The American payments landscape is a study in contradiction: unprecedented consumer demand for speed is clashing with systemic inertia within the banking sector. New research from global payments experts RedCompass Labs has spotlighted the severity of this issue, revealing that a staggering two-thirds (67%) of US banks are struggling to keep pace with the industry’s relentless evolution.
This struggle is not merely an internal headache; it’s a direct contributor to global operational instability. The report, “On time, on budget and other fairytales – Payments modernization,” draws on a survey of 300 senior payments professionals and paints a clear picture: payments modernization projects are failing at an alarming rate, directly leading to costly outages.
The True Cost of Stalled Projects
The core finding is unambiguous: a critical payments expertise gap is paralyzing modernization efforts. This lack of specialized knowledge is directly translating into operational failures and significant financial losses.
- Projects Under Pressure: Over half of US banks (54%) delayed or scaled back a key payments project in the past year due to a deficit in internal expertise.
- A Direct Link to Outages: Nearly half of all banks (43%) admit these delayed or troubled projects are directly leading to payments outages.
- Failure is the Norm: Payments projects are widely failing to meet their targets: 83% are delayed, 87% go over budget, and 83% fail to deliver to the original specification.
- The Financial Hit: Each troubled modernization project incurs an estimated average financial loss of nearly $500,000 ($496,953), a figure that doesn’t account for long-term reputational or regulatory penalties.
“There are almost no payment modernization programs that go live on schedule, on budget, with the original specification,” notes Tom Hewson, CEO at RedCompass Labs. “The entire payments consulting industry exists because of this issue. What holds banks back? The same four systemic issues: the rate of change, the vendor gap, the scale divide, and, critically, the shortage of true payments experts.”
A Global Pattern of Instability
The report provides sobering context with a list of high-profile global system failures that underscore the urgency:
- The European Central Bank’s multi-trillion-euro payments system was offline for seven hours.
- Citibank suffered a nationwide outage impacting 200 million customers.
- The UK Treasury questioned nine major banks following a total of over 800 hours of unplanned downtime in just two years.
The Systemic Barriers to Modernization
Banks are facing immense pressure from multiple angles, including the looming ISO 20022 migration deadlines, the rollout of instant payments, and growing cross-border and Open Banking demands. The survey identified the main obstacles crippling their ability to adapt:
- Shortage of Skilled Professionals (55%): The talent gap is the single biggest impediment, highlighting a profound lack of deep expertise required to manage modern compliance, technology, and real-time operations.
- Regulatory Pressure (41%): Continuous and evolving mandates force banks into costly, time-consuming compliance exercises that often overshadow strategic innovation.
- Legacy Systems (36%): Outdated, custom-built infrastructure is proving inflexible and highly resistant to modern upgrades, increasing the risk of failure with every attempted change.
- Budget Constraints (35%): With payments often viewed as a cost center rather than a revenue driver, securing sufficient investment for massive infrastructure overhauls remains a challenge.
AI: The New Frontier for Bridging the Expertise Gap
Recognizing the unsustainability of the current approach, banks are increasingly turning to next-generation technology to fill the talent vacuum.
The research suggests a clear consensus that Artificial Intelligence holds the key to greater operational resilience and project success:
- Potential in AI Agents: A commanding three-quarters (75%) of banks see significant potential in AI agents to help address the acute payments expertise shortage.
- Adoption is Accelerating: Over half of respondents (53%) are already utilizing AI in their payments operations, with a further 29% planning adoption within the next 12 months.
“AI can write and calculate faster than we can,” explains Hewson. “It doesn’t need breaks, vacations, or childcare. It gives our experts more time to focus on what matters most, thinking and solving the most complex problems. It’s a new way of working, humans and AI, side by side.”
For the US banking sector, the path ahead is defined by a choice: continue to endure costly, reputation-damaging outages caused by a lack of deep payments knowledge, or accelerate the adoption of specialized support and AI tools to finally keep pace with the hyper-speed reality of modern payments. The data suggests that for a majority of institutions, the latter is quickly becoming the only viable option.