Ovum recently surveyed 226 bank representatives;, 65% stated that their payment systems require major upgrade or replacement in the next 3 years. The payment landscape around the world is changing due to the need to meet increasing customer demands, domestic and regional level regulation, payment infrastructure changes, value-added service delivery and the potential of revenue generation such as: payment-as-a-service, bitcoin, and so on. The narrative of Open Banking APIs and real-time payments require continuous transformation of payment systems and infrastructure.

Recent Trends

  • In the UK, New payment Architecture (NPA) solution is currently being developed to enable prompt bulk payments and corporate payments.
  • The European Central Bank’s TARGET Instant Payment Settlement (TIPS) initiative, is scheduled to be launched this month.
  • SWIFT, redesigned its message formats to ISO 20022 XML with its MX messages. In addition, SWIFTNet Instant solution called “multi-CSM” (Multi-clearing and settlement mechanism) has been developed.
  • Similarly, in the US, VocaLink is powering clearing houses in adopting real-time payments.
  • Likewise in Australia, the New Payments Platform (NPP) has been developed for low-value, high-volume domestic payments.
  • The Smart Nation initiative was introduced by Monetary Authority of Singapore (MAS) to make Singapore one of the major global financial hub with international payments services.
  • While in China, interoperable partnership is on the scene. For instance, Alipay partnering with TWINT to enable customers to scan TWINT QR-Codes at Swiss retailers to pay for goods.
  • The Hong Kong Monetary Authority (HKMA) recently announced the Faster Payments System initiative to support instant payments and achieve full connectivity among Hong Kong banks using mobile phone numbers, email addresses or QR codes.

Customer demands are driving banks to provide some specifics or capabilities. For instance, U.S Transaction banking allowing access to large corporate customers.

Open Banking in the Market place

Regulation from governments or regional authorities are requiring Banks to open data and access. For instance, PSD2 in Europe. Customer demands are driving banks to provide some specifics or capabilities. For instance, U.S Transaction banking allowing access to large corporate customers. FinTechs are innovating and working closely with banks to realize open banking.
The consensus of CEOs from the recently concluded Sibos 2018 Open Banking conference is that it has the potential of making banks definitive market place platform providers. However, Banks needs to expand capacity and consider:

  • Bundling and unbundling of services.
  • Other ecosystems to meet customer expectations resulting in loyalty.
  • Open source API community to derive benefits.
  • FinTech partnership to get the best out of open banking.

5 Digital Transformation steps for Financial Services

Financial Institutions would experience steady decline in revenues-to-assets if proper strategies are not in place to ensure better customer value propositions. In meeting current and future challenges, Financial services must evolve with new capabilities such as: Innovative enterprise digital delivery, use of cognitive and robotic solutions, integrated data management and scalable infrastructure. 5 effective steps for digital transformation in Financial Services include:

  • Adopting a flexible, platform operation approach that aligns with a customer’s journey.
  • Adopting End-to-end enterprise digitization across operational services, core banking services, channel integration, and central data management.
  • Providing customized offerings for each customer needs and transforming customer experience into a revenue generating stream. For instance, better cross-sell/up-sell/referral business. Also, diversifying into non-traditional, fee-based revenue sources, such as marketplace banking.
  • Employing the use of emerging technologies such as AI for customer personalization and engagement resulting in improved customer service.
  • Acquiring flexible and scalable infrastructure to support growth and minimize cost. This may also involve modernization and enhancement of legacy systems that will provide immediate and future benefits.