The pains of payments modernization (and how Applied AI can help)

Imagine you’re operating a long-distance passenger train.

The carriages are full. Business is going well. You’ve been running this service for years.

But up ahead, the track ends. And you’re hurtling toward it at high speed. If you don’t act now, the train will derail. The problem? You can’t stop to fix it. Your customers have places to be. Any major disruption, and they’ll take their business elsewhere.

So, you do the only thing you can: build as you go (Wallace and Gromit, anyone?).

You start connecting new tracks in motion. Every time you edge forward, another section needs laying. It works, but it’s complex, expensive, and nerve-racking. Just when you think you’re done, another problem appears.

Sound familiar?

The pain of payments modernization

Just like building the track as you go, banks have to replace old systems, meet ever-changing regulations, keep up with customer demands, and sometimes migrate entire payments operations – all without disrupting your day-to-day business. It’s a massive ask.

Think of the migration to ISO 20022. Or connecting to new instant payment schemes like FedNow or SEPA Instant. These projects take several years, cost tens of millions, and cause untold stress. You can’t just pause operations to integrate with these schemes. You have to upgrade systems, manage downtime, and train teams without upsetting your customers. 

Traditionally, that meant relying heavily on manual processes. Large parts of your payments modernization projects are spent reading regulatory updates, summarizing information, and writing epics and user stories. Mistakes can crash systems, delay go-lives, and lead to financial penalties.

It’s not cheap. It takes a while. And it’s really, really hard to do.

The Applied AI advantage

The good news? Applied AI is changing that.  

Applied AI is the tailored use of artificial intelligence to solve complex, real-world problems. These tools consume years’ worth of proprietary project and company data, regulatory documentation, system requirements, and business goals in seconds. 

They automate repetitive tasks, map project risks, and reduce the time it takes to implement change. This can help banks like yours tackle challenges head-on. 

Through techniques such as retrieval-augmented generation (RAG), natural language processing (NLP), and multi-agent models, Applied AI goes beyond ChatGPT and other off-the-shelf tools. It’s especially useful in regulated, data-heavy industries like banking, where accuracy matters. 

So, instead of spending months and years to change your systems, you can use AI-enabled experts to do the work for you in a fraction of the time.  

Practical benefits of AI in payments modernization

How does it work?

Accelerated analysis and planning

AI tools sift through regulatory standards, technical specifications, and legacy system documentation. They find the problems, map a solution, and figure out the quickest way to upgrade your systems. By automating complex analytical tasks, what used to take months now takes weeks. 

Improved data quality and consistency

Data quality is a big issue in legacy systems. Consider the ISO 20022 structured address migration. Banks have to upgrade libraries of messy customer data to meet the new standard. That would’ve taken ages. But now, AI can identify inconsistencies, suggest corrective actions, and standardize data to fit new platforms. It ensures you hit the deadline with smoother migration and fewer post-migration errors.

Reduced project costs and duration

By automating repetitive tasks, reducing manual errors, and providing precise guidance, AI lowers both the duration and cost of modernization projects. Banks can redirect resources from routine compliance and testing to strategic areas. 

Real-world application: AI-enabled migration

We helped a global bank define functional requirements for their Verification of Payee vendor selection. AI did the heavy lifting, with humans approving the outputs. The result? It took 3 hours, not 3 weeks.

Applied AI is a strategic imperative

As a bank, you face a big decision: maintain traditional, labor-intensive way to respond to regulatory changes and payments modernization. Or, adopt AI early to get there faster, and for less.

The approach you choose can impact your success. 

So if you’re still traveling on old tracks, upgrading to new rails, and wondering how you’ll meet the next set of requirements, you’re not alone. But you don’t need to go it alone either.

Let RedCompass Labs help you modernize mid-journey — safely, quickly, and without alarming your customers. Talk to one of our experts today.