Financial institutions are re-architecting their core payments infrastructure as the speed of transactions defines customer expectations and regulatory demands heighten the need for resilience.
For large, incumbent banks, this often means confronting decades of legacy systems to embrace a future driven by instant payments and hyper-personalized digital experiences. The question facing the banking industry is, “How do you create a flexible infrastructure that allows core banking to support all of the new modern digital-first lines of business?”
Infrastructure modernization has transformed over the past five to six years, moving beyond initial steps toward a more cloud native re-architecture of payment systems.
Tracking the Evolution
Nilesh Dusane, global head of institutional payments at AWS, which has been helping banking partners with their modernization efforts, highlighted the evolution.
“If you go back five or six years, customers used to start their cloud journey with what we used to call a lift and shift model, where they used to take their existing applications and move them to cloud,” he said. “Now, that definitely had its advantages. You could immediately scale the application, you could reduce your costs when the data center costs were high.”
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More recently, customers like NatWest, a Tier 1 bank based in the United Kingdom, have started re-architecting their payment applications using cloud native services.
To do that, APIs/microservices are a starting point toward breaking down banking monoliths, Dusane said. Those efforts break the payment process into discrete components, allowing banks to choose what components they want to keep as their core competencies.
The collaboration between AWS and NatWest exemplifies this forward-thinking strategy. However, it also often involves a shift in mindset.
NatWest CIO of Payments Technology Ian Povey said there’s a need for a brave commitment from the outset of such a journey.
“I’d stress the willingness and preparedness to be bold on this journey,” he said, adding that without this ethos, some of the inherent challenges might prove insurmountable.
For NatWest, this meant aligning the modernization initiative with the broader group strategy on cloud hosting to avoid fragmented solutions.
Dusane articulated AWS’ approach to these conversations, detailing how AWS specialists collaborate closely with customers and the broader industry to build awareness around the capabilities of AWS infrastructure, including regions and availability zones.
“We have specialists, organizations and teams within AWS who know how to speak to regulators, who know what they are looking for,” Dusane said.
Collaboration Is Key
NatWest’s modernization strategy also integrated Icon Solutions, a key partner providing a low-code solution, the Icon Payment Framework (IPF).
Using this framework on AWS has been instrumental in enabling NatWest’s teams to develop features and orchestrate journeys, including the successful launch of SEPA instant payments and CHAPS on AWS.
“The way we’ve actually brought this together is not treated AWS and Icon as two separate entities, but [we] actually operate as a collective,” Povey said.
This collective approach is so embedded that the executive steering committee for the project includes representatives from all three organizations, fostering complete transparency and shared accountability.
This tri-party collaboration enabled milestones, such as the go-live of NatWest’s multi-region solution within a short timeframe of just over four months.
“This has allowed us not only to meet an obligation made with the regulators, but also ensure that we continue to evolve that team mindset, that team culture — that this isn’t about being an on-prem model anymore,” Povey said. “We now have the control within the team of when we move workload from one region to the other. The forefront of the strategy is being absolutely prepared for multiple schemes becoming instant or near instant.”
Fostering Communication, Embracing APIs and Driving Value
The success of such a transformative project hinges on fostering open communication, embracing new technological paradigms like APIs and cultivating a culture of continuous improvement within the organization.
The transition to an API-driven architecture has and positively impacted NatWest’s agility and ability to integrate new payment rails. Povey, drawing on his background at PayPal, where APIs were foundational, said that while the banking community is still evolving in this space, their value has been “unleashed … in our case, we’re catering for multiple different payment carrying streams. For me, an abstraction on all dimensions, not just the front-end layer.”
A hallmark of NatWest’s journey has been its proactive approach to operational readiness, particularly through rigorous “war gaming” scenarios and dry run drills, Povey said. The strategy involved embedding DevOps engineers into site reliability engineering (SRE) teams and vice-versa, fostering cross-fertilization of experience between development and operational functions.
“What we did was we actually reversed the polarity of both teams and embedded some DevOps engineers into our SRE team, and SRE into our DevOps,” Povey said, adding this allowed for a deeper understanding of development and operational run contexts.
New Areas of Focus
While “time to market” was an initial priority for many, the focus has now shifted to “time to value,” Dusane said.
Under that concept, AWS’ banking customers are emphasizing that they need their end users, “whether it’s retail customers, commercial customers, corporate customers, to quickly and as easily as possible use the new solutions that [they’ve] built on AWS,” he said. APIs are critical in speeding time to value.
The partnership with AWS has positioned NatWest to use innovations in artificial intelligence and machine learning, shifting the culture and mindset of Povey’s team.
The team is exploring AI for enhanced testing, tying it into test cases and creating “golden journeys” that can be used across the organization to accelerate testing against payment services, Povey said.
Another use case involves using AI to address the challenge of legacy systems and outdated message standards. Some banking standards are decades old, leading to a loss of corporate knowledge.
“AI is becoming a powerful tool for that sort of reverse engineering of the legacy to support us on that journey,” Povey said, pointing out how AI can help unpack legacy systems to inform what needs to be rebuilt or avoided in the new AWS environment.
AWS’ AI strategy is a progression, Dusane said. While financial services have used AWS’ AI and ML services for years, the recent focus has been on generative AI. There are three key areas where customers are applying generative AI: developer productivity, employee productivity and hyper-personalization.
The impact of this modernization extends beyond technological upgrades to tangible improvements in employee productivity and the potential for new value propositions.
A relationship manager could use generative AI to generate 80% to 90% of a proposal for a corporate customer opening a new account, allowing them to fine-tune it more efficiently, Dusane said.
The transition to a more data-driven model, particularly through the implementation of ISO 20022, goes beyond mere compliance to enable enhancements in fraud prevention, customer experience and business insights, he said.
Looking ahead, the future of payments centers on several key areas, Dusane said.
First, the continued development of microservices-based, flexible architectures will provide banks with much-needed agility for building and offering new services.
Second, the foundational role of APIs is setting the stage for “agentic” use cases, where autonomous agents will rely on APIs to interact with financial services, he said.
In the future, agents will be able to communicate with each other seamlessly, a task impossible with traditional batch files, Dusane said.
Finally, the industry is increasingly moving toward offering value-added services built on top of basic banking and payment capabilities, using rich customer data to deliver enhanced experiences beyond mere transactions.
As Povey told PYMNTS, “payments is a network sport, and you need more than one party to actually work out the solutions that you’re going to have either at a market level or at a global level … it requires a different level of collaboration and engagement, [also with] the customer community more broadly, to get to the right use cases.”
