For mid-tier banks, payments modernization is no longer a luxury but a necessity in a fast-paced financial environment. Customers demand faster, more secure transactions, while regulatory requirements continue to evolve. However, modernization efforts can be costly, requiring significant investments in infrastructure, technology, and staff training. Without a strategic approach, banks risk overspending on solutions that may not align with their long-term goals or provide a strong return on investment.

Mid-tier banks must adopt scalable, flexible, and efficient modernization strategies to stay ahead. Nearly all surveyed institutions in the mid-tier banking sector invest significantly in payment modernization, with PaaS and cloud deployments emerging as key enablers. Finding the most effective, cost-conscious strategies that mid-tier banks can implement will help upgrade their payment infrastructure while maximizing return on investment.

Leveraging cloud-based solutions for cost efficiency

Cloud technology is critical in payment modernization, enabling mid-tier banks to reduce infrastructure costs while improving scalability and security. Traditionally, banks relied on on-premise data centers, which required significant capital investments for maintenance, upgrades, and security compliance.

Fifty percent of mid-tier banks are adopting private cloud solutions, offering enhanced data control, security, and regulatory compliance. At the same time, 33% of mid-tier banks implement multi-cloud strategies. This diversifies their payment infrastructure to reduce vendor dependency and improve resilience. Furthermore, it enables banks to scale their payment services dynamically, ensuring they can meet increasing transaction volumes without major infrastructure overhauls.

A growing number of banks are also integrating hybrid cloud models, blending on-premise and cloud-based systems for maximum flexibility. Seventeen percent of mid-tier banks have adopted hybrid cloud environments, balancing cost efficiency with regulatory requirements. Hybrid cloud deployment allows institutions to modernize gradually. The process ensures legacy systems remain operational while transitioning to a more efficient cloud framework.

Beyond cost savings, cloud-based payments infrastructure enhances security and operational resilience. Leading cloud providers offer built-in compliance with ISO 20022, real-time fraud detection, and end-to-end encryption, reducing security risks. By leveraging cloud-native solutions, mid-tier banks can improve payment operations without costly system replacements or compliance headaches.

Utilizing API-driven payments for flexibility and scalability

APIs are transforming the financial industry, enabling banks to enjoy various benefits. It can integrate new payment solutions, automate processes, and enhance customer experiences without large-scale infrastructure changes. Mid-tier banks can leverage API-driven payments to modernize their systems at a fraction of the cost.

Many financial institutions are prioritizing open banking capabilities to improve interoperability between banking platforms, fintech solutions, and payment processors. Sixty-one percent of mid-tier banks rate their open banking capabilities at 6 or higher on a 7-point scale. Integrating APIs helps banks offer real-time payments, automated treasury management, and instant account validation, reducing manual processes and operational costs.

APIs also enable faster adoption of real-time payment networks. Sixty-seven percent of mid-tier banks are already connected to multiple domestic real-time payment systems, with 83% planning further expansion within the following year. API-driven payment integration allows banks to seamlessly connect to networks like FedNow, RTP, and SWIFT GPI. This ensures real-time transaction processing without expensive infrastructure modifications.

AI-powered API security layers can detect suspicious activities, enforce Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, and block real-time fraudulent transactions. By embedding these security protocols into API-based payment workflows, mid-tier banks can reduce compliance risks and operational expenses.

The strategic use of APIs allows mid-tier banks to offer modern payment solutions, enhance security, and scale efficiently. As financial institutions continue the digital transformation, APIs will be the key to modernizing cost-effective payments.

Adopting low-code platforms to accelerate payment modernization

One of the most effective ways for mid-tier banks to modernize their payment infrastructure is through low-code and no-code platforms. These platforms allow financial institutions to build, modify, and deploy payment solutions using visual modeling tools instead of traditional coding. This significantly reduces IT costs, accelerates development timelines, and minimizes the need for specialized programming expertise.

With legacy system upgrades often costing millions and taking years to complete, low-code platforms provide a cost-effective alternative. They allow banks to rapidly integrate new payment services, such as ISO 20022 messaging, real-time transaction tracking, and AI-driven fraud detection. Mid-tier banks can customize payment workflows, automate back-office tasks, and launch new digital banking services in a fraction of the time required for traditional software development.

The demand for ISO 20022 compliance is a key driver behind low-code adoption. Sixty-seven percent of mid-tier banks already comply with ISO 20022 for domestic payments, while 44% comply with cross-border transactions. By leveraging low-code automation, banks can streamline their migration to ISO 20022 without disrupting existing operations or requiring extensive manual intervention.

Low-code platforms also improve customer experience and engagement. Banks can enhance their digital offerings by integrating self-service payment portals, digital onboarding solutions, and mobile payment apps. This allows mid-tier banks to remain competitive in an industry where consumer demand for seamless digital banking is at an all-time high. With mid-tier banks investing heavily in payment modernization, low-code platforms offer a practical solution to reduce costs, improve efficiency, and accelerate innovation.

Payments as a Service (PaaS) enable scalable transformation

Payments as a Service (PaaS) is rapidly becoming mid-tier banks’ preferred payment modernization model. Ninety-four percent of financial institutions plan to adopt PaaS solutions, recognizing their cost efficiency, flexibility, and scalability. Unlike traditional on-premise payment processing, PaaS solutions allow banks to outsource transaction processing, regulatory compliance, and security management to cloud-native platforms.

By adopting PaaS models, mid-tier banks can eliminate costly infrastructure investments and pay only for the services they use. This subscription-based approach reduces capital expenditures (CapEx) while ensuring access to cutting-edge payment technology, real-time fraud detection, and regulatory compliance updates. With PaaS, banks can rapidly scale their payment operations to accommodate increasing transaction volumes without costly system overhauls.

PaaS also enhances cross-border payment capabilities, an area where mid-tier banks often face challenges. Fifty-five percent of mid-tier banks provide access to three or more cross-border payment networks beyond SWIFT, improving global transaction efficiency.

A cost-effective approach to payment modernization

Payments modernization is essential for mid-tier banks to remain competitive, but it must be done strategically and cost-effectively. Financial institutions can modernize their payment systems without excessive costs by adopting cloud-based solutions, leveraging APIs, integrating low-code platforms, and embracing Payments as a Service.

Volante Technologies offers a comprehensive PaaS solution that enables mid-tier banks to modernize payments efficiently, reduce operational costs, and accelerate digital transformation. Contact one of our payments experts to learn how Volante Technologies can support your payments modernization strategy.