Sam Jawad, ACI’s Executive Vice President and Head of Banks & Intermediaries, explains how managed services for payments have evolved over the past two decades, and how banks can take advantage of the ongoing evolution in cloud architectures.
Q: How has the landscape for managed payment services changed over the past 20 years, during which time ACI has been managing and operating payment solutions on behalf of customers?
Sam Jawad: The enormous investments in cloud technology over the last decade or so have transformed the way payment services can be provided for every tech player. It is now more efficient, cost-effective and faster than ever for financial institutions to integrate and consume third-party, cloud-hosted Payments-as-a-Service (PaaS) solutions, and use them to get products out to market quickly. This applies across the entire payments solution stack, from real-time payments, cards and account-to-account, through to acquiring and transaction processing.
Modern cloud architectures also mean that today’s PaaS models are not the same as traditional models of outsourcing operations, which left financial institutions dependent on their partner’s roadmap. Vendors with mature offerings and decades of market experience also have rich partner ecosystems, whose solutions can also be enabled and integrated via the cloud to enrich the payments experience. This allows financial institutions to further accelerate cost-to-return by cutting out significant development time and costs — it is common now for new features and services to be brought to market in 90 to 180 days, or less.
These ecosystems also enable financial institutions to circumvent skills shortages, which are growing more acute as fintechs and big tech players compete for talent, and demographic changes see experienced talent leave the workforce.
Q: How do these factors enable financial institutions to leverage Payments-as-a-Service to enhance their competitive advantage?
SJ: Payments-as-a-Service, and the cloud more generally, allows you to create an ecosystem of partnerships. That allows banks and payment providers to better respond to today’s competitive landscape by strategically focusing on the areas where they differentiate and add value, while partnering in the areas where they don’t.
This matters because success in digital payments depends on getting to market quickly with new and differentiated overlay services that, enabled by richer data, enhance the customer relationship and establish new revenue streams beyond simply processing payments. For consumers, that might be services built on top of traditional borrowing and lending products that improve manageability or better integrate with other aspects of their lives (both financial and non-financial).
In the corporate world, quicker sending and receiving of funds improves liquidity, but data-enabled services around payments management, tracking, financial insights and automations are more differentiated and higher value.
However, the complexity of today’s “spaghetti” architectures seriously limits banks’ abilities to compete with neo banks and other new entrants to these kinds of customer experiences. They are also not well suited to managing the evolution to a real-time world with consumers and corporates expecting instant gratifications.
Built on new rails with advanced messaging formats, real-time payments require a new set of working relationships, processes and policies across the board — and this is just the tip of the iceberg.
Cards took decades to evolve from tools for making payments more convenient and transportable, to sitting in digital wallets and enabling eCommerce. Real-time payments, too, will evolve beyond being just a faster alternative to traditional payments to unlock new business models and real-time economies (we already see this in the gig economy). But that change will be even more disruptive, and it will take a fraction of the time — so Payments as a Service will be vital for keeping up. Specifically, managed services from vendors with reputations for running mission-critical software.
Q: What are the differentiated attributes that ACI brings to the table as a Payments-as-a-Service partner, and why are they important?
SJ: ACI and its solutions have the scale, expertise and flexibility to simplify payment environments and provide customers with credible paths to incredible changes that deliver transformation without compromise, right across the payments landscape. These attributes are vital for financial institutions looking to develop end-to-end consumer or corporate payment experiences, beyond individual channels.
Payment processing is a critical and potentially systemically important function. For the “as-a-service” model to truly allow banks to focus on developing their business and better serving customers, it requires mature solutions combined with decades of experience with payment messaging formats and handling business processing complexity.
ACI’s scale in terms of depth and breadth of resilient, high-performance solutions for any payments channel — and the global experience and skills to support them — is a huge advantage here. Likewise, our track record of successful implementations stretching back more than 45 years, plus the knowledge and experience gained from supporting the payment strategies of 19 of the world’s top 20 banks.
As financial institutions build out new tech stacks combining best-in-class services, our solutions and wider ecosystem mitigate complexity by being simple to work with, to access and connect to. This ensures time to market remains short, even as the scope of their ambitions around digital payments and overlay services grows.
And, finally, the nature of financial services means one-size-fits-all solutions or deployment models are not always appropriate. Financial institutions require the flexibility to modify — or have modified — vendor solutions, or the option to deploy them on premise in their own cloud instances. Only vendors of a certain scale and maturity, such as ACI, can offer the flexibility to tailor managed service solutions based on customers’ needs.
Get more insights on current trends transforming the payments industry in the 2022 Prime Time for Real-Time report.