Legacy tech has gotten a drubbing throughout the pandemic — and rightly so, many would argue, as merchants and their payments partners seek to create new experiences that were not technologically possible before, while managing high levels of risk that ride along.
Merchants particularly are reviewing payments through a digital transformation lens and seeing immense potential in switching out familiar systems for superior cloud offerings.
Yael Barak, vice president of product at Checkout.com, told PYMNTS, “When I think about legacy technology, I think about platforms that are … cobbled together pieces of technology. It might come about through acquisitions over the years or systems that were bought and integrated where what that created was inefficiencies of data moving between systems.”
ECommerce companies relying on legacy systems are robbing themselves of the speed, access and convenience that newer architectures provide, Barak said. And that means processing data in batches instead of in real time — along with reliance on automated clearinghouse (ACH) and settlement rails.
“That again is, to me, an aspect of legacy technology — that cobbled-together kind of architecture, whereas when I think about today’s digital-first solutions, I think about stacks that are end to end [and] uniform. What I mean by that it’s maybe a combination of microservices that are accessed via APIs.”
An API-accessible, cloud-based architecture, on the other hand, may not sound sexy, Barak said, but it can scale to accurately handle any high-volume, high-value transactions that the shifting demands of eCommerce throw at it. Cloud also frees organizations from on-premise systems and the cost of upkeep, to say nothing of the idea that cloud is forever, while aging on-site systems are decidedly not.
“If something happens to your data center, you’re pretty much dead in the water. In the cloud, you’re able to deploy faster,” she said. “Your data is held in locations where it should be held from a compliance point of view, but also from a scalability point of view. You can respond quickly to incidents and spin up more processing power quickly.”
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Building on Solid Foundations
Barak said Checkout.com isn’t leery of blockchain tech, which, minus the crypto dazzle, is proving a solid system to facilitate how money is expected to move in 2022.
Barak told PYMNTS, “If you take cryptocurrencies to the side for a moment, blockchain technology is something that is enabling us to cross borders and do so 24/7, no downtime, no bank holidays, with real-time processing. The use cases of that technology are game changers.”
That reality stings if you’re still waist-deep in legacy tech as the great digital shift rages all around, but legacy still has its uses in applications that demand high security — and have stable datasets.
“If I think about traditional banks, that’s high-risk data management. They’re managing people’s monies and bank accounts and business balances,” she said. “That’s where maybe having your data center in the basement of a highly secure building [is] the right place for it to be.”
Except it doesn’t need to be that way anymore as FinTechs are making cloud more secure and easier for merchants and PSPs to migrate to as an integrated end-to-end solution.
Value-add services that traditional financial institutions (FIs) “are going to be either slow to deploy or even unable to deal with the risk of having something like that integrated into their technology, that’s where innovation can play,” she said. “Regulation like PSD2 is allowing FinTechs to build that layer of value add on top of traditional FIs [and] the role they still play.”
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The Future Is Unified
In the case of Checkout.com, the company made a strategic decision from day one that it wanted to own and operate its entire stack, Barak said. As an acquirer, that means it built its own integrations with Visa, Mastercard, Amex and other processors rather than going with ready-made offerings.
That would have saved money and time, but the PSP realized that only by building its own payments gateway and token vault could it offer a better experience for eCommerce providers and their customers — and help Checkout.com deploy new services faster. This also affords opportunities to enrich data within a unified system, she said, which can improve routing costs, conversion speeds and other key metrics.
None of this means snubbing legacy tech or the businesses still reliant on it. Legacy still controls vast amounts of the commerce and payments experience, so the old and new must communicate.
“Where we play with legacy technology is let’s say, obviously, we also have bank accounts and we need to move money in and out of bank accounts, and we need to pay our merchants. So we do integrate with traditional financial institutions, but we try to use partners who themselves use better technology,” Barak said. “When we can’t, or when we work with legacy technology, we build a layer around it that allows us to maintain the merchant experience.”
Of course, the objective now is to transition away from dependence on legacy systems and their growing list of limitations compared to the connected ecosystem possibilities now extant.
“If I think about full stack from a merchant point of view, it’s ease and convenience which then drives scalability,” Barak said. “If you have to go global, then that single integration is lowering cost of integration and cost of operations as well. Your finance reconciliation is going to be globally unified,” so data looks the same, no matter what region you’re reconciling.