Digital transformation is top of mind for financial institutions of all stripes, yet many are cautious when initiating such projects and unsure where to begin due to the inherent risk associated with modernizing legacy systems.

This is especially true when it comes to modernizing payments systems. Today’s consumer wants to not only pay using traditional card-based methods, but also wants to use the vast array of digital payments available and new innovations such as buy now pay later (BNPL).

How financial institutions can successfully modernize their payments systems will be a focus of discussion at Diebold Nixdorf’s upcoming Intersect conference in Las Vegas on August 29–31. The annual conference is returning after a two-year hiatus brought on by the COVID-19 pandemic.

To hear more about what financial institutions will learn about modernizing, PaymentsJournal sat with Michael Engel, Managing Director & VP Payments for Diebold Nixdorf, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service for Mercator Advisory Group.

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Overcoming Fear of Change

The biggest reason financial institutions put off modernizing their payments systems is the potential risk and fear of something going wrong. Engel noted the adage “no one ever got fired for buying IBM,” and said many bank and credit union executives hesitate to move from systems that work fine, even if the systems are decades old.

“Banks do understand that they need to future-proof,” he added. “But change is always associated with risk. Many feel soft and cozy with their legacy systems, and it feels safer to do nothing than to take a risk.”

Still, he noted that there are risks involved in simply staying the course. For one, financial institutions that do so can’t offer their customers access to the latest innovative digital products and services. Being able to do so is a matter of staying competitive.

“Fintechs will come in and provide these services and win customers if banks don’t change,” Engel said.

He added that the siloed legacy systems many financial institutions ...