Research Reveals Software Development Limitations Cost Banks 5% a Year in Lost Payment Revenues

18 September 2023

Banks are increasingly turning to ‘low code’ for payments processing to take control of their transformation journey.

Independent research conducted by Celent on behalf of Icon Solutions estimates that software developer capacity constraints have impacted banks’ payment revenues by 5% over the past two years. This is leading to increasing interest in ‘low-code’ tools and platforms to accelerate the delivery of revenue-generating services, while maintaining control of the development process.

Launched today at Sibos, the survey of Tier 1 banks in North America and Europe found that the account-based payments processing model remains under significant and sustained pressure. Despite a high interest rate environment, 61% reported that margins are becoming more difficult to maintain amid evolving customer expectations, increasing regulatory demands and the emergence of new competitors.

These margin challenges are compounded by capacity limitations within the technology function. Many large banks prioritise in-house builds over buying vendor packages for payments processing software to maintain control and competitive differentiation. The ability to deliver change, however, is inhibited and improvement projects are frequently cancelled, de-scoped, or fail entirely to make it onto roadmaps. On average, banks reported missing around four opportunities to launch revenue-generating enhancements to their payment processing offering over the past two years, with the opportunity cost estimated to be around 5% of annual payment revenues.

To overcome this challenge, banks are increasingly exploring the use of low code to realise greater efficiencies, agility and collaboration. Low code involves the use of standardised, pre-built blocks that can be used to rapidly create new code or make changes to existing software through a visual, ‘drag and drop’ interface. This enables software development without manual coding, increasing developer productivity and enabling non-technical product specialists within the bank to contribute to the development process.

While low code has traditionally been restricted to enterprise applications or workflow improvement projects, the research revealed that several large banks are now extending its use into payment processing. 36% of banks reported that they are already using low code to support software development to some extent in non-card payments, with the same proportion actively experimenting or exploring their options. Overall, 90% of banks are planning on implementing low code for non-card payments in the immediate future.

“Low code is not a new concept but is emerging as a very important topic in the payment industry,” comments Kieran Hines, Principal Analyst at Celent. “Many large banks face the same challenges, with the need to deliver payments modernisation and product enhancements stymied by capacity limitations. Several early adopters are now using low code in some areas within non-card payments, and the number of proof points and use cases is building. Underpinning this is a growing consensus that the benefits of low code are both real and realisable.”

Toine van Beusekom, Strategy Director at Icon Solutions, adds: “Low code presents a powerful opportunity to reimagine the payments processing value chain, moving payments from cost to profit centre while maintaining control. There is no single approach to leveraging low code to deliver enhanced, revenue-generating services, yet all banks will be required to think differently and assess the full spectrum – from buying a package to a full in-house build – to ensure a unified focus on the customer need. This starts with a clear strategy and an understanding of the underlying architectural requirements needed to realise its transformative potential.”

Download the full report, ‘Using Low Code to Accelerate Payments Innovation: Unlocking Greater Agility and Flexibility’.

Icon will be exploring payments processing strategies in more depth at Sibos. Find the team at stand DISM10 or book a meeting with Icon here.


About Icon Solutions

Icon Solutions is a leading specialist provider of services and technology solutions that are simplifying banking transformation.

Icon is the past, present and future of payments. With a proven record delivering mission-critical solutions for global institutions, it is driving the next-generation of banking and payments architecture. Icon combines industry-leading domain experts, services, accelerator assets and technology that empower customers to solve problems, fight complexity and embrace change.

Icon has applied its payments, technical and integration expertise to create IPF: a low-code, cloud-native, open-source technology platform to accelerate payments transformation.

Icon’s clients include leading global banks such as BNP Paribas, HSBC and Lloyds Banking Group.

Categories: Press Release