Payments professionals from around the globe met in Orlando, Florida at the NACHA Payments 2019 Conference in May to discuss the latest innovations in payments, and the future direction of cross border payments.
This year’s conference theme: Smarter. Faster. related to the future of the payments ecosystem. While many sessions focussed on those critical elements, there was also discussion around the equal importance of compliance and cybersecurity in shaping the payments world of tomorrow.
Corporations, financial institutions (FIs), non-financial institutions, payment service providers (PSPs) and other delegates met in open sessions across the three-day event, speaking enthusiastically about what smarter payments meant for them and their organisation – and what it could mean for the way payments will be made in the near future.
The customer reigns supreme
In discussing the future direction of global payments, one message came through loud and clear: it’s all about the customer. So, what is a smarter payment and what does it mean for the customer?
A smarter payment is one where “the customer could make a payment through the channel of their choosing, whenever they wanted (i.e. 24hours x 7days x 365 days per year), to wherever they wanted.” One could argue that “real-time” should be added to that statement, as many conversations acknowledged the rapid move to real-time payments will soon become ‘table stakes’ for payment providers.
In addition, the following are helping drive change in the payments ecosystem:
- Customers’ expectations – institutions are expected to provide faster, transparent and more intelligent payments experiences to match those of their customer’s best digital payments solutions.
- Changing regulations – are driving a ‘customer first’ agenda. PSD2, Open Banking and AML4 and AML5 are good examples of where regulation is shaping the way banks, PSPs and fintechs are creating new value-add customer propositions on top of standard payment rails.
- Technical innovation – is changing the way that customers experience the payment journey, and is creating a multitude of new channels and payment methods giving customers more payment choice than ever before.
- Bank/fintech collaboration – technical innovation also drives new competition by fostering collaboration between banks and fintechs to leverage their individual strengths to create incremental customer value. While banks have the depth of customer data, fintechs are leading cutting-edge innovation in the payment space.
The future of smarter payments
There’s no doubt that the need for immediacy for information is driving new propositions. Improved payment standards, such as ISO 20022 are enabling richer payment information to flow with transactions and enabling greater automation in the payment process. These factors are creating the foundations for smarter payments to flourish.
‘Payment wizards’ and ‘payments as a service’ platforms are examples of upcoming innovations that create a payments marketplace for best cost and routing utilising cutting-edge techniques like AI and machine learning to deliver the ultimate (aspirational) frictionless payment experience for the customer.
But caution is needed. With the reality of real-time and faster payments comes the additional risk of fraud, money laundering (AML) and liquidity issues. Smarter payments require vendors to recognise and mitigate the increased risks of a real-time payment ecosystem to ensure that along with new commercial opportunities, their businesses models continue to offer outstanding payment propositions whilst minimising fraud and compliance risk.
Real-time customer/beneficiary bank due diligence together with integration of learning models will provide the highest level of frictionless, straight-through processing possible to minimise the costs of failed payments to an organisation and customer.