A platform for change
How modernizing infrastructure drives payments transformation
Donna Brennan
Director, Visa Business Solutions, Global Public Sector
Donna Brennan
Director, Visa Business Solutions, Global Public Sector
Payments transformation is no longer a concept of the future. Technology advancements, and the benefits of digitized payments within the private sector, have made it a priority in the present. With this comes a considerable new opportunity for the public sector: enhancing both government-to-business (G2B) as well as government-to-citizen (G2C) payments. Pursuing this shift would yield greater efficiency in procurement, reduced costs, and more robust security. While simultaneously a society-wide impact to businesses receiving funds from the government would be noticed.
60% of government IT decision makers think modernizing their IT infrastructure is important for improving efficiency and security.
But within governments and the wider public sector, legacy IT infrastructures are delaying payment transformation. According to IEEE Spectrum, $35 trillion USD has been spent on IT products and services, with about 75% going to the maintenance and operations of these IT systems. As well as being more costly and less productive, interconnected, outdated applications are not able to scale with technology advancements. And for many governments across the world, intentions to modernize their infrastructures are thwarted by the fear of high transformation costs and complex processes.
The need for a modernized infrastructure foundation
Despite the benefits recognized within the private sector, the challenges of IT infrastructure modernization for governments cannot be overlooked. Infrastructures are incredibly complex, operating highly customized systems that often require dedicated teams to action manual updates. Applications are typically monolithic and can’t simply be transferred to modern solutions, due to their fixed capacity to a few data centers. Less agility within the public sector, along with the need for cost efficiencies, high levels of risk, and the threat of reputational damage would need to be considered for transformation.
While taking action may appear daunting, the lost opportunities of delaying IT modernization far outweigh the cost and effort of changing and upgrading. There are increased risks associated with remaining on legacy platforms, namely those around security and reputation. IBM has found that 60% of government IT decision makers think modernizing their IT infrastructure is important for improving efficiency and security. And as research by McKinsey has shown, infrastructure modernization should be a priority, highlighting benefits such as:
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Cost savings
Consolidating data to the cloud can reduce delays and incurred costs.
Modernized application portfolio
Avoid bottom-up analyses to determine where applications should land, with rationalization and categorization that quickly segments portfolios.
Elevated productivity
As noted within the private sector, productivity can improve by 80%, as core IT activities become automated, and servers and storage are no longer disparate.
Bolstered security
The process of infrastructure modernization is an ideal time to evaluate security needs, measure risks against cost, and create a footprint to meet an organization’s security requirements.
An infrastructure that empowers positive change in payments
Critically, a modernized IT infrastructure can become the secure platform for change across a range of other vital areas, such as payments. Digitizing payments can lead to increased cost savings for governments, alongside eliminated manual processes, greater operational efficiencies, higher satisfaction among constituents, and increased automation.
Any hurdles in the way of achieving this, while unwieldy, are not insurmountable. There are opportunities for public sector organizations to partner with their private sector counterparts, who have relevant expertise to support them in transformation. Evaluating current IT portfolios, adopting new KPIs, and involving all key stakeholders across departments will help secure buy-in for a successful transformation. Modernization can trigger changes in IT system management; there may also be a need to invest in the development of cross-functional skills across infrastructure, security, and application environments.
Beginning the process with this in mind will make the course to transformation less turbulent for the public sector. And with a modern infrastructure foundation, governments and the public sector will be able to realize an actual, noticeable change in payments.
An ideal time for transformation
With the increasing digitization of payments around the world, and innovations in technology driving this forward, the time to act is now. In an article on government trends, Gartner states that 95% of new IT investments made by government agencies will be made in Anything-as-a-Service (XaaS) solutions over the next three years. Efforts to digitize payments could deliver crucial benefits, such as improved procurement; with Straight Through Processing and Virtual Accounts used to speed up processing times. Virtual accounts and central trade accounts can be used to manage travel-related expenses more efficiently. And even within mobility, the use of fleet cards can drive improved efficiency.
Governments and the public sector more broadly are faced with unique challenges and held accountable for optimizing budgets, demonstrating transparency and fiscal responsibility to constituents. Digital transformation in payments points to one thing: a more efficient, secure, and productive public sector, robustly prepared in the present for what the future holds.
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Sources
Three Trends Driving Payments Industry Transformation In 2022 (forbes.com)
Inside the Hidden World of Legacy IT Systems - IEEE Spectrum
MC + IBM Government Index for IT Modernization.pdf (mediaroom.com)
Modernizing public sector IT infrastructure | McKinsey
Gartner Unveils the Top 10 Government Technology Trends for 2022
Straight Through Processing | STP | Automated Payments | Visa
B2B Virtual Account Payment Method (visa.com)
95% of new IT investments made by government agencies will be made in Anything-as-a-Service (XaaS) solutions over the next three years. Gartner
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