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.
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In the UK, faster payments are well established, and we have seen new innovations as well as new businesses being built since May 2008. In Singapore, which went live in 2014 with its Fast and Secure Transfers (FAST) scheme, we are starting to see similar innovations. And we can expect similar seismic shifts in payments innovation for years to come, as Instant Payment schemes in Europe and Real-Time Payments in the US go live, ubiquity increases and real-time payments become the new normal.
Security, the New Payments Ecosystem and the Need to Educate the Consumer (Or Ask Them to Unclog Your Sewer!)
When it comes to any payments ecosystem, you must remember that we are talking about MONEY. More importantly, people’s money (like yours and mine). In any conversation in this space, secure is something that is assumed. A consumer simply won’t use a new system if they don’t believe it is secure. Unless of course it’s free Wi-Fi. As we have seen, folks are willing to do almost anything to get free access on their devices, even agreeing to clean toilets! (This was a real thing… one hotspot operator added it to their Terms of Service fine print). When we talk secure, it’s important that we keep this in mind: secure is not just a piece of the Hierarchy of Payment Needs, it’s an integral part of it, which is why it sits directly on top of the foundations. Without this layer, the whole ecosystem collapses.
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How to Protect the Foundations of Transaction Banking
Scalable, Available, Reliable – #SleepAtNightability for Corporate Banking
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Available in Spanish and English
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Dear Mark, this is a 100% true story (and a solid ‘Ranting’ to boot). As you know, I just returned from a lovely and relaxing vacation (or as our European colleagues call it, holiday). And as I got into my car this morning—for the first time in more than a week—I realized the gas tank was near-empty and that my low-tire indicator light was on… and I needed to get my daughter to camp en route to coming into the office.
You’d think this a minor inconvenience, right? Well…
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