Real Time Everything: Transaction Banking Good to Great - Blog Series Week 2
My introductory blog last week included references to a bicycle race. I now bring us to our first race stop, and this week we're going to talk about 'real time'. At this point in the race, our cyclists are looking around and seeing how the competition compares. For a bank, this means how they compare to their peers and industry leaders, and for a corporate customer, it's about knowing what they've got to work with now.
In the UK, we've embraced real time with Faster Payments, and from the consumer perspective, it’s very exciting. It means I can pay my credit card bill later and thereby keep the money to myself for longer, and subsequently benefit from absolutely no extra interest in my 0% interest current account (0% is disappointing, but the concept is jolly clever nonetheless). Of course there are more benefits than just that, and I certainly appreciate knowing that the money has been warmly received by my beneficiary.
The story is more important when we start to look at the corporate client. Holding onto their money for an extra day or two means it can be used as working capital. And working capital is good. When a corporate does pay, they need to know exactly when it is received. Knowing where their money is at that moment in time is what’s important to them, and helps them maintain mutually rewarding trading relationships. So it's about real-time payments, and real-time reporting and statuses back; anything else is too long and too late.
We are making progress with some of our 'peloton' banks that are investing heavily with real-time core banking, real-time payment engines and real-time reporting. But of course many of the bank systems are still stuck in batch mode and will be for many years to come. The biggest cost for getting Faster Payments in the UK was the banks moving to real-time capabilities and doing so on legacy systems. Thankfully new solutions are coming forward that can bring 'legacy systems' kicking and screaming into the modern age without the need for this heavy investment. This week, I'm attending a launch event for such a system and it will be fascinating to discuss with industry pundits how this can truly help the peloton with their customer propositions and their readiness for real time.
And then there is the big dinosaur in the room, which we shall call the 'MT103-osauraus'. Let's face it, the MT103 is a 20th century model and the lack of carried information, and lack of real-time confirmation of arrival and settlement is hampering true global trade. SWIFT are trying to push the MX messages, but until that is embraced consistently around the world, we're going nowhere.
We can achieve real time domestically with RTGS and a bit of effort, but internationally, we're going to have to embrace beyond MT103s to be truly great. Perhaps that's why some banks are now looking for 'Correspondent+' services outside of the standard SWIFT model.
Real time is certainly a buzzword (2 actually), so what do you think will truly make a difference? Send me your comments.
Next week, race stop 2, and we'll take a look at improving some of those legacy systems.
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