Navigating the future of payments: trends, challenges, and opportunities for banks

From payments growth to modernisation, bank execs are rethinking strategy. Phil Bruno, Chief Strategy and Growth Officer at ACI, discusses how they can stay competitive in a shifting landscape.

With rising regulatory pressures, cybersecurity risks, competitive threats, and the rapid pace of digital transformation, what are the biggest concerns keeping bank executives up at night, and how can they address them?

Right now, one of their biggest concerns is the uncertainty surrounding the future. Bank executives are trying to navigate questions about the global economy – where interest rates are headed, whether they’ll rise or fall, and which sectors will drive growth. This helps them determine where to lend and invest.

Another major priority is determining the best path for growth. They are evaluating various parts of their business – such as commercial lending, consumer banking, credit cards, and small business – to identify the most effective investment strategies for the future.

How is ACI Worldwide helping banks modernise their payment infrastructure to enhance efficiency, interoperability, and cost reduction across all payment types? 

Let me start by looking at both the banking and customer perspectives as they approach the modernisation of their tech stack. The era of large-scale ‘rip and replace’ core banking overhauls is coming to an end. Many banks have faced challenges, false starts, and even failures when trying to modernise from a core-first strategy. As a result, we're now seeing a shift toward a more modular and strategic modernisation approach.

Additionally, tech budgets have declined compared to two years ago, forcing banks to be more deliberate about their investments. This has led to a few different modernisation strategies.

One approach is what I’ll call a ‘hollow out the core’ strategy – keeping the existing core system but reducing its role to a system of record while modernising the surrounding infrastructure. This includes upgrading channel software, risk and fraud management, product catalogues, pricing, and underwriting.

A key priority in this modernisation effort is payments. Banks are focusing on revamping their payment stack across various payment types, particularly in commercial payments such as wire transfers, ACH, and instant payments – especially in North America, where adoption is growing. They are also modernising cross-border payments through SWIFT, as well as upgrading orchestration and switching capabilities for card-based payments, including credit, debit, and ATM transactions.

At ACI, we are supporting this transformation through Connetic, our cloud-native payments hub and orchestration layer. Connetic enables banks to modernise in a modular way, allowing them to adopt a common architecture that fits their needs while ensuring scalability and flexibility across all payment types. As banks centralise and streamline their payment capabilities, what new business models are emerging? How do innovations like payments insurance, improved payment visibility and routing, and lower merchant fees through account-to-account payments create new opportunities?

Great question. Traditionally, banks have approached modernisation primarily to cut costs, focusing on reducing processing expenses, optimising interchange fees, and improving operational efficiency. While cost management is still important, it has shifted to a lower priority. Now, banks view modernisation through a broader lens, starting with how an improved payment stack can drive revenue growth, followed by improving the customer experience, and finally, increasing efficiency and reducing costs. 

Another critical factor in this shift is risk, regulatory compliance, and reporting. For some institutions facing significant regulatory pressure, this can be the top priority, while for others, it remains important but ranks lower in their strategic focus. 

When it comes to innovation, the increasing digitisation of payments and advancements in payment infrastructure are unlocking new opportunities for value-added services, which are becoming a substantial revenue driver for banks. On the corporate side, a modernised payment stack that integrates various payment types allows businesses to better manage financial exposure. Instead of relying on traditional 30, 60, or 90-day receivable aging, companies can dynamically assess and qualify receivables in real time. Additionally, improved straight-through processing enhances liquidity management, ensuring a more seamless cash flow. 

As the entire accounts receivable and payables ecosystem becomes digitised, banks can offer more comprehensive financial services. This includes receivables financing, securitisation, and optimised payables management, all of which provide businesses with greater financial flexibility. By leveraging these capabilities, banks can move beyond simple payment processing and position themselves as strategic partners, helping their corporate clients optimise financial operations while creating new revenue streams.

What do you see as the biggest trends in global payments over the next five years, and what strategies should banks adopt to stay competitive and compliant in the evolving global payments landscape?

We're seeing a return to broader discussions about payments growth, and despite economic uncertainty, the outlook remains strong. In the US, payments revenue is expected to grow at around 6%, aligning with long-term averages. While this rate fluctuates slightly over time, it remains a solid growth trajectory, especially considering that payments typically account for 35-40% of a bank’s total revenue. Over the next five years, this steady expansion is expected to continue, making it a bright spot within financial services.

Interestingly, commercial payments are projected to outpace consumer payments in terms of revenue growth. A key driver behind this trend is the long-overdue digitisation of the accounts receivable and payable value chain. While this transformation has been unfolding for years, it is set to accelerate further. Additionally, small business payments represent a significant profit opportunity. Historically underserved compared to both consumers and large corporates, this segment is now gaining attention from financial institutions looking to tap into its potential.

On a global scale, real-time payments are entering a phase of exponential growth. Although real-time payments have existed for years, certain markets – including India, the UK, and Brazil – are now seeing transaction volumes surpassing the trillion-dollar mark. The real catalyst behind this surge isn’t just the payment rails themselves but the applications built on top of them. Markets prioritising user-centric payment applications, such as India’s UPI and Brazil’s Pix, are experiencing the most rapid adoption. Just as a water supply is only useful when connected to appliances like dishwashers and showers, payments infrastructure only reaches its full potential when paired with applications that facilitate P2P transfers, point-of-sale payments, small business invoicing, and corporate transaction services. In some countries, governments and central banks play a direct role in shaping both the infrastructure and the applications, while in others, market-driven innovation is leading the way.

When it comes to modernisation, rather than large-scale core replacements, banks are taking a more strategic approach with two key models. The first, often referred to as ‘hollowing out the core,’ involves maintaining the existing core system while modernising everything around it. The second approach, sometimes called a ‘sidecar strategy,’ introduces modernisation in a controlled manner, often by testing new systems in smaller areas. For example, some institutions start with short-term consumer lending, where loans naturally expire within a year, eliminating the need for system conversions. Others are rolling out updated systems in a digital bank or a foreign subsidiary before scaling the new architecture across the broader organisation. These strategies allow for a more gradual, risk-averse evolution, minimising disruption while still driving progress.

This interview was originally published in the Trends Report: The New Payments Era. Download the report and start building your next-generation payments strategy today.

About the interviewee

Philip Bruno is Chief Strategy and Growth Officer at ACI Worldwide, where he leads the company’s corporate strategy and long-term growth initiatives, including the commercial roll-out of ACI’s next-generation payments hub. With over 30 years of experience in payments and financial services, he previously served as Partner and Co-Lead of the Global Payments Practice at McKinsey & Company, advising leading financial institutions and technology companies on strategic growth, digital transformation, and customer success.

 

About ACI Worldwide

ACI Worldwide, an original innovator in global payments technology, delivers transformative software solutions that power intelligent payments orchestration in real-time so banks, billers, and merchants can drive growth, while continuously modernising their payment infrastructures, simply and securely. With nearly 50 years of trusted payments expertise, we combine our global footprint with a local presence to offer enhanced payment experiences to stay ahead of constantly changing payment challenges and opportunities.