It's a time of change for financial institutions, and nowhere is that more evident than payments. Financial institutions are redefining their payments strategies to meet ISO 20022 requirements, as well as growing demand for real-time payments, enhanced customer insights and increased profitability.
Solutions that were on the cutting edge a decade ago may not work now. So how do financial institutions decide on a strategy that's right for them?
Generally, there are two paths financial institutions can take toward payments modernization. The short road employs a tactical approach that focuses on compliance and one-off solutions. The longer route means investing in a more strategic approach that reimagines their entire payments strategy. Either choice will have long-term implications for differentiation and sustainable growth.
Finding the Right Path for Your Organization
Determining the best path forward starts with an analysis of the terrain. Consider how your financial institution can address (or is addressing) these areas:
Providing real-time payment capabilities can help your financial institution retain customers and remain competitive.
Real-Time Payments Take Center Stage
Real-time payments processing is one of the fastest-moving developments in the financial industry. Consumers and businesses want streamlined ways of moving money. Providing real-time payment capabilities can help your financial institution retain customers and remain competitive.
With faster payments comes risk at a quicker pace. Financial institutions rely on accurate and complete data monitoring in near real time to minimize fraud risk exposure and improve regulatory reporting.
The Customer Journey
Historically, financial institutions have focused more on the payment instead of what the customer needs. Customer journeys vary; even customers within the same vertical may not have the same needs. By mapping each journey, your organization can determine where to best digitize the value chain.
Financial institutions like yours can use current and emerging technologies to engage customers upstream and downstream from the point of payment to leverage all related data and automate and increase straight-through processing. Then, using capabilities such as artificial intelligence and machine learning, they can interpret the data to make intelligent decisions.
ISO 20022 and Payments Data
With the adoption of ISO 20022, financial institutions can replace aging systems with new, better technology. The move to ISO 20022 will generally require financial institutions to run two systems – one using a legacy format and the other with the new format. This is the right time for a new payments system that easily adapts to changing requirements, including the new SWIFT gpi.
As ISO 20022 adoption becomes easier, financial institutions will have richer data sets to add muscle to their machine learning models. Smarter models will enable financial institutions to get creative in how they introduce consumers to solutions beyond the payments ecosystem.
With technology advancements, financial institutions can choose both standardization and customization.
Underlying Infrastructure and Technology
Over time, systems and technologies have grown to be too expensive to maintain and too slow to adapt to the changing needs of many financial institutions. Fortunately, advancements in technology provide more options.
The days of deciding between standardized, large-scale, cost-effective platforms and highly customized but costly solutions are gone. With technology advancements, financial institutions can choose both standardization and customization. Capabilities such as nonlinear scaling, cost-effective configuration, microservices and cloud computing provide the means and agility to deliver customized – and affordable – solutions.
The Road to Long-Term Value
The payments transformation target will always be moving. Technology doesn't rest and customer expectations will continue to evolve. For those reasons, taking a short-term approach to payments modernization, including upgrading systems simply to comply with the new standard messaging format, may lead to missed opportunities.
Rather than narrowing the focus to format or compliance, your financial institution may find greater value by widening your view. Is the underlying technology robust and flexible to adapt dynamically to evolving product and customer needs? How are your products and solutions positioned? How can your organization use additional data to create more value for customers?
Thinking strategically means investing in a single, intelligent and secure platform that meets immediate regulatory needs and is responsive to change. With an enterprise view of all payments, financial institutions can leverage payment-rich information to customize new products and services. Starting with one functionality and one channel at a time, financial institutions can progressively transform their payments infrastructure.
The strategic path forward may be longer and it won't always be easy. But by taking an enterprise view of payments, financial institutions like yours will be better positioned to manage competing priorities and uncover new revenue-generating solutions. The key is to stay focused on delivering the payments experience consumers want by harnessing technology investments that add value over the long term.
Your payments business can be a competitive advantage and a differentiator, especially when your payments infrastructure delivers fast, intelligent processing and connectivity across channels, payment types and clearing schemes.