The payments world is both complex and complicated:
- Complex because of the many different parts that need to come together to facilitate the movement of value; and
- Complicated because the parts are interconnected both domestically and globally.
New technologies, new payment entrants, end-user client demands, and the move to global standards are dramatically changing the global payment landscape. Payment market infrastructures must continue to provide a safe, sound and resilient payment system while evolving to address these market changes. Keeping up with this accelerating pace of change is challenging.
With the push to real-time payments and the increasing demand for electronic payments across multiple channels and devices, there needs to be a re-thinking and re-structuring of payment infrastructures. Right now, there is a lack of clarity and transparency that simply won’t support the payments models of the future.
With all this swirl of change, where’s the best place to start?
Keep it resilient
First and foremost, payment market infrastructures must be resilient and stand up to disruptions. For many markets, weather disruptions and political instability are realities to plan for and manage. Outsourcing the infrastructure could be a path forward in building this resiliency and has proven effective in markets around the world. Many solutions for the financial services industry are moving to a cloud-based model. Why not payment market infrastructures?
Build in flexibility for the future
You can’t read an industry newsletter today without seeing something on the proliferation of FinTech start-ups, which are creating solutions to eliminate payment friction, whether in the area of cross-border payments, FX processing, remittances, trade finance documentation or e-billing. Block chain technology will change the world of payments as we know it.
Spend time to explore, understand and consider how these technologies could shape your future payment market infrastructure. Better to be informed and aware of the developments than to be caught off guard with a payment market infrastructure that is no longer relevant to your stakeholders.
Safely open the door for other participants
Many payment market infrastructures around the world have been mandated to open the market to more innovation and more players. This creates the need for continued and enhanced governance and risk management to ensure the safety and soundness of the overall payment infrastructure.
These new entrants are meeting an unmet end-user need. Work with regulators and various stakeholders to figure out a way to safely onboard and bring in these new entrants without compromising the overall system.
Evolution versus revolution
Financial institutions around the world are evolving to meet customers’ demands for 24x7, omni-channel, user-friendly solutions. As a result, financial institutions are devoting resources and funding to meet these demands. Real-time capabilities and ISO 20022 can provide some of the underlying solutions required to meet this 24x7 enriched experience that clients are demanding.
However, changing underlying bank payment ecosystems that were built 30 years ago into real-time, standards-based models will not only stress technology and processes but the financial institution’s appetite for financing this investment. Work collaboratively with your stakeholders to develop an evolutionary way forward. Payment ecosystems were built over decades and can’t be re-built in a day. Look for opportunities to deliver incremental value to your stakeholders in short timeframes to maintain focus on your payments evolutionary journey.
We are all in this together
Learn from others, don’t be left behind and start now. The payment market infrastructure market is unique; central banks don’t compete against each other and therefore there’s an interesting opportunity to share best practices and collaborate globally.
Given that payment market infrastructures don’t compete, they’re in a unique position to learn from and collaborate with each other. Getting together with others to learn from and brainstorm solutions is a helpful path forward. Others have already ventured into real-time, ISO 20022 and payment infrastructure outsourcing. Learn from their experience and collaborate together to build a global payment infrastructure that simplifies the complexity we see today.