Sibos 2016: rethinking systems for a real time world
Open application programming interface (API) banking and immediate payments are a perfect storm for new banking, according to FIS. Established payment systems do not work in the way most consumers and businesses expect in a digital, mobile, real time world.
Consumers expect instant gratification; digital money should act more like physical cash in terms of speed and ease than a funds transfer. Banks will have to rethink their roles in order to serve their customers in this environment, bearing in mind that customer loyalty is a thing of the past; if banks do not develop the services customers want, those customers will go elsewhere.
During yesterday’s Open Theatre session, Flavours of fast – Immediate payments & open API banking: The perfect storm, FIS explained how banks might approach an ‘always on’ payments environment. “In an open API environment, customer expectations will be quite different,” said Warren Gardiner, vice-president strategy, enterprise payments at FIS. “Banks used to talk about 99.95 per cent availability; now it is 99.999 per cent. But in a 24-hour world, even that won’t be enough.”
What does this mean for banks’ infrastructures? Banks can approach this from a legacy point of view or can use the changing requirements as a reason to reassess systems. Real time payments will mean a significant increase in hits on banks systems and every transaction that comes in must be validated, requiring other systems to be interrogated. One bank FIS was advising calculated that migration from batch to real-time payments processing could require tens of millions of dollars extra to be spent on support of those payments.
“Banks need to think about how they can deploy systems that will allow them not to have to spend that sort of money and also to take the load off systems,” he said.
Richard Chapman, vice-president and functional head of reconciliations at FIS, said in searching online about the benefits of faster payments and API banking one group was conspicuous by its absence: banks. “We have heard a lot at Sibos about how banks have to adapt to the new world and create new revenue streams for their business,” he said.
There was an underlying theme to the Sibos hot topics of blockchain, open APIs and faster payments, he said, and that was the transfer of data into and out of a bank. “The services banks deliver in the future will all be around data. To do that, you need to have confidence in your data.”
In a real time payments world, banks need platforms that will enable them to validate, enrich, collate and report on data in a focused manner. “Faster payments delivers the capability to provide supplementary data and open APIs enable banks to collect information more seamlessly. Combining these innovations on a powerful framework based on new technologies such as machine learning, will enable banks to deliver new solutions.”
These solutions will form the basis of new revenue-generating streams. Chapman mentioned a few, such as the concept of delivering payments messages with invoicing details and collecting information from other banks in order to aggregate it and provide a holistic service to customers so they know their positions across all of their banks. “Banks can create efficiencies for customers using the same data that is collected, validated and enriched on the same platform.”
FIS reminded delegates that in the instant world, you need to provide context in order to drive revenues, reduce costs and increase efficiency. Faster payments without data or context is just less slow payments; open APIs without context or data is confusion.
Andy Schmidt, senior analyst at CEB Towergroup, reminded the audience that customer loyalty among corporates is a thing of the past. The share of the corporate wallet is being spread across many more banks. While relationships remain important to corporates, being able to deliver innovative products and services to meet their needs – and that will evolve with them – also matters.