Back-end processing and data management will suffer if firms fail to keep up with the fast-growing alternative payments market, according to research by Capgemini and RBS.
The 2014 World Payments report found that, in 2013, alternative payments increased globally by 9.4%. It also said that 800 billion non-cash payments will be made over the next 10 years.
As the number of payments services, such as PayPal and mobile wallets, increase so do the amount of online transactions made. The use of credit and debit cards is also on the rise, fuelling innovation in the payments space.
In the last few months alone Apple announced Apple Pay, PayPal has said it will become independent from parent firm eBay and TfL began accepting contactless payments on the London Underground transport system.
The report expects online payments growth to slow, and predicts it to grow to only 15.9% over the next year. But mobile payments are set to increase and the World Payments Report predicts m-payments will grow by 60.8% in 2015.
The report also highlighted the current trend of financial legacy systems being unable to keep up with the processing needs of new and innovative customer-facing initiatives.
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Despite legacy systems often leading to service outages, banks are reluctant to replace these systems due to risk of failure and increased cost.
The Payments Council is putting pressure on banks to provide customers with services they need and, from September 2014, banks will process funds twice in a day if single batch processing leads to funds not being cleared.
There has also been an increase in the number of Key Regulatory & Industry Initiatives, 50% of which lead to innovation in the industry.
Despite large legacy systems, the financial services industry invests heavily in financial services technology startups to drive new technologies and innovation.
"There’s a lot of hope and expectation about trying to let technology have a transformative effect on what has been a traditional method of using cash and, more latterly, card,” saiid Alex Kwiatkowski, head of IDC Financial Insights Europe.