs to pick a payments solution that enables them to meet ever-evolving market demands and provide a sustainable, future-proof platform for growth.

Change – or fail

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Aside from being a barrier to innovation; expensive transaction and maintenance costs combined with the massive expense required to achieve even basic levels of customisation, mean many existing payment systems simply cost too much.

While some technologies lend themselves well to being enhanced with add-ons, it is neither practical nor cost-effective to adapt less flexible legacy platforms. Not only is much of the technology old and outdated, but the engineering skills needed to maintain it are becoming rarer and more costly. As an example, the provider of the widely used Base24 Classic has threatened to remove support for some time, which in turn, has seen many banks and FIs turn to smaller consultancies to customise the platform to meet their own needs.

The result? Disparate organisations using Base24 in disparate ways, locking themselves into the unique approaches of their chosen third party support.

The unpalatable truth is that all legacy technology is likely to become ever more challenging and expensive when compared with streamlined new solutions.

Do nothing but continue to support their legacy

payments platform

Invest in enhancing their existing system

Invest in a new state-of-the-art payments solution

Legacy versus new payment technology - the facts?

Despite the challenges and costs associated with continuing down the legacy path, for some FIs, it is still their preferred option. The alternative; scrapping and upgrading an existing platform, with worries about resources and maintaining their payment services in parallel during the switch-over process, is perceived as higher risk.

But if banks and financial institutions are to avoid falling behind their competitors the decision to either enhance legacy technology or upgrade to a new platform is now critical.

The cost of maintenance - has this become excessive?

Availability of vendor support - is the platform now entirely reliant on third parties/ consultants/ systems integrators?

System upgrades capability - can it be cost-effectively upgraded to compete?

Likely life expectancy - would enhancement versus replacement be a short-term fix, or long term solution?

Key questions every FI needs to answer about their payments platform

Let’s analyse the optionsEvery financial institution running outdated legacy technology has three possible options:

Option 1 Option 2 Option 3

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Continuing to do nothing guarantees problems; perhaps not immediately but sometime soon.

Deteriorating architecture requires continual investment, meaning legacy platforms that have had no enhancement at all will become progressively more expensive and less competitive.

As they are increasingly wooed by offers from innovative disruptors, customers can shop around to find more sophisticated payment and processing services that help to simplify managing their finances.

Regardless of whether doing nothing to update payments technology is a result of procrastination or policy, it likely to prove a very dangerous strategy. Longer term, it could present a significant long-term risk to the commercial viability and performance of the business.

The price of doing nothing

From a competitive business perspective, every FI needs to ensure it can not only retain accounts, but recruit new business. It therefore needs to prove that any investment in enhancing an existing platform provides a clearly defined development pathway and visible return on investment.

For some, the arguments for investing into further enhancing an existing system, instead of replacement, can be compelling. Not only does enhancement require far less immediate capital expenditure, but with the right specialist technology partner, priority applications can be implemented swiftly and cost effectively, immediately improving services offered to customers and making the system and services more competitive.

Factors to be considered include any technologies currently employed, the availability of long-term support, and whether the platform is flexible enough to compete while remaining affordable.

Furthermore, with barriers to switching accounts for consumers being lowered all the time, it is crucial that new service differentiators and innovations that benefit customers are quick and easy to bring to market.

The decision to enhance a system requires a full analysis and understanding of the business benefits to be targeted, and whether the current legacy technology can be cost-effectively improved to deliver the ROI, services and cost reductions needed to compete.

Revaluing a legacy investment – is enhancement an option?

Option 1 - Do nothing but continue to support their legacy payments platform

Option 2 - Invest in enhancing their existing system

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The perceived risks of full system replacement are often seen as akin to carrying out ‘open heart surgery’ and are cited by many as the reason for choosing enhancement over replacement.

But with planning and an experienced team on board, there’s no reason system replacement will incur any more risk than enhancement.

Additionally, an entirely new platform, based on more modern technology, will be better supported, offer greater capacity for future development, and accelerate the process of innovation.

The only decision then is choosing the right partner, with the proven track record to deliver a payments platform that meets the needs of the business now, and for the future.

Replacement - The advantages of choosing new

But while proven agility and speed are likely to prove important considerations if a new platform is to remain competitive and compliant, commercial viability also dictates that costs need to be kept to a minimum.

The ideal solution will deliver faster ROI, with a lower cost of ownership, easy configuration and maintenance, with no need for complicated, expensive development. However, certainty and track record are also crucial in ensuring a low-risk, pain-free transition process and guaranteeing zero downtime.

There is little point in replacing a payments platform unless the proposed substitution will significantly out-perform the legacy technology and is well established to ensure long-term support. For this reason, it is important to work with an experienced and commercially aware team, who will implement proven technologies and provide on-the-ground support whenever needed.

Platforms like SmartVistaTM that offer proven ‘out of the box’ solutions that can be ‘plugged in’ and configured are better suited to today’s fast moving business environment than those requiring huge heavy customisation or development.

Choosing a new payments platform (What’s required?)

Nothing, in technology, is as likely as change, and the ability to respond and adapt quickly must be a key requirement of any new platform.

If you are embarking on a legacy payments enhancement programme, quick wins that deliver rapid commercial value make sense - add-ons that improve customer experience, security and system performance, reduce costs and increase the speed of transactions.

The most ‘urgent’ in terms of security and customer demandinclude the following:

• Fraudprotection:real-timetransactionmonitoring• EnhancedATMservices;billpaying,fundstransfer,

charity donations, changing and ordering a new PIN• ‘Addedvalue’services:DynamicCurrencyConversion

(the ability to withdraw cash or pay in the currency of their choosing at the ATM), integrated loyalty awards etc

• In-storeshoppingenhancement;Makingthingseasierfor consumers by linking loyalty to card usage and enabling dynamic rewards and voucher redemption at point of sale

Prioritising enhancement opportunities

Key questions:

How fast can the technology be implemented?

How adaptable is it to change - can it meet future requirements?

How certain and comprehensive is future support?

Is support guaranteed for the likely lifetime of the platform?

How measurable are the associated costs; implementation, long-term ownership, transaction pricing and future customisation?

Option 2 continued - Invest in enhancing their existing system

Option 3 - Invest in a new state-of-the-art payments solution

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Replacement - The advantages of choosing new

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BPC’s SmartVista™ product suite manages the entire payments lifecycle, with components designed to work and grow together. The majority of our customers use the full SmartVista suite to handle their entire payments process from end to end. Others choose individual components to manage their specific challenges: for example cutting down fraud, switching transactions via ATMs and POS, or issuing cards. It’s a flexible approach designed to match your needs.

Where many FIs have previously been running multiple systems to achieve a far less agile and flexible capability, SmartVista’s design allows innovation at the speed of banking and payments change. Through flexible, modern architecture and a modular design, SmartVista is optimized for specific payments functions and business areas, enabling the rapid introduction of new products and services with no need for development or customisation.

Whether managing one card or one million; installing one ATM or 50,000 POS terminals—SmartVista scales, eliminating the need to redesign infrastructure or install new applications. Moreover, unlike competitors, SmartVista handles unlimited card volumes so the solution suite can meet the needs of any size financial institution.

SmartVista’s flexibility significantly reduces both operating costs and Total Cost of Ownership to provide a reliable future-proof solution to all payments needs.

SmartVista replacement system

Planning checklist: do you have everything you need to upgrade?

Skills and human resources:

o Do you have the people and resources available in-house to upgrade and maintain a new system?

Business case and budget:

o Have you examined the outcome of preserving the status quo?

o Is your legacy technology still supported and can this be guaranteed into the future?

o Have you compared the cost/ benefits of replacement over enhancement?

o Do you have the required budget to replace your legacy system, or would enhancement be a better financial fit?

Desired outcomes:

o Are you seeking bring in new services for your consumers?

o Are you feeling the heat from the competition?

o Do you have a clear vision for the future direction of your payments services?

o Do you know what timescale you need to achieve it?

The right partner:

o Are you working with an expert in legacy replacement?

o Are you confident of an honest assessment of your situation?

o Do they have the scale, heritage, focus and experience to deal with your challenges?

o Can this partner help you regain or maintain your competitive position?

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Step-by-step: a structured approach to your legacy payment system upgradeStep 1. Detailed investigation and project scoping

To determine your best approach and deliver the greatest value, an upgrade requires a full understanding of what is in place today, your immediate technical and business priorities and long-term requirements.

Failure to benchmark your current technology, its structure and availability of resources is to risk unexpected issues or higher than planned costs

Step 2. Choosing the right migration plan

Once the technology and structure of your current platform have been investigated, the best upgrade strategy can be agreed.

As a highly experienced integrator, with 20 years’ experience providing winning solutions to some the world’s largest financial institutions and small operators alike, at BPC we have honed our skills and approach so we can recommend the best option for each situation and the likely timeframe. To help our customers choose the right plan for their business, we divide our implementation processes into four main choices:

Big BangThe most aggressive strategy, typically best suited to smaller organisations who want a very quick result. Big Bang is a one-stop approach to upgrading that can be implemented over a short space of time.

• 1 weekend full 1-step tranformation• Aggressive time to market• Typically smaller implementations• Limited number of time windows available

Parallel Run Box

• Full Parallel modewith all or branch data• Full Synchronisation of old and new systems• High operative effort• Full risk aversion with rollback points and soft switch over

A full parallel implementation including synchronisation between existing legacy and upgrades. A parallel approach requires a considerable commitment by the organisation but offers a very low-risk solution with roll-back points and soft switch over..

• Migrate section (boxes) alongside

the old system• Every box goes

through all project stages• High intergation effort

with existing system• Smaller migration steps

with seamless service provisioning

A section by section (box by box) migration alongside existing system with each section put through each

project stage - process, tools integration and testing. The Box approach requires a high-level of integration effort

but enables seamless switch-over of service provision as each section is completed.

Pilot RunCreating a parallel system suitable for larger, more

conservative operators, this approach keeps the upgrade and testing in-house, often including staff

training as part of the process.

• “Family & Friends” parallel run• Larger migrations, more conservative players

• Embedded staff training possible • Additional operative overhead

CHOOSE THE RIGHTMIGRATION PLAN

Option 1 Option 2

Option 3 Option 4

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Migration Options

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PREPARATION MIGRATION

Product to be migrated

Migration Plan1st Product

Test Migration

1st Product Pilot Migration

1st Product Migration

Last Product Migration

Credit Cards

Debit Cards

Other Cards

Networks

POS

ATM

All underpinned with diligent testing

PRODUCT ORDER

Infastructure Interfaces

Function & Intergration

Testing

Pilot Product Defined

Pilot Run

Stabilization Period

Stress Testing Dispatcher

Step 3. Staged upgrade implementation

Once a migration approach is agreed, the key to successful migration is planning and preparation. BPC analyses clients’ priorities, advises on the best strategy to meet them, then works with them to deliver the planned upgrade, including maintaining seamless customer service during the process.

Every organisation will tend to have a different focus, especially if they are feeling the effects of competitor activity in one area of their business, or where maintenance costs around a product are escalating. Determining the priority order of products to be upgraded - credit cards, debit cards, networks, POS or ATMs is often the best starting point to a platform upgrade.

02 03 05

1. Test Migration

2. Timing5. Migrationtools

3. Verticalcheck

4. Horizontalcheck

ProductSetup

MigrationScripts

Timing DataVeri�cation

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Creating an implementation plan with timings, testing and proving built into each stage is vital to create trust in the solution and confidence in the team. The BPC approach includes benchmarking each step required in advance; from product set-up through to data verification and having a backup solution, roll-back plan in place. Each upgrade implementation process will typically include several test migrations, with data consistency verification at each stage.

Approach

Several Test Migrations (2-3 times)

Predefined data format (from data repository or CARD)

Data consistency check

Dispatcher testing

Backup Rollback plan

Migration report (for data consistency)

Timing - how much time do we need for each step

The key to migration is preparation

Product Setup Migration Scripts Timing Data Verification

Migration testing creates trust in the approach

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Partnering with BPCLet us help to simplify the next generation payments challenge and bring evidence-based clarity to your legacy enhancement or replacement decision-making process.

Our experienced teams offer pragmatic and unbiased advice on how you should proceed, based on what’s best for your FI and your competitive climate.

Sign up for a free, no obligation Discovery Workshop with the experts at BPC.

About BPC BPC Banking Technologies is a global leader in payments solutions. We create technologies that inspire business to drive change and inspire progress for people everywhere. Founded in 1995, with our HQ in Switzerland, BPC is independent and a world leader in payment solutions.

Our customers include large tier 1 banks, and both midsize and smaller companies. We are well known for our long-term commitment to customers and their success and believe this is where we offer real difference versus the competitors.

We are the architect and developer of the market-leading SmartVista platform which handles all aspects of ATM management, billing, mobile and contactless payments, settlement, point of sale, card issuing and acquiring, microfinance and electronic payments processing.

Global expertise, local knowledge

Our over 160 clients include leading financial institutions in more than 56 countries and several of the world’s largest banks. Providing long-term support and partnership for our customers is why we have global network of 19 offices, all with local language support.

Whether it’s an ATM cash withdrawal in Madrid, using contactless to pay for fuel in Kiev, sending money across Africa, topping up your mobile in Panama City, buying online in Ho Chi Minh City or paying for your breakfast in Kabul, we make sure it works.

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Payment Cards Managed

Over

160Customers

Over

190MILLION

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Get in touch with one of our

experts today.

Request a call back

T +41-43-508-4024

Find our more: www.bpcbt.comor contact us at: info@bpcbt.com

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