Being compliant with operational efficiency requirements for core banking systems is as difficult as it sounds, and it’s a pressing matter that banks and financial institutions need help with.
Based on a survey of more than 230 C-level executives from banks and FIs, Bottomline’s 2025 annual global report, “The Future of Competitive Advantage in Banking and Payments,” finds that 91% of banks and other FIs said that it would be ‘very challenging’ or ‘challenging’ to remain compliant with industry mandates over the next 12 months. And the surprises don’t stop there.
Keeping up with regulations is challenging due to juggling already busy roadmaps, launching new fraud prevention tools such as Verification of Payee as part of the SEPA Inst mandate in the EU, all whilst continuing to meet customer expectations for innovation and solid operational efficiency.
Legacy infrastructure exacerbates these obstacles, with 40% of surveyed institutions citing outdated systems as the largest barrier to real-time payments, and 31% noting the hindrance they cause with regulatory compliance. Operational resilience remains a key concern, with 37% of respondents emphasising the importance of alternative payment methods to prevent primary system failures.
Modernisation is a priority, as expected, with 32% of respondents focusing on new payment channels and another 32% enhancing cross-border strategies. SaaS models accelerate regulatory compliance by offering automated solutions, enabling banks to stay ahead of the curve and address these multifaceted challenges.
Rising transaction volumes and evolving customer expectations around B2B payments illuminate the inadequacies of traditional banking infrastructures. This gap has led to a mass migration toward scalable, flexible, and resilient solutions in the cloud, with Software-as-a-Service (SaaS) core banking platforms becoming the preferred choice for enabling operational efficiency, compliance, and resilience in what remains a fast-paced payments landscape.
Linking Regulation to Operational Resilience
An evolving regulatory environment compels financial institutions to adopt systems that can keep pace with rapidly changing rules and regulations. Regulatory frameworks such as the FCA's Operational Resilience Requirements and the Digital Operational Resilience Act (DORA) underscore the importance of embedding operational resilience within organisational ecosystems.
SaaS models can accelerate regulatory compliance and help banks stay ahead of the curve by using automated solutions. A growing regulatory burden also highlights the urgent need for banks and FIs to transition from legacy systems that restrict adaptability and speed.
Interestingly, despite the pressures of compliance, the study revealed that only 22% of financial institutions prioritise security as a core concern. This gap reflects a misunderstanding of the integral role security plays in achieving operational resilience and efficiency.
Pain Points Addressed by SaaS
Financial institutions face numerous pain points that cloud-based models can effectively address. Legacy systems continue to be identified as the largest obstacle to modernisation, with 40% of surveyed institutions indicating they are a significant barrier. These outdated infrastructures frequently struggle to meet the demands of modern payment systems, especially as customer expectations shift toward instantaneous, seamless, and personalised services.
Additionally, siloed infrastructures limit scalability and impose operational inefficiencies due to the challenges that come with managing disparate systems. For their part, SaaS platforms provide a remedy, enabling quick access to new payment rails, seamless integration across lines of business, and the agility needed to scale operations when and where needed.
For instance, 44% of financial institution respondents cited scalability as a key advantage of SaaS platforms, allowing them to quickly expand payment services to new regions and customer segments. By leveraging SaaS, banks can focus on delivering innovative customer-centric services while allowing specialised providers to manage infrastructure complexities.
Driving Collaboration and Transparency
Another significant advantage of adopting SaaS solutions is the promotion of collaboration among financial institutions. In the increasingly fragmented global payments landscape, SaaS platforms can serve as a shared framework for collaboration. They enable non-competitive banks to leverage shared services and APIs for a broader range of payment solutions across diverse regions, accelerating the time to market for new services.
Moreover, SaaS platforms foster transparency by centralising data and providing real-time insights. Financial institutions gain enhanced visibility into transaction flows, customer behaviour, and potential risks, ultimately improving decision-making and mitigating operational risks.
Managing Sanction Screening and Reducing False Positives
In today's regulatory climate, managing sanctions screening has become a critical function for banks. Traditional methods involving manual updates to in-house systems are becoming untenable as transaction volumes grow. By incorporating sanctions screening into SaaS platforms, banks can utilise real-time and updated sanctions data to automate their screening processes. Advanced algorithms and machine learning can significantly reduce false positives, resolving one of the major challenges in sanction checks while minimising unnecessary service disruptions.
Legacy Systems and Cloud Migration: A Hybrid Future
While the advantages of SaaS are clear, not all financial institutions will fully move to a cloud-only model in the immediate future. Many will adopt a hybrid solution, balancing legacy systems with cloud-based platforms. This flexible approach allows institutions to retain the stability of existing systems while gradually migrating to cloud solutions to support the latest payment innovations.
The hybrid model allows organisations to maintain reliability while adopting newer technologies to improve functionality and address current challenges.
The Future of SaaS in Banking
Looking ahead, the trend of SaaS adoption within the banking sector has staying power. According to Accenture, 61% of financial institutions intend to transition to the cloud in the next five years, with many already investing in the necessary technologies for modernisation.
The market for SaaS is predicted to expand from $54 billion in 2022 to over $130 billion by 2027, according to the SaaS Academy global trends report.
As the pressure to innovate and meet complex regulatory demands increases, SaaS-based core banking platforms will be positioned as essential components of future payment infrastructures. By enhancing scalability, operational efficiency, compliance, and resilience, SaaS solutions offer the foundation for navigating the evolving financial landscape.
Key Benefits of SaaS for Digital Payments Modernisation
Financial institutions can leverage SaaS technology for improved operational resilience and payment system modernisation through several strategic advantages:
- Access Centralised Visibility: Bottomline’s Universal Aggregator solution provides oversight of the financial information flow, bolstering security and compliance while ensuring efficiency in global financial messaging.
- Receive Consolidated Access to Services: SaaS solutions facilitate comprehensive financial messaging by aggregating payments and cash management into a single, secure platform for streamlined processing.
- Develop New Opportunities through Connectivity: Institutions can enhance their capacities for near-real-time payments and open banking, benefiting from broad access to global markets and services via a multi-clearing network through an intelligent platform.
- Leverage Enhanced Insights: Improved visibility, fraud prevention, and compliance tools allow institutions to protect customers and streamline acquisition efforts, all while fostering trust and operational efficiency.
- Ensure Compliance and Security: Financial organisations can rest easy knowing that they are meeting regulatory and legal requirements globally through integrated solutions that address financial crime management comprehensively.
- Scalability for Growth: Bottomline's solutions enable clients to grow efficiently rather than compounding inefficiencies at a larger scale, thereby facilitating effective tracking, control, and insights into transactions.
The evolution of payments infrastructure is forcing banks and FIs to rethink their strategies for operational resilience and efficiency. SaaS and cloud computing offer a pathway not only to achieving compliance but also to enhancing scalability and innovation.
As FIs navigate a complex and evolving landscape, capabilities offered by SaaS and strong bank connectivity solutions are critical for ensuring operational resilience and efficiency. By addressing legacy pain points and facilitating seamless integration, these technologies empower banks to respond swiftly to disruptions, meet regulatory requirements, and maintain a consistent customer experience.
The adoption of cloud-based platforms will not just enhance operational resilience; it will redefine the very nature of banking. As institutions fully embrace SaaS and strong connectivity, they position themselves not only to survive but to thrive in today's fast-paced payments environment.
Ultimately, success in the digital age hinges on financial institutions' ability to leverage technology strategically, creating a robust, agile, and customer-centric operational framework. By investing in transformative solutions, banks can thrive in an increasingly competitive environment and ensure success in the future of banking and payments.
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