How Commercial Banks Are Adapting to New Systems

Banking may sometimes lag behind other industries in modernization, partly because digital transformation is costly and complex. However, client expectations, new technologies, and regulatory standards are driving commercial banks to adapt faster than ever before. In this new era of banking, these institutions are rethinking how they process payments, modernize digital systems, and apply artificial intelligence. 

Modernizing payment processing 

Today’s business clients expect payments to move instantly. Meeting that demand requires a commercial bank to update its systems for speed, accuracy, and transparency. 

A key component for this transformation is ISO 20022, a universal language created by the International Organization for Standardization. Payment transactions built on ISO 20022 carry richer, more structured data that can be read by machines, reducing the need for human intervention and creating consistency across borders. 

Real-time payment processing is faster, but that’s not the only improvement ISO 20022 brings. Commercial banking clients may also benefit from: 

• Connectivity. Using the same international standard allows payments to move smoothly across different countries and systems, reducing delays and simplifying cross-border transactions. 

• Cost savings. Increased efficiency and fewer errors reduce transaction costs and eliminate the expense of data translation. 

• Enhanced fraud prevention. More information on each transaction can help fraud monitoring tools spot red flags before money moves.  

Altogether, the advances brought by adopting ISO 20022 give businesses the speed and reliability they need to compete in a connected world. 

Moving beyond legacy systems 

Historically, commercial banking has relied on outdated systems that are costly to maintain, difficult to integrate, and prone to creating silos. In recent years, however, many banks have begun investing in modern platforms designed to streamline operations and improve the client experience. 

A major step in this direction is the growing use of application programming interfaces (APIs). An API is essentially a behind-the-scenes pipeline that allows two systems to exchange data securely. For example, a commercial bank might provide APIs that enable clients or fintech partners to initiate payments, check balances, or reconcile transactions directly from their own accounting or treasury systems. 

Banks can provide APIs using their on-premises legacy systems, and many started this way. However, shifting to cloud platforms has made it easier for banks to scale, manage, and secure APIs more effectively, allowing for faster integration and innovation. 

Using artificial intelligence and data analytics 

Data analytics – the process of examining raw information to identify patterns and trends – has always been important in commercial banking. By analyzing transaction data, banks can uncover insights that improve decision-making and support better client services. 

Those insights can surface almost instantly when you add artificial intelligence (AI) to the picture. AI can also generate real-time recommendations for both clients and bank leaders. 

For example, commercial banks might use AI to: 

• Predict customer behaviors. 

• Increase operational efficiencies. 

• Automate manual processes in loan underwriting. 

• Detect and assess the impact of regulatory changes. 

The possibilities seem limited only by how banks choose to put AI to work. 

A new era for commercial banking 

The future of commercial banking is already taking shape, and it’s the institutions that adapt to new systems and technologies that will lead the way. By embracing modernization, commercial banks can create lasting value and build stronger partnerships in a rapidly changing world. 

Sources 

https://www.usbank.com/corporate-and-commercial-banking/insights/payments-hub/trends/demystifying-iso-20022.html  

https://www.redcompasslabs.com/insights/iso-20022-the-ultimate-guide-to-rich-data/  

https://www.aciworldwide.com/wp-content/uploads/2024/09/Unlocking-the-value-of-ISO-20022.pdf  

https://unitedfintech.com/legacy-systems/ 

https://aws.amazon.com/what-is/api/  

https://www.pwc.com/us/en/industries/financial-services/library/cloud-banking.html  

https://www.investopedia.com/terms/d/data-analytics.asp 

https://www.deloitte.com/us/en/services/consulting/articles/ai-in-banking.html 

Contact Information:

Name: Sonakshi Murze
Email: Sonakshi.murze@iquanti.com
Job Title: Manager