How can banks stay competitive and measure up against their peers in their digital transformation strategy?

The simple answer is making sure banks & FIs stay ahead of their competition. Banks & FIs need to take advantage of the opportunity to compare their strategic priorities, product roadmaps, and plans for future innovation with their peers. In the process, they can discover the technology trends the industry is prioritising and align with themes. 

This article is a summary of the findings from Bottomline’s Future of Competitive Advantage in Banking & Payments Survey and is based on a peer-based, real-time comparison benchmarking survey to see how executives and their companies met customer expectations and progressed toward achieving their digital payments transformation strategy. Topics covered included real-time/instant/faster payments, cross-border, ISO 20022 messaging, fraud & financial crime management, cash & treasury management, and Open Banking. 

With input from more than 320 banking & FI players globally across Treasury, Fraud, Operations, Innovation, Product, and Technical Implementation at C-Level in 34 countries globally. The report illustrates and benchmarks the critical issues for competition in 2023. For instance, adopting new payment rails, such as real-time payments, has risen from 40% in 2021 to 55% in 2022 as the top priority for banks and FIs over the next 12 months, followed by mitigating fraud risk from 38% in 2021 to a massive jump to 53% in 2022. 

“Thought-provoking questions and a gentle push to take action. I appreciated seeing the total results by question and how my opinion compared to the rest of the respondents.” Olimpia Modorcea, Senior Account Manager EMEA – Euronet Worldwide 

This report is based on a peer-based, real-time comparison benchmarking survey to see how executives and their companies met customer expectations and progressed toward achieving their digital payments transformation strategy. Commentary is also included from Pay.UK, EBA Clearing, SWIFT, Deutsche Bank & Open Banking Expo.

There’s a lot in this report and many key findings. But if you had to pick one insight that’s most impactful from this report, what would it be? 

First of all, thanks for that comment because I really do feel the report is stacked, which we will get into a bit later. But if I had to pick one, it would be real-time payments. Last year the overwhelming focus of our respondents was on digital transformation, specifically via the cloud. Real-time payments were a distant second. This year, however, 63% of our respondents said real-time or instant payments were the biggest focus for their business. Now, this could be the result of a few dynamics. First, I think it’s safe to assume that more banks and FIs are at least well on the way in their digital journey. That’s encouraging. Second, I think it’s proof positive that banks see the future in real-time if you’re in the US or instant payments in the EU and faster payments in the UK. All three are very good news. 

Is that finding more important in the context of the current landscape? And what are the dynamics that affected the report, in your opinion? 

Good question. I do think industry dynamics led the responses here. We have new instant payment regulations coming in pretty urgently in the EU. However, there are other dynamics reflected here. For example, there are changes coming in cross-border payments with SWIFT, which, at least in part, have been necessitated by the Russia-Ukraine crisis. We also saw a huge bump in fraud concerns from 38% in 2021 to 53% in 2022. 

Let’s talk about cross-border payments. What were your findings there, and why are they significant? 

Good news and bad news here. I was encouraged by the finding that only 22% are seeing the revenue drain from nostro accounts as an obstacle to cross-border payments. However, visibility is still a big issue. 35% listed the lack of visibility on payment status as the biggest obstacle, and that’s up from 24% last year. There’s no doubt that cross-border will be a more efficient and rich revenue stream, and it can’t be ignored. They need to keep their eye on the new fee-based pricing, which will include visibility. They also need to keep their eye on ISO 20022. 

The report shows that ISO 20022’s main use case is its role as a fraud defense. I found that surprising. 

Maybe, but it’s also good news. When we asked which areas of your company’s cash positioning & fraud monitoring could benefit from the improved data that ISO 20022 provides, I expected the 53% who said data analytics. But yes, I was somewhat surprised that 56% identified improved fraud monitoring. Banks should really need no other reason to drive toward becoming ISO Native. Data is an underrated factor in fraud prevention and detection. The impact that the richer data from ISO on fraud monitoring & compliance, as well as cash-flow management, should push it to the leadership position in any bank’s roadmap. 

Speaking of roadmaps, where did digital transformation show up in this report? 

It was spread throughout, and we saw some concerns as well as encouraging results. We asked, “how confident are you with your company’s digital payments transformation strategy?” and we found pretty much the same results as last year when it should have seen a spike. Only 32% are highly confident. Now, we also know that digital transformation and cloud migration go hand-in-hand. Results were a bit concerning here as well, probably because there’s a much higher awareness of the need for cloud migration as the basis for any kind of innovation. In 2021, 75% of respondents said their appetite for SaaS technology was strong or extremely strong. That dropped to 60%. As I said, there are a lot of potential reasons, but I know one thing: it’s incumbent on companies like Bottomline to continue to educate the market and bring that 60% up to 100%. 

It’s called the 'competitive' banking report. Why? 

Because these are the elements that will determine whether you can compete against fintechs, compete for new customers, and retain your commercial accounts. Another reason is that - whenever respondents engage with the report – they can see how they compare against their peers, take our live comparison survey, and receive their own personalised report.

Final thoughts?

Competition and the ability to compete will be directly tied to a commitment to accelerating digital transformation. It's important to say that legacy infrastructure is not limited to payment systems because if you want to enable instant payments as a bank, you need to also take into account real-time limit checks, real-time sanctions, real-time booking, and so on and so forth. In a world of 24/7/365, you can’t just focus on the payment system; you need to think about your end-to-end secondary infrastructure process too.

Read the report in full now. Make sure your financial institution is on track to maximise on the changes impacting the payments ecosystem and accelerate your digital payments transformation strategy today – that is where true competitive advantage can be leveraged. Also, make sure you have your voice heard and start the live comparison survey now. 

About Zhenya Winter

Zhenya Winter is the Global Head of Financial Messaging Marketing at Bottomline. She has more than 22 years of experience in the Financial Services sector, specialising in payments over the last 10+ years. Key areas of focus within payments messaging and connectivity include; Real-Time domestic & cross-border payments & ISO 20022.

About Bottomline

Bottomline delivers a single SaaS platform for payments, securities, and messaging that helps financial institutions and corporations to achieve lower costs, wider reach, speed-to-market, greater security, and improved risk management.