Payments & Transactions

Delivering differentiated business value with intelligent routing of payments

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Innovative payment options today are driving competition and rapid changes in the payments industry. The payments business has started to embrace a more client-centric model as payments customers, both retail and commercial markets, increasingly demand new payment options such as real-time payments. Financial institutions serving these customers are looking at ways to offer flexibility and added-value in terms of speed, revocability, efficient routing, transparency, fees, traceability and liquidity – leveraging next generation technologies.

Enabling intelligent routing of payments for banking customers

Over the past 20 years technology has positively impacted banking and will continue to do so with the adoption of new capabilities such as robotic process automation (RPA). A Forrester Research report projects the RPA market to grow to USD 2.9 billion in 2021 from just USD 250 million in 2016. With a wide array of use cases, RPA application in the banking industry is likely to drive most of this spending. McKinsey & Company, in an article titled A roadmap for digitizing source-to-pay, state that 93% of payment processing can be automated.

With ever-growing payment options and requirements, bank customers – especially commercial ones – can feel pressure to expend more resources and capital to manually route payments resulting in process inefficiencies and burgeoning costs. Banks can deliver value by applying RPA to intelligently route payments for its customers through optimal schemes, helping them better manage payment commitments, optimize working capital, reduce transaction costs and maximize information transfer in order to lower reconciliation costs. This will be a key differentiator in banking services as emerging payment options like real time payments will be commoditized over time. Banks who jump on the intelligent routing bandwagon early may realize growth and retain their customers with value added services offered on top of existing services.

 For decades, the choice of payment methods has been somewhat limited. However, with multiple new emerging rails to choose from, both domestically and internationally, an intelligent routing value-added service can now be used to simplify the payment origination process for both retail and commercial clients. Attributes that can now be leveraged for optimal delivery timing for include:

  • Payment origination customer preferences
  • Payment beneficiary preferences
  • Specific payment rail costs
  • Fee structures
  • Timing or value date of the payment
  • Transparency in knowing where the payment is in the process
  • Confirmation of payment received by the beneficiary

Corporate clients can now use such services for optimizing cash management, regulatory compliance and control, fee reduction, and improved beneficiary satisfaction, as payments arrive on time in the most efficient way possible. Banks poised to sell these services at the advisory level – tied into a wide range of markets – can help clients save money by routing payments in the most cost-efficient manner.

How a large US financial institution is piloting intelligent routing

 Clients are starting to implement intelligent routing services today by combining the participant and beneficiary preferences from shared directories with business rules calculations. Automation services such as RPA and artificial intelligence services dynamically determine the appropriate rail to use, and the initiation of the payment. By combining these capabilities with a set of robust APIs to enable and power a new ambient commerce environment, payments can be initiated anytime with as limited input as necessary.

Get started with IBM

IBM helps payments specialists make choices that support interoperability between legacy infrastructures and new models such as APIs. These decisions also span across enhanced security for mobile and on-premises, off-premises and hybrid cloud deployments. IBM payments solutions offer cost-effective capabilities that help financial institutions stay competitive, as the payments and transactions market evolves, to include high value services like intelligent routing.

With advanced routing capabilities from IBM, financial organizations can automate optimal routing decisions for virtually all capture channels from a single processing point. User-defined business rules drive the routing choices. Authorized IT or business users can change individual rules within the decision in real-time by updating parameters online. With such simplified approaches, code updates aren’t needed.

Join IBM at NACHA Payments 2019

IBM payments executives will be attending NACHA Payments 2019. This year’s conference will be held at the Orlando World Center Marriott, May 5-8, 2019 in Orlando, Florida. In one of the knowledge track sessions “Modernizing Payments Systems for the era of real-time payments“ on the morning of May 8th we will share IBM’s point-of-view on the future of payments and how banks can take a progressive approach towards payments modernization. We will discuss intelligent routing as one of the technology themes banks should consider as part of the modernization journey in the next 5-10 years.

To attend, visit the registration page at NACHA Payments 2019 and add this session to your agenda. You can also meet us at booth #423 while you are at the event.

Director, WW Payments Solutions

Craig Rector

Commercial Payments Offering Manager, IBM Watson Financial Services Solutions

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