Three Strategies to Modernize Payments in 2025

By Eric Marts, Industry Principal, Banking & Payments, Red Hat

Financial institutions must consider their strategies for managing the expected surge in 2025 digital commerce from businesses and consumers. Already, signs are pointing to increased retail activity from previous years, with Ecommerce Europe reporting an e-commerce turnover of €958 billion and U.S. e-commerce sales expected to reach $6.33 trillion in 2024.

However, many decades-old payment systems are not well suited for spikes in demand. Furthermore, some of these systems comprise a patchwork of legacy technologies that are difficult to change and costly to operate. Payment systems are frequent targets of cyberattacks, and connections between disparate technologies can leave them vulnerable.

Every year, technical debt continues to grow, making modernization even more costly. This has made it more difficult to make the necessary changes to simplify operations and avoid serious service disruptions.

The situation is untenable, but there is hope for 2025. Let's explore three strategies that financial organizations can adopt to ensure that their payment services can handle what promises to be another record-setting year for financial transactions.

Begin migrating from individual systems to a cohesive payments platform.

Many financial institutions use multiple types of technologies to manage different payment rails. For example, they might have one system handling domestic payments, another for credit card payments, and another for cross-border payments. They may even have separate systems for real-time and scheduled payments.

This "system" isn't a system at all. These technologies operate independently and require different management protocols. The lack of cohesiveness makes using consistent operating tools and processes challenging, increasing overall operational costs. When an outage occurs, it can be hard to identify its root cause. Teams might spend precious time attempting to fix the issue, which can draw the attention of regulators and result in lost business from consumers and retail partners.

In 2025, organizations should begin or accelerate the movement from traditional payment systems to a modern cloud platform that combines disparate technologies. Overlaying technologies on top of a common platform makes it easier and more efficient for managers to control and monitor various systems, which will help reduce operating costs and mitigate risk.

Measure capacity and automate scalability for expected and unexpected surges.

As organizations prepare for 2025, they should measure the capacity levels they experienced at different times in 2024, particularly in November and December. The volume of transactions processed then can help inform teams of how much they can expect at similar times next year. This data can help them calculate cost-per-transaction savings via modernization and optimize future cloud infrastructure purchases.

Traditionally, organizations have invested in new payment infrastructure to account for capacity increases. Many companies either leave these running at full scale or shut them down after the shopping period is over, only to be rerun in the following year. They may also schedule them to scale up during scheduled batch processing periods and turn them down after those periods have ended.

This method is inefficient, however. Organizations spend more time and money than necessary on equipment and time to manage the process, and it doesn't account for unexpected surges or the need to process real-time payments in seconds.

A cloud-native payment platform can automatically scale payment services up or down, depending on capacity needs. The platform provides elasticity and the ability to scale as payment volumes rise and fall, allowing organizations to cope efficiently and effectively with payment volume volatility.

The ability to scale automatically based on demand isn't just beneficial for specific times of the year. More countries, including the United States, are embracing real-time payment models, necessitating the need for platforms that can easily handle unexpected increases in demand. Basing payment infrastructure on a flexible platform gives financial institutions the agility to support real-time payments and expected increases in transactions during busy shopping periods.

Ensure business continuity plans and teams are in place.

Building off a common platform can help minimize the chances of an extended outage, but it will not eliminate the risk. Although the platform provides greater visibility into the entirety of the infrastructure and allows teams to respond more quickly to problems, there may still be downtimes while managers remediate issues.

In these cases, having pre-prepared contingency plans and business continuity processes helps. Organizations may wish to develop playbooks that clearly define roles and responsibilities and courses of action that administrators must take if an outage occurs. Teams should know what to do in these scenarios and have the necessary resources and materials to take action and rapidly recover and restore systems to their original state. They should also be readily available when transaction volume is expected to be heavy, such as during holidays.

Whatever financial organizations have planned for 2025, it is clear that failure to modernize payment systems is not an option. Inaction will inevitably result in undesirable consequences, including loss of business and reputation and potentially regulatory action.

As such, financial institutions that still need to do so should begin proactively planning their move toward a common, modern payment platform. This critical function warrants investment and will yield significant returns in the near and long term.

Eric Marts, Industry Principal, Banking & Payments, Red Hat