Every year at CGI, we conduct research on the services banks offer their customers—whether consumers or corporates—comparing the customer’s perspective with that of the bank. This year, we sponsored additional research focused specifically on payments. With the worldwide move to instant (or real-time) payments, we thought it would be timely to explore some of the key trends and issues in adopting instant payments.
In March and April of this year, CGI sponsored a survey by the Financial Services Club—a leading European network for senior financial services executives—that solicited input from 360 club members, including bankers, payment processors, corporates, consultancies, academics and government representatives. In this first blog on the research, I’m pleased to share some of the highlights.
Our intention with the survey was to get a clearer picture of where the payments market is headed over the next five years, including a look at possible new revenue streams for banks, what technologies will dominate and what are the most pressing instant payments issues. The results have been very interesting.
What payment instruments will dominate in 2022?
First, we explored the nature of payment instruments themselves and which are most likely to dominate by 2022. The survey findings show that real-time account-to-account transfers will likely overtake card payments within the next five years. This is both a threat and an opportunity for banks. While card business growth and revenues may decline, new account-to-account transfer business will open up. The research also showed that both cash and checks will fall rapidly—a trend that’s already taking place in several countries.
What payment technologies will dominate in 2022?
As for the technologies that will most likely dominate payments over the next five years, the results show that APIs and real-time payments will dominate in both the retail banking and corporate banking sectors. Given the additional regulatory pressures across Europe (e.g., Revised Payment Services Directive (PSD2) and Competition and Market Authority (CMA) mandates in the UK), leading banks are focusing more on their API strategies. As these APIs will be externally facing, allowing end users to take advantage of their features, this effort is a lot more complex than just building a set of technology-orientated open APIs. Attention must be paid to the management and security of these platforms and how customers can interact with them through third parties.
How big of a challenge is cybersecurity?
As bank processing increasingly becomes real time, cybercrime is following suit. Real-time processing puts more pressure on bank cybersecurity systems. With traditional batch processing there is time to check and monitor for unauthorized activity, but when payments go real time, the same checks have to happen in milliseconds. Combined with the growth in Third Parties accessing customer information through Open APIs banks are facing a new front in the battle against cybercrime.
The survey asked, “How big of a challenge is cybersecurity?” An astounding 96% of respondents said it was either their biggest challenge or a big challenge. The combination of increasing cyber threats and the move to real-time processing creates the perfect storm for banks and other financial institutions, with more cyber attacks likely to make the headlines in the future. Doing more of the same or trying to fine-tune batch-based systems will not necessarily fix the problem. A complete review of financial crime processing and cyber protection should be conducted, with processes and systems transformed, as necessary. The good news from the research is that many banks are aware of this and are acting on it.
In the next part of this blog series, we’ll look at some of the other research findings, including the trend toward value-added services made possible by the move to open APIs, as well as who should pay for the move to real-time payments and assume liability for instant payment legal issues.
CGI has extensive experience in the payments arena, playing a key role in the setup of national payment infrastructures in more than 20 countries over the past 15 years. We’re also working closely with clients on the adoption of instant payments. If you’d like to learn more about our research or work in this area, download an overview of our research, feel free to contact me or visit cgi.com/payments.