Sibos 2023: The era of instant payments – global banks must turn to the latest technology
When it comes to payments, the need for speed underpinned by new industry, regulatory and customer demands has put enormous pressures on banks to adapt.
Consumers and businesses want instant, seamless payments to be sent and received whenever and however they choose. They want to be able to manage their cash flow in real time and receive funds even on a weekend or public holiday.
Experts predict that 80% of the payment volume worldwide will use ISO 20022 standards by 2025. This new messaging standard is accelerating the adoption of instant payments, as it is used for services such as the UK’s New Payments Architecture (NPA) and the US’ FedNow to support seamless transactions in real time. In Europe, the EU Commission has proposed a legislation that mandates all payment service providers to offer instant payments in euros at any time of day, every day, using networks such as TARGET Instant Payment Settlement (TIPS).
Instant payment services in the APAC region are also accelerating. Japan launched the world’s first real-time payment network almost 50 years ago. Fast forward to today, countries like the Philippines – which have significant unbanked and underbanked populations – are leapfrogging the card age and moving straight to digital wallets. Even more recently, the launch of the UPI-PayNow linkage enables users from India and Singapore to make and take payments instantly between both countries.
Instant payments bring new challenges
The benefits of instant payments are clear – transactions are faster, more convenient and seamless for customers and businesses alike. However, they come with a new set of challenges for banks, such as upfront costs to adapt, implementation issues and combating financial crime.
According to Finastra’s survey in partnership with Aite-Novarica (now Datos Insights), many financial institutions are currently in the process of deploying new payment rails. 72% have completed this project, have one in progress or plan to implement. However, 57% of respondents are facing challenges, with legacy infrastructure making modernisation efforts extremely or very challenging, especially for smaller banks.
Banks must also upgrade the way they manage fraud and financial crime. The speed of instant payments minimises the timeframe to stop such activity, meaning banks need to utilise the right technologies to do this in real time. If they fail to do this effectively, they may be liable to severe reputational and financial damage due to noncompliance.
Embracing the new era of tech-driven payments
Innovative technologies are bringing the future of payments forward for banks, with cloud and Payments as a Service (PaaS) solutions significantly reducing barriers to entry. Instant payment processing in the cloud enables banks to quickly transform and scale their operations to cope with increasing volumes and adapt to new customer, regulatory and industry demands.
PaaS helps banks modernise their payment capabilities at a reduced time to market and value, and at a lower Total Cost of Ownership (TCO). This also alleviates concerns about upfront investments in costly and complex infrastructure.
For example, Finastra Payments To Go is an end-to-end SaaS payment processing solution that enables banks to deliver instant and flexible digital payments faster and more efficiently. Integrated with Finastra’s Financial Messaging Gateway, the solution provides institutions with frictionless, more affordable and direct access to a range of instant payment networks. Through open APIs, banks can quickly and seamlessly integrate specialist fintech services with the solution, such as for compliance with anti-money laundering (AML) or know your customer (KYC) requirements.
Other technologies such as AI can be used to analyse a customer’s payment history to stop fraudulent activity and financial crime in real time. We recently launched Finastra Compliance as a Service to help banks combat financial crime for a range of instant payment infrastructures, such as the FedNow Service and TIPS. The service includes Fincom’s real-time AML transaction screening and ThetaRay’s AI-powered transaction monitoring as a pre-integrated packaged solution with Finastra Payments To Go, via FusionFabric.cloud.
More recently, GenAI is being explored to create additional transactions that look like fraud transactions, to build more robust models that enable banks to identify new sets of fraud they’ve never seen before. It is also being explored to enhance customer support capabilities, streamline upgrades and migrations and to deliver ever more contextual user journeys. With machine learning (ML), automation and advanced analytics, banks can also optimise payment routing and processing decisions, reduce transaction times and ensure smoother payment flows to boost efficiencies.
Banks have an enormous opportunity to move beyond compliance and take advantage of innovative technologies to remain competitive and deliver the seamless payment services that customers expect. Finding the right partner to support this journey is key – a partner with the right combination of industry expertise, implementation support and the ability to offer the latest technology to solve real-world challenges.
About the author:
Sylvie Boucheron-Saunier is the global chief revenue officer, payments at Finastra. She has a strong technology background and deep knowledge of the financial services and payments industry, from various perspectives. Before Finastra, Sylvie had a decade-long tenure at ACI Worldwide, a real-time payments solutions company, where she held various leadership roles.
Sylvie is a strong advocate for the leadership and growth of women in the payments industry and continually looks for ways to provide mentorship, empowerment, and foster inclusivity and diversity in all roles. She is also passionate about giving back and helping to reduce poverty and inequalities, particularly in Africa where she gives her time to NanoBNK, a fintech offering digital banking solutions for unbanked African populations. Additionally, Sylvie is a board member of the Anglo-African Group, present in multiple African countries.
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