By Ken Musante
Napa Payments and Consulting
Traditional processors FIS, Fiserv and Global Payments collectively process over half of all U.S. originated payment transactions. Some banks, like Chase and U.S. Bank have their own processing. All of them have a legacy problem: their code was outdated decades ago.
At the millennium, these processors scrambled for COBOL developers to ensure the world would not end at the dawn of the 21st century. To enable this, engineers were scrambling to modify two-digit years to four, but because the code was written in COBOL, they had difficulty finding engineers who could interpret and modify the code.
These same legacy systems continue to power card transactions. They are difficult to replace. To do so, you would need to duplicate the certifications to all endpoints—every certified device or solution multiplied by the number of card brands. Any end-to-end encryption and the connection to the card brands themselves would need to also be certified.
Thirty years ago, a large processor endeavored to consolidate all of its platforms onto a single platform. This failed because of the unique functionality or integration within each platform. Out of a dozen or so platforms, only one was eventually sunset after many years.
Thus, these processors maintain monolithic code repositories that are expensive to upgrade. Nearly all of their bandwidth is decked out against the card brand mandates and little if any discretionary projects are prioritized. Ideally, new functionality is built outside the processor as a module.
This can work for some features but is impractical for core functions. For example, a gift card solution could exist entirely as a separate code base and invoked when needed, but this would be difficult if the feature was to evaluate every transaction such as a currency conversion solution. Consequently, legacy processors endeavor to maintain the existing code base as stable as practical.
To enable easy connectivity, these processors built modules that allow for modern connectivity via API's. While this is needed and allows for much quicker integration, the modules are only effective for the solutions connected to them, which is typically the front-end or authorization side. The back-end requires extensive coding to a legacy solution.
Adyen recognized the limitations of legacy processors, especially when entering new markets and geographies, and built a native, ground up, modern tech-stack payments solution. Adyen's solution will enable faster integrations and open more markets and products, but it comes at a cost. Customers are beholden to Adyen, have limited integrations, scarce device certifications and are not in a position to negotiate costs.
To overcome some legacy issues, Visa and others are developing solutions that will elevate development efforts. Visa introduced Visa Platform Connect APIs to enable acquirers and fintechs to process through a direct interface to Visa—and for all card networks. The connection may be either via a cloud-based or traditional server. While the end points and certifications are limited, it allows for instant, embedded connection to Cybersource with all Cybersource's capabilities and integrations.
This solution will speed time to market and enable fintechs to focus on their own solutions rather than processing payments. Payment platforms will need to employ and integrate with a back-end settlement provider, and while the path may take them back to a legacy processor, they may choose an alternative, modern processor to settle transactions.
To provide context, I reached out to Kapil Pershad, CTO of Payzli and Travis Chrisman, President of CoastalPay. The platform's modern API structure, product stack, ease of integration, and embedded Cybersource gateway drew Pershad's initial interest. Pershad also found the access to robust data sets and the simplified fee structure appealing. As Payzli collaborated with the Visa Team, Pershad appreciated the flexibility and responsiveness in tailoring the emerging offering to the requirements of a contemporary payments platform.
Chrisman and Coastal Pay appreciated many of the same features cited by Pershad but mentioned additional, specific use cases. Coastal Pay will utilize Visa Direct as a way to serve gaming clients via push payments. Both Payzli and Coastal Pay expect to be live in the first quarter of 2024.
I remain excited by the prospects and capabilities of a modern authorization provider that may be accessible by traditional processors and fintechs alike. 
As founder of Humboldt Merchant Services, co-founder of Eureka Payments, and a former executive for such payments innovators as WePay, a division of JPMorgan Chase, Ken Musante has experience in all aspects of successful ISO building. He currently provides consulting services and expert witness testimony as founder of Napa Payments and Consulting, The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
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