Banking

Preparing for instant payments in a digital economy

Share this post:

As the commercial banking landscape transforms rapidly to adapt to an increasingly digital world, it’s clear that client-demand-led schemes like faster payments are challenging the traditional paradigms we’ve held sacred for decades. This is resulting in direct pressure on financial institutions to adapt faster and place a premium on innovation now – more than ever before.

Previously at Sibos, it was my pleasure to moderate a discussion on the topic of “preparing for instant payments in a digital economy” with very esteemed panelists. This resulted in an incredibly interesting and engaging discussion given the two different viewpoints: one from a U.S. Central Bank and the other from a European Commercial Bank.

My key takeaways were as follows:

  • Demand for new payments schemes and services in an omnichannel world is driving the need to be more efficient, faster, and nimble, to serve clients effectively. The true business case for faster/immediate/instant payments is serving customer needs by providing them the option to send and receive payments almost instantaneously. By doing so, it also opens up the avenue for innovative players to provide value-added services on the back of this scheme.
  • The Central Banking authorities like the U.S. Federal Reserve Bank are enabling their member banks with guidelines by being an advocate, educator, and, more importantly, a change agent to influence payments system policy and direction. In Europe, directives like PSD2 and Pan European (SEPA) Instant Payments scheme are introducing new dynamics that are driving intermediation and emergence of Fintechs.
  • Security and risk reduction are very high on the priority list for participants offering Faster/Instant Payments. These schemes highlight the need to provide this service together with real-time financial crime detection as well as prevention and vastly improved and simplified regulatory compliance capabilities.
  • As banks invest in their modernization, there’s a trend toward reliance on common industry standards like ISO20022, to ensure ability to support multiple requirements and proceed with progressive renovation of their legacy infrastructure.
  • Being a truly digital bank is real. Financial institutions like DNB in Norway are leading the way. In a country with a 90%+ digital customer base and cash transactions account for approximately 9% of retail (C2B) spending, the banks support clients who opt for an electronic channel for self-service, resulting in less than 3% reliance on call centers or traditional branch banking.

Strong alliances between industry participants and their trusted partners will help make this journey to a fully digital (and very soon…) a truly cognitive bank, easier and increasingly profitable. Becoming digital will be the new minimum, as banks apply machine learning and other related capabilities to better understand their business and, more importantly, their clients. These are truly interesting times. Banks are making the leap to becoming a digital bank – and, on the horizon, transforming to a cognitive bank.

For more information about how to accelerate service delivery, visit https://www-935.ibm.com/industries/banking-financial-markets/payments-transactions.html

Meet me and others at the upcoming IBM Watson Financial Services Summit for Payments. This event takes place December 5 at the IBM NYC Client Center and features industry-led discussions including:

Director, WW Payments Solutions

More Banking stories

Zions Bancorporation improves customer service with master data management

Banks and financial services continually face growing demands to improve customer experience. To meet these demands, organizations are looking for a way to manage all aspects of their critical enterprise data, no matter what system or model, and deliver it to their application users in a single, trusted view. Zions Bancorporation needed a master data […]

Continue reading

The five key levers for radical transformation in financial services for digital success

If Charles Darwin were still alive, I wonder what he would think about the evolution of banks? Once again, banks are being forced to evolve or die. And financial institutions that fail or refuse to become cognitive and digital will get left behind. It’s survival of the fittest at its finest. Right now, survival is […]

Continue reading

What does reinventing financial services look like?

The word “reinvent” is something you hear all the time. Reinvent yourself. Don’t reinvent the wheel. But what does reinvention really look like? The word reinvent means to change something until it is entirely new. It is nothing less than a complete transformation. This concept of reinvention was the topic of the recent FSM annual […]

Continue reading