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Insights and Expertise

Why companies are rethinking

the payments back-office

Growth for Banks, (see https://bit.ly/4014USu) these ineffi-
ciencies lead to reduced productivity and increased labor
costs, with maintenance expenses for legacy systems ex-
pected to rise by 8 percent annually, reaching $57 billion
by 2028.

The real cost of outdated systems
Legacy back-office systems are increasingly proving to be
a costly burden. Companies reliant on manual, labor-in-
tensive processes are facing rising workloads due to trans-
action volume growth, while bugs and delays increase
operational disruptions. And with skilled legacy system
developers retiring, it's increasingly challenging to find
and retain talent that can manage these outdated systems.

By Casey Scheer A recent PYMNTS.com tracker titled Core Strength: FIs
BHMI Must Modernize to Meet the Fintech Challenge (see https://
bit.ly/3P2CnGb) stated that around 59 percent of banking
any companies in financial services are rac- executives identify legacy infrastructures as a significant
ing to adopt new payment rails, channels, business challenge, particularly because outdated back-of-
and innovations, but they may be missing fice processes and technologies prevent them from mod-
M a critical piece of the bigger picture—their ernizing effectively.
payments back-office. While the latest in real-time pay-
ments, digital wallets, and other consumer-facing innova- "Most companies don't realize the full cost of their legacy
tions capture attention, the true backbone of payments payments back-office systems," says Jared Drieling, chief
processing lies in the back-office.
Key benefits of back-office modernization
As 2025 begins, many financial services companies are
making the modernization of the payments back-office a
top priority—a New Year's resolution that will enable them • Efficiency gains: Modern systems reduce
manual processes, lower operational costs,
to keep pace in an industry that depends on efficiency and
scalability. and minimize errors through automation.
Back-office systems: • Scalability and flexibility: Configurable,
The hidden brainpower of payments rules-based platforms adapt quickly to new
payment types and regulatory changes, keep-
Back-office systems connect front-office systems to essen- ing businesses agile.
tial processing functions, creating the infrastructure that
enables end-to-end payment processing. They manage • Real-time capabilities: Continuous process-
data reconciliation, settlement processing, fee and com- ing and real-time data access improve trans-
mission assessment, and dispute management—all while action speed and accuracy.
providing the necessary data for reporting, analysis and • Talent retention: Automation shifts employ-
compliance. ees to higher-value tasks, improving job satis-
faction and reducing turnover.
"Think of the back-office as the operational heart of a pay-
ments operation," said Joyce Mehlman, Founder of iLEX • Competitive edge: Companies that modern-
Consulting Group. "Without a modern and efficient back- ize can meet rising customer expectations,
office, the whole operation falls behind, which can lead to integrate emerging technologies, and scale ef-
regulatory and financial issues." Despite the critical role fectively.
of payments back-office systems, they are often outdated
legacy systems riddled with inefficiencies and high costs. Upgrading payments back-office systems is essential for
growth and resilience in today's fast-evolving financial
According to the IDC Financial Insights info brief titled landscape
Future Ready Payments Platforms Enabling the Next Phase of
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