Mid-tier banks face growing pressure to modernize their payment systems, but the path to transformation is rarely straightforward. Legacy infrastructure, high implementation costs, and evolving regulatory demands create significant roadblocks. At the same time, customers and businesses expect faster, more seamless transactions, leaving banks in a race to keep up with industry shifts. Without a strategic approach, modernization efforts can become costly and complex, delaying progress and impacting competitiveness.

The transition to modern payment solutions is underway, with 100% of mid-tier banks planning to make at least a moderate investment in payment technology within the next three years. The need for faster processing, operational efficiency, and enhanced security drives the adoption of Payments as a Service (PaaS), a cloud-native solution that streamlines payment operations.

Volante understands these challenges and provides a streamlined, scalable approach to payments modernization. Instead of struggling with fragmented upgrades, banks can adopt a simplified, end-to-end modernization strategy that delivers results quickly and efficiently.

Navigating regulatory and compliance challenges

Regulatory compliance remains a major hurdle for mid-tier banks, requiring adherence to domestic and international payment regulations. Banks must comply with ISO 20022 messaging standards, anti-money laundering (AML) policies, and real-time payment mandates while managing cross-border transactions and domestic payment networks.

One of the biggest challenges in payments modernization is ISO 20022 migration, as banks need to transition from legacy payment formats to rich-data ISO 20022 messages. Currently, 62% of mid-tier bank customers are either using or planning to adopt ISO 20022, making compliance essential for global payment interoperability. Implementing automated message transformation, validation engines, and real-time compliance monitoring is critical for reducing errors and ensuring regulatory alignment.

Mid-tier banks must also enhance fraud detection and risk management to comply with AML and Know Your Customer (KYC) regulations. Traditional fraud detection methods often rely on batch processing, which delays response times. Banks can improve fraud prevention and meet regulatory expectations by adopting AI-powered risk assessment and real-time transaction monitoring.

To address these challenges, Volante’s PaaS solution offers pre-configured ISO 20022 compliance, automated transaction screening, and real-time reporting tools. These capabilities allow banks to adapt quickly to regulatory changes, maintain compliance, and improve fraud detection without overhauling legacy systems.

Overcoming integration complexities with legacy systems

Many mid-tier banks still rely on monolithic core banking systems that lack the flexibility required for modern real-time payments, open banking, and digital transaction processing. Eighty-six percent of mid-tier banks prefer hybrid cloud approaches, indicating that full cloud migration is not always feasible.

Legacy system integration poses several challenges, including:

• High implementation costs and lengthy deployment times
• Limited API support for seamless fintech and third-party integration
• Incompatibility with modern payment rails like FedNow® and The Clearing House RTP
• Increased risk of transaction bottlenecks and processing delays

Mid-tier banks need low-code integration tools to connect legacy systems with modern payment platforms while maintaining operational stability. Volante’s cloud-native PaaS platform offers pre-built APIs, real-time data orchestration, and automated transaction routing, allowing banks to modernize payment infrastructure without costly system overhauls.

With pre-integrated real-time payment support and seamless API-driven connectivity, banks can extend the lifespan of their legacy systems while adopting next-generation payment solutions. This approach enables cost-effective modernization while ensuring business continuity and reduced operational risk.

Ensuring cost-efficient payment modernization

Cost remains a significant concern for mid-tier banks looking to modernize their payment infrastructure. The traditional model of on-premise payment processing requires high capital expenditures, ongoing maintenance costs, and expensive compliance upgrades. However, with 67% of mid-tier banks increasing their budgets for payment modernization, banks must ensure that investments provide long-term value.

Payments as a Service (PaaS) offers a cost-effective alternative, enabling banks to shift from capital-intensive infrastructure to an operational expense model. Key financial benefits of PaaS include:

• Predictable, subscription-based pricing with reduced upfront investment
• Lower IT maintenance costs with cloud-native deployment.
• Scalability to accommodate fluctuating transaction volumes
• Built-in compliance tools, reducing regulatory overhead

By adopting Volante’s PaaS model, banks can modernize their payment infrastructure without costly system replacements. The cloud-native platform automates payment processing, real-time settlement, and fraud detection, allowing mid-tier banks to focus on revenue-generating activities rather than IT maintenance.

With 50% of mid-tier banks prioritizing private cloud deployments and 33% adopting multi-cloud strategies, Volante’s flexible deployment options allow banks to select a modernization approach that aligns with their operational goals.

Expanding real-time payment capabilities

The demand for real-time payments (RTP) and instant transactions is skyrocketing. 59% of mid-tier bank business customers anticipate increased use of real-time payments within the next 12 months. However, many banks struggle with scaling their payment systems to meet real-time transaction demands due to:

• Inconsistent real-time payment processing capabilities
• Limited network connectivity to domestic and global RTP schemes
• Operational inefficiencies in exception handling and dispute resolution
• Lack of fraud protection for high-speed transactions

To address these challenges, Volante’s real-time payment processing solutions provide:

• Direct connectivity to FedNow, The Clearing House RTP, and multiple cross-border RTP networks
• Automated routing for instant, ACH, and high-value transactions
• Real-time fraud detection with AI-powered anomaly detection
• Instant exception handling, reducing transaction failures and chargebacks

Sixty-seven percent of mid-tier banks are connected to multiple real-time networks, and 83% plan to expand within the next year. With Volante’s ISO 20022-native RTP solutions, banks can seamlessly integrate real-time payments, meet customer demand, and drive revenue growth.

A strategic path to payments modernization

Mid-tier banks must overcome regulatory complexities, legacy system limitations, and cost constraints to stay competitive in the evolving payments landscape. Real-time payments, open banking, and AI-driven fraud detection are no longer optional—they are essential for maintaining relevance and meeting customer expectations.

To stay competitive, financial institutions must invest in flexible, API-driven platforms that support real-time settlement, fraud monitoring, and ISO 20022 messaging standards. Volante Technologies provides a comprehensive PaaS solution to help mid-tier banks modernize payment processing, enhance compliance, and drive innovation. Learn how Volante Technologies can support your bank’s payment modernization journey.