Payments Modernization: Hubs, Intelligent Routing, and the Race for Real-Time
By: Paul Schaus
April 1, 2026
If there is one area where I see the widest gap between what banks say they want and what they are actually doing, it is payments. Every conference panel, every board strategy session, every vendor pitch deck declares that payments modernization is urgent. Datos Insights finds that 97 percent of bank payments executives expect their institution's payments revenue to increase over the next 12 to 24 months. And yet, when I look at the actual state of payments infrastructure across the industry, too many institutions are still processing transactions through fragmented legacy systems that cannot deliver the speed, transparency, and intelligence that commercial and retail customers now demand. The gap between aspiration and execution in payments is wider than in any other technology domain in banking.
Datos Insights' survey of 200 financial institutions (66 over $10 billion, 52 over $30 billion and 82 over $100 billion) tells the story in stark terms. Forty-eight percent have implemented some form of payment hub, 13 percent are in the process of implementation, and another 13 percent are planning to do so within 36 months. Among banks with assets over $100 billion, adoption reaches 98 percent. But downstream at the regional and community bank level a large percentage of institutions are still figuring out their strategy or have no plans at all.
I want to be direct about this: if your institution does not have a payment hub strategy in 2026, you are already behind. A payment hub is not a luxury technology for large banks. It is the architectural foundation for everything else, real-time payments, intelligent routing, consolidated fraud detection, regulatory compliance, and the kind of unified customer experience that commercial clients increasingly expect. Without a hub, you are managing payments through disconnected systems that duplicate effort, obscure risk, and make it nearly impossible to deliver the consolidated view of payment activity that your commercial clients need.
The business case is compelling across multiple dimensions. Datos Insights' research found that payment executives rank revenue drivers as the most important factor in the investment decision, but the benefits extend to operational efficiency, risk mitigation, and competitive positioning. Seventy-eight percent of respondents rate cloud-native deployment capability as high or critical importance, and 75 percent say the same about intelligent routing capabilities. These are not incremental improvements to existing processes, it represents a fundamentally different approach to how payments are managed across the enterprise.
The Federal Reserve's FedNow service, launched in 2023, has crossed the adoption threshold that separates early experimentation from mainstream infrastructure. Over 1,600 financial institutions across all 50 states now participate, a 44 percent increase from the prior year. The transaction limit has been raised from $1 million to $10 million, opening the door to commercial and business-to-business use cases that were previously impractical. New APIs enable institutions to automate data integration, and the Exception Resolution Service has been expanded to cover instant payment transactions.
My perspective on FedNow is this: the institutions that are still "evaluating" instant payments are going to find themselves unable to compete for the commercial relationships that increasingly demand real-time settlement. Treasury management clients expect instant visibility and instant movement of funds. The Clearing House's RTP network and FedNow together are creating a real-time payments ecosystem that will become table stakes for commercial banking within the next 18 months. CSI's survey confirms this trajectory, with 44 percent of community banking respondents planning to expand real-time payment capabilities for commercial clients.
Of all the applications of artificial intelligence in banking, intelligent payment routing may offer the most immediate, measurable return on investment. As the payment landscape grows more complex with multiple rails, varying fee structures, different settlement speeds, and evolving regulatory requirements across channels, the ability to automatically route each transaction through the optimal path becomes a significant competitive and cost advantage.
Datos Insights found that 75 percent of bank executives rate payment routing capabilities as high or critical in importance in their modernization efforts. The convergence of card payments and account-to-account (A2A) payments is accelerating this need. Banks increasingly need a single platform that can intelligently direct transactions across card networks, ACH, real-time payment rails, and emerging channels based on cost, speed, compliance requirements, and customer preferences.
McKinsey's Global Payments Report frames the broader landscape as one of "competing systems, contested outcomes," with $2.5 trillion in global payments revenue at stake. Regional fragmentation, competing standards, and the ISO 20022 transition are making the routing decision more complex, not less. My opinion is that intelligent routing is where banks should focus their AI investment in payments before pursuing more speculative applications. The ROI is tangible, the technology is proven, and the competitive impact is immediate.
Payment's modernization is not just a technology upgrade, it is the gateway to commercial banking growth. CSI's survey reveals that 49 percent of community banking respondents cite technology limitations or integration gaps as the biggest obstacle to expanding their commercial portfolio. Nearly half of respondents say technology not competition, not credit risk, and not regulatory burden is what holds them back from growing commercial relationships.
This finding resonates with what I see at CCG Catalyst Consulting. The institutions that are winning commercial relationships in 2026 are the ones that can offer integrated cash management, real-time payment capabilities, seamless international settlement, and intelligent analytics on payment flows. These capabilities require modern payments infrastructure. You cannot deliver them on legacy systems.
Fifty percent of CSI respondents plan to leverage data analytics for commercial client insights, and 43 percent are expanding digital commercial and treasury services. These are the right priorities. But they all depend on having a modern payments platform that can generate the data, support the APIs, and process the transactions at the speed the market demands.
One mistake I see repeatedly is institutions that approach payments modernization and regulatory compliance as separate workstreams. They are not. The OCC's Fall 2025 Semiannual Risk Perspective includes payments infrastructure in its cybersecurity examination priorities. The 2023 interagency guidance on third-party risk management applies directly to payment hub vendors and processors. NACHA rule changes taking effect in April 2026 add new requirements for monitoring and fraud detection on the ACH network.
My advice is to build regulatory compliance into the payment hub architecture from day one, not as an afterthought, not as a bolt-on, but as a design principle. Institutions that embed compliance into their payments infrastructure will move faster because they will not need to retrofit governance later. This is the same principle I discussed in my article regarding AI governance - compliance-first actually accelerates innovation.
If I had to recommend a single technology investment for a bank executive to prioritize in 2026, it would be payments modernization. The business case is proven and well-documented. The technology is mature, cloud-native payment hubs with intelligent routing, real-time processing, and robust analytics are commercially available from multiple established vendors. The competitive pressure is intensifying daily as fintech players and larger institutions raise customer expectations. And the regulatory framework supports modernization while providing clear guardrails.
Banks that invest in payments modernization now will own the commercial relationships of the future. Those that delay will find themselves competing for scraps—processing the transactions that other institutions' systems have already routed elsewhere.
Datos Insights, Payment Hubs: Why Banks Must Move Forward With Urgency (Q2 2024 survey of 200 FIs)
McKinsey, 2025 Global Payments Report: Competing Systems, Contested Outcomes
Federal Reserve, FedNow Service Updates and 2026 Fee Schedule (2026)
CSI/CITE Research, 2026 Banking Priorities Executive Report (October 2025 survey)
Capgemini, Top Trends 2026 Banking
Accenture, Banking Trends 2026: Unconstrained Banking
Newgen, Banking Top Trends FY26: Banking Identity 2026
OCC, Semiannual Risk Perspective, Fall 2025
Interagency Guidance on Third-Party Relationships: Risk Management (2023)
Next in this series: Lending Transformation: AI, Private Credit, and the Battle for Borrowers
CCG Catalyst Consulting is a banking and fintech advisory firm that has guided over 600 financial institutions through core modernization, digital transformation, AI strategy, payments, contract negotiations, and M&A. Through its Bankers Fintech Council, CCG Catalyst also bridges the gap between banks and fintechs to accelerate responsible innovation. Managing Partner Paul Schaus is a recognized Top 25 Financial Services Consultant, and subject matter expert in banking, bringing experience across every level of the industry to the firm's advisory practice. Learn more at www.ccgcatalyst.com
