The banking and fintech industry is experiencing fundamental change driven by not only new and evolving regulatory guidelines, but also by the changing needs and expectations of consumers – largely attributed to organizations like Netflix and Amazon.

Aside from that, financial institutions are now facing increased competition from non-bank companies like Google, Facebook and Apple. To effectively rise to the challenge on each of these fronts, institutions must develop a holistic payments strategy.

Recently, there has been much discussion around “payment convergence” – a single platform to process many payment types. This approach yields substantial benefits, including improved efficiency, streamlined vendor management, tremendous cost savings, strengthened customer service, and so on. With the rapid adoption of mobile and emerging trends of contactless payments, a consolidated payments platform is more attainable today than ever before.

According to the U.S. Census Bureau, 30% of the adult population will be part of the millennial generation by 2020. Considering this, the success for the financial services industry will depend upon how institutions adapt to this generation shift. Today, customers tend to focus less on the payment type and place a greater importance on the end result of quickly and securely moving funds from one place to another. They are not concerned with the underlying infrastructure or how an application works. They simply want an easy, fast, secure way to transact in a way that best suits them.

But there are challenges to consider. Many institutions have fragmented platforms, typically due to different areas of the institution making isolated decisions for their respective channels.  These different systems are no longer efficient and create inconsistent experiences for accountholders.

Moreover, large institutions in particular face significant challenges with managing multiple platforms to support a single financial transaction or payment type, not to mention, multiple payment types. These institutions often adopt a “best-of-breed” approach, whereby implementing different technology platforms for each activity. As a result, many vendors are involved to process a single payment.

Check processing is often approached this way.  An institution’s check processing operation can be tangled up with a patchwork of systems to process a single check. The check is captured by the first system; then passed to another system for validation; the check image is then handed off to a third system to be archived; and a fourth system is required to research the item.

By leveraging multiple systems, institutions run into operational inefficiencies, fragmented systems, multiple points of failure, duplication of data and images – an entire host of problems that result in added costs. It also takes massive IT resources to manage the multiple systems, not to mention vendor management and compliance teams managing multiple relationships – just to process one check.

Additionally, managing, processing and reporting different financial transactions tend to occur in payment silos, which means that when a new product is added, a new silo is also created to maintain it. Again, the institution is forced to manage and maintain multiple vendors for compliance and due diligence protocols. 

By consolidating payment platforms, institutions are better able to meet their accountholder’s needs and expectations more effectively and at a much lower cost. As technology progresses, it is critical that institutions adopt innovative solutions that reflect the important feature consumers want – which is a consistent user experience. Streamlining all channels and back-end systems under one consistent platform eliminates the once fragmented approach and delivers a seamless, user-friendly experience.

But it doesn’t stop there. Institutions must also stay up-to-date with market demands. A seamless platform transfers accountholders’ transactional and non-transactional activities from channel to channel, enabling a consistent experience across all devices and banking services. Additionally, a consolidated platform gives the institution insight into all channels, providing a holistic, enterprise-wide view of all payments. Institution can not only replace outdated features, but they gain better functionality and reporting capabilities.

Another benefit to consolidating payment systems is the ability to tightly integrate various solutions. Modern systems are built with the architecture to add new products and services as needed, enabling institutions to provide value to consumers long-term. The platform must also offer users – both employees of the institution and its accountholders – flexibility for device or hardware requirements, operating systems, and databases.

While critical for market competitiveness, replacing an existing legacy system with a modern platform is a daunting task. Institutions must carefully evaluate their goals and design a migration strategy with key milestones and timelines outlines. These strategies vary from institution to institution, but the end goal should be to consolidate payment systems under a single, modern platform that will efficiently meet the institution’s needs now and well into the future. For many institutions, consolidating check processing operations with a single, scalable platform able to accommodate other payment types is a good starting point.

Murthy Veeraghanta is Chairman and CEO of VSoft Corporation.