Payments modernization, depending on the financial services company, will be synonymous with upgrades.
But it also needs to be synonymous with innovation, collaboration and business outcomes. As Wally Mlynarski, head of merchant solutions and receivables at Bank of America, told PYMNTS for the “What’s Next In Payments” series, modernizing payment infrastructures represents a shift in how transactions are handled and processed.
According to Mlynarski, modernization is not just upgrading infrastructure — it’s much more than that, including new transaction types, new information, new data, essentially enabling new business models.
This comprehensive approach to modernization is driven by client demand and the necessity to improve customer satisfaction through enhanced payment experiences. As Mlynarski explained, clients face “pressure to accommodate the new payment types given the high correlation of customer satisfaction to the payment experience.”
One such area of focus is the increasing adoption of alternative payment methods (APMs). These methods vary significantly by region, with Europe leading through SEPA open banking and domestic initiatives like Zelle gaining traction in the United States.
“We’ve seen incredible uptake on Zelle,” Mlynarski said, adding that, as an industry, the next step is to further the use case, including investing in request for payments.
Real-time payments (RTP) and the adoption of ISO 20022 messaging standards are pivotal in the modernization journey. Bank of America is actively involved in these developments, leveraging platforms like The Clearing House’s RTP® Network.
As Mlynarski said, the introduction of the FedNow® Service by the Federal Reserve also aims to support smaller banks and ensure interoperability across different platforms, further propelling the adoption of real-time payments. This initiative is crucial, he said, for creating a seamless and efficient payment ecosystem that benefits all stakeholders.
Mlynarski also addressed the international scene, which presents unique challenges and opportunities in payment modernization. He highlighted Brazil’s success with the Pix payment system as a case in point.
“The government saw a huge opportunity to drive a new payment type that carries robust remittance data and other information to help automate the reconciliation of receivables while reducing the risk of returns,” he said.
Such innovations underscore the importance of investing in infrastructure beyond just the payment rails, including ancillary products that optimize the entire transaction process. Bank of America’s Brazil Auto-Invest product, for example, automates cash management processes to improve efficiency.
While digital assets generate buzz, they are not yet a client-driven initiative for Bank of America.
“There’s a lot of buzz around digital assets,” Mlynarski said, “but our clients are actually not asking for another new way to accept payments. … So this is not a client-driven initiative for us.”
On the other hand, artificial intelligence (AI) holds immense potential in enhancing payment processes and client experiences. Bank of America has invested in AI-driven solutions like the Intelligent Receivables product, which uses AI to match invoices to payments, improving straight-through processing.
Highlighting another example, Mlynarski said, “We extended a chat feature that uses our AI assistant, Erica, from our consumer model.” So now, corporate customers are seeing the advantage of AI in self-service.
One of the less known but valuable services Bank of America provides to its merchant accounts is the data that can be aggregated and deployed to gain customer insights. Harnessing data effectively remains a critical challenge and opportunity.
“I think anybody who says we’re all doing a good job with the data we’re generating doesn’t understand the magnitude of the terabytes of data that we’re generating on a daily basis,” Mlynarski said. He encourages the creation of business cases that leverage data for cost reduction and potential revenue uplift through AI deployment.
Mlynaski pointed to future advancements in AI, such as small language models, that could further refine data utilization, allowing for microprocess improvements within individual companies. This evolution will enable more targeted and efficient data applications, enhancing overall business operations.
For businesses navigating the complex landscape of payment modernization, Mlynarski advised prioritizing investments that offer speed, scale and industry support.
“You must execute on the things that are near, that are here, and have an industry behind it … and supporting it,” he said.
Collaboration and partnerships are also crucial. Embedded finance and partnerships with software providers enhance customer experiences, while interoperability initiatives like the FedNow platform require collaboration across the financial sector.
“We need to partner with our peer banks, our competitors, our merchants, and collaborate with our legislators and regulators,” Mlynarski said.
Looking ahead, Mlynarski doubled down on real-time payments and enhanced data and their potential to play pivotal roles in the payment ecosystem. Innovations in identity verification, security and fraud prevention will further shape the future, he said.
Mlynarski also called out sector-specific opportunities, such as healthcare and hospitality, where payment modernization can drive improvements.
“Whenever there’s a transfer of payment or money, there’s an opportunity to enhance [the process],” he said, “and drive a better customer experience for consumers as well as businesses.”
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