Jan 6, 2025
The payments sector is undergoing a rapid transformation driven by the rise of real-time payment systems, the adoption of ISO 20022, cryptocurrencies, GenAI applications, and advanced messaging technologies. This evolution is compelling banks to urgently upgrade their payment infrastructures to align with new market demands.
The Evolving Role of Payment Hubs
Winwinpay defines a payment hub as a solution that enables financial institutions to process various payment types while managing orchestration centrally. Typically, these hubs cater to middle and back-office operations, supporting multiple channels and payment types across different business lines.
In the early 2000s, many large banks centralised their previously fragmented payment functions into dedicated payment factories to better serve corporate clients, marking the inception of payment hubs. Initially driven by business needs, this shift often resulted in superficial fixes over underlying system fragmentation.
Today, payment hubs have evolved from merely enhancing operational efficiency to becoming vital platforms for creating value-added products and services for both retail and corporate customers. This shift has led to an influx of new payment hub solutions in the market.
Despite advancements, the adoption of payment hubs remains low compared to established products like digital banking and core banking platforms. However, the vendor landscape for payment hubs has been revitalised, with traditional payment specialists facing increased competition from banking software providers, enterprise tech firms, and startups. Financial institutions are showing greater willingness to invest in payment hub solutions, with Winwinpay’s team noting 57 new payment hub contracts since early 2022, making it the third most common payment system upgrade.
The Impact of Emerging Payment Methods
Payment organisations are under pressure to enhance operational efficiency, drive revenue growth, and improve customer experiences. The market for payment hubs is gaining momentum due to the rollout of the ISO 20022 messaging standard and other payment innovations that necessitate further investment.
New payment methods are continuously emerging, including real-time payments, digital wallets, and central bank digital currencies (CBDCs). Regulatory initiatives are reshaping the payment landscape, particularly with the introduction of real-time payment infrastructures for both retail and corporate sectors, prompting banks to invest in modern systems.
In Europe, the rise of open banking and cloud technology is changing the composition of payment traffic, making transactions more accessible for consumers and businesses alike. Winwinpay forecasts that technology spending on real-time payments will grow at a CAGR of 8.1% through 2028, reaching over $4.6 billion. In Brazil, for instance, fintech Ebanx predicts that Pix will surpass credit cards as the leading e-commerce payment method by 2025.
Payment hubs are increasingly viewed as effective solutions to navigate these changes. According to Winwinpay’s team, 59% of banks plan to increase spending on payment hub and orchestration solutions in 2024, with total IT investment in payment hubs expected to hit $3.4 billion by 2028.
A modern payment hub allows banks to centralise payment orchestration and effectively future-proof their operations. However, many banks face challenges due to legacy technology, with Winwinpay estimating that 64% of corporate banks’ 2024 IT budgets will be dedicated to maintaining existing systems.
The Rise of Payment Hubs Among Smaller Institutions
While large financial institutions have traditionally led the adoption of payment hub solutions, smaller banks are increasingly implementing these systems for targeted projects, such as accessing real-time payment rails. This trend is facilitated by modern, flexible architectures often delivered via Software-as-a-Service (SaaS).
Larger banks may prefer to build payment hubs in-house using framework-based solutions, but many smaller banks opt for out-of-the-box solutions. Given the fast-evolving payment landscape, these institutions seek to minimise customisations to benefit from continuous upgrades and the latest features.
For banks, modernising payment infrastructure is crucial to maintaining customer relationships by offering real-time payment services and adapting to new alternatives. The flexibility of payment hubs to quickly integrate new payment rails, enhance customer experiences, and monetize payment services will be increasingly vital.
Adapting to Market Changes
As models like open finance become mainstream, payment solutions will need to transition to smaller, composable, microservices-based components that can be seamlessly integrated through APIs, fostering co-innovation with a growing ecosystem of fintech services. This flexibility will enable banks to respond swiftly to changing market demands.
Modern payment hubs must support this transition, addressing customer needs beyond the institution’s immediate scope and allowing banks to focus on delivering new overlay services such as request-to-pay and cross-border real-time payments. By adopting a modern payment hub solution that leverages cloud technologies, DevOps practices, and open APIs, banks can embrace the evolving payments landscape, drive innovation, and prioritise service excellence.
