Key initiatives in the payments space should be high on every bank’s agenda as global payments revenues reach c.US$2 trillion annually, with additional growth forecasts in the strong single figure range. As non-banks build payments capabilities it is important for existing players to keep up with customer demands and trends to defend and grow their market share. Following on from our previous 3-minute-masterclass ‘Covid-19 and the death of cash’ we have identified an additional 4 key trends that should be on every bank’s radar:
1. Real-Time (RTP) & X-Border payments:
Cross-border payments continues to grow 5% p.a. to US$30 trillion in 2022. Retail and corporate payments drives this growth whilst traditional correspondent banking declines further. Key initiatives to improve the existing model such as SWIFT GPI and ISO 20022 are being adopted by banks globally. Many alternatives like Jasper-Ubin by MAS & BoC have emerged which challenge the traditional model and promote new tech (e.g. DLT). Some banks are also exploring payment overlays (Domestic + Real-Time-Payments) to lower cost and enable new propositions.
2. OpenAPI & Data services
With achieving PSD2 compliance, many institutions began exploring monetisation options through API-enabled use cases using payment initiation service, and account information and aggregation data. New products and services make use of API-enabled data fetching and service execution by creating new meta-data enabled products or build & orchestrate new Over The Top (OTT) services. Firms like N26 and Revolut, entered new product spaces in less than 6 months with minimal investment which was enabled by their API strategy.
3. Payments as a Service (PaaS)
Financial technology providers have matured cloud-native delivery of core payments services known as Payments as a Service (PaaS). This can reduce costs up to 90%. Many financial institutions with legacy payments infrastructure are now exploring PaaS as an alternative to upcoming legacy replacements and upgrades. PaaS can unlock more operational flexibility to adopt new service capabilities and enable new features (through APIs) quicker and with less risks.
4. Request to Pay (R2P) & eBilling
R2P provides transparency and control around payment execution. It also enables integrated end-to-end B2B and B2C payment workflow processing and reconciliation. Financial institutions are looking into building their R2P ecosystem to deepen customer understanding and ability to expand value chain(s). R2P can act as an enabler to realise the full potential of investments put into instant payments (SCTinst) and real-time messaging capabilities (ISO 20022), 24/7 liquidity, etc.
What do banks need to do?
Banks need to understand what customers want from payments. To do this they must listen to their customers and envision going through their customer’s journeys. Data-driven insights are key, but arguably more important is an open culture of communication that embraces challenge and change. Only then can payments solutions can be identified that fit the future needs of both the customer and the bank.
Projective has a proven track record of delivering change and transformation in the payments industry. For each trend identified we can help shape your strategy and support your delivery. Our team of payments practitioners are with you from the beginning to the end of your journey. Like to know more or discuss further? We’re always up for a (virtual) cup of coffee. Let’s talk.