How to Protect the Foundations of Transaction Banking Against Disruption in The New Payments Ecosystem
Scalable, Available, Reliable – #SleepAtNightability for Corporate Banking
I previously wrote about the ‘perfect storm’ in payments, and why transaction banks need to be prepared for increasing volumes of payments, processed over a different selection of real-time payments rails.
The increasing transaction value limits on payments made via immediate payment schemes such as UK Faster Payments, Singapore FAST, and the advent of uncapped schemes in Australia, Sweden and Turkey are all indicative of a blurring of the lines between what is transaction banking and what is retail.
So, what impact will this have on traditional, corporate banks?
Protecting from Cracks in the Foundations
One answer is, it is going to place pressure on your foundations. Existing core infrastructure is going to need to continue to facilitate your customers’ high value payments via RTGS, but layering on real-time capabilities is also essential to meeting the convergence of the two banking markets. This includes the ability to process new, cross-border fast payments via the SWIFT gpi messaging standard, as well as true real-time payments in your international market.B2B cross-border payments account for almost 80 percent of all cross-border payments revenues, and banks own 95 percent of this sector. It’s a market share you want to protect from new entrants, and competitors.You need the option to route via the most appropriate and least cost rails to provide the best possible customer experience, and maximise your margins.
But speed cannot come at the expense of the foundations. Reliability and security are critical to your business. The reliability, scalability and availability of your payment services cannot be compromised. It’s easy to fixate on transforming your business, but transformation is a process, which starts with a strong base.And it’s not just about speed; the New Payments Ecosystem is fast and open. 47 percent of corporate banks say they are under significant pressure to increase the amount of remittance data that a payment can carry. The true value of a payment is increasingly shifting to the additional data that a transaction can carry, beyond simply the transaction itself, and corporate banks need to provide both transparency and value to their services
Thinking short-term and rushing to meet regulatory requirements around new real-time payments, without a strategic plan for open payments, will impair your ability to maximise the new revenue opportunities afforded by open payments, and serve to apply greater pressure to your foundations. Supporting an increasing number of payment types and introducing digital channel strategies will both add to payment systems that are already heavily loaded, and could impact on reliability and throughput as well as limit abank’s agility to compete. You need to be able to transform with minimum risk and complexity, to a real-time platform adapted to new open demands.You need to establish an environment that allows you to sleep at night in the future; it’s your problem today, not somebody else’s problem tomorrow.
Securing the New Payments Ecosystem
There is one more consideration before you transform your business – any innovation around real-time payments or Open APIs has to be underpinned by strong security. Validating the credibility of the origination of a transaction is a hot topic in corporate banking, because fraud in transaction banking is becoming more sophisticated. AFP and JPMorgan Chase found that nearly half of financial professionals reported an increase in the incidents of fraud attempts in 2016.
Banks will always have to adapt to introduce new methods to protect treasury management online channels, but this can often impact on user experience. Finding methods to beat the fraudsters whilst providing a great customer experience is key. Advanced analytics are a great way to balance security and compliance with customer experience. Whether this is real-time risk scoring to deal with real-time wire and payment fraud, enhanced analytics to combat money laundering, or Two-FactorAuthentication to protect against theft. You must be secure in the knowledge that your business and that of your customers is protected.
The pressure on transaction banking is two-fold; client expectations around speed, services and experience are evolving at an ever-increasing rate. On top of this, regulatory requirements are becoming more complex as they mandate an open payments ecosystem. This is probably themost challenging era ever for payments, as it works to meet these demands without breaking the foundations of a bank. Transformation has to occur without impacting on the availability, scalability and reliability of the core systems. It’s about maintaining #SleepAtNightability.
Related Blog Posts
Increasing Collections & Satisfaction: Real-Time Payments for Loan Servicing
The old adage that “cash is king” is precisely that: old. In today’s world, convenience is king and real-time payments deliver it in spades. Consider that convenient ways to pay can reduce late payments by up to 76%, while reducing call center volumes by up to 83%, and it’s no wonder lenders are expanding their offerings over time to include checks, ACH, debit cards and now real-time payments.
GDPR: Modern Wealth Is In Your Digital DNA
Hands up if you don’t really know what GDPR is… don’t worry, you’re not alone in fact, 6 in 10 people have never heard of it.
And why should the average consumer know about the General Data Protection Regulation (GDPR)? The regulation itself, which will become enforceable in May 2018, is designed to stop businesses using our data without our knowledge or consent. And that consent means complete transparency on how our data is being used. This sounds like a very reasonable expectation for consumers to have, which of course begs the question; why hasn’t this been the standard up until now?
Fintech Frenzy and Fun
I’m in vibrant Singapore for day one of the inaugural Money20/20 Asia... or is this day two? I’ve lost all concept of time this week (and didn’t realize how close Singapore is to the equator… it’s like wicked hawt outside!) And I’m joined once again by my ever-intrepid Rantings colleague to rant about what’s happening in this fun-filled world of payments.
It’s A Hard Knock Life: Digital Transformation for Payment Service Providers in the New Payments Ecosystem
Is it a hard-knock life for processors and PSPs? Margins are constantly under pressure, and there’s the need for constant innovation, not to mention rock-solid #SleepAtNightability of solutions. And if there’s even the slightest crack in the fundamentals, customers will surely let you know all about it!
Instant Payments Are at the Heart of the New Global Payments Landscape: 10 Trends to Watch in 2018
2017 was a big year for immediate payments: European Banking Association, Real-Time 1 (EBA RT1) SEPA Credit Transfer Instant, The Clearing House (TCH) Real-Time Payments in the U.S., and the Australian New Payments Platform (NPP) schemes, all either going live, or in the case of Australia, about to go live. These schemes enable real-time payment transfers across the United States, 34 European countries and Australia, with the potential to reach nearly another 1 billion people. This comes on top of the existing live schemes in the UK, China and India, so that over half of the global population now can access real-time payments solutions.
The Complexities of Cannabis: Banks, Merchants, Consumers and More
Cannabis—it’s no longer the verboten 800-pound pink elephant (though I think that might be a new strand). It’s about as mainstream as well…mainstream. And as we begin our latest Rantings Rant, it seems like the last time we (well, not you or I) experienced something like this, Al Capone and Elliot Ness were facing off during the time of Prohibition (if you’ve never seen the film The Untouchables, I highly recommend it!).
KodakCoin and Six Ways That Blockchain Could Really Be Leveraged
The newest cry in the cryptocurrency clamour? That of heritage-photography-giant-cum-new-kid-on-the-payments-block, Kodak. Unbelievably, they have managed to out-blockchain the long-island-iced-tea company in their audacity, and (more than) double their share price to boot.
Why User Engagement Matters, Even for Enterprise Applications
As a User Experience Designer at ACI, I spend a lot of time watching users interact with my designs. I need to make sure our solutions work properly, but lately I’m more interested in how they make my users feel. Engagement is a dominant concept in user interface design right now. It’s important because positive emotional experiences often lead to increased use and loyalty.
Five Payments Trends to Watch in 2018 [Part 2]
The New Payments Ecosystem Is Here. The floodgates are opening with PSD2 and UK Open Banking coming into force, bringing an onslaught of new competitors and potential partners. Whether evolution is mandated or market-driven, banks and processors are facing a critical year in their long-term success.
Five Payments Trends to Watch in 2018 [Part 1]
2018 is set to be a year of rapid change and new challenges for payments players. The floodgates are opening with PSD2 and UK Open Banking coming into force, bringing an onslaught of new competitors and potential partners. Whether evolution is mandated or market-driven, banks and processors are facing a critical year in their long-term success.