Digitisation and connectivity have transformed service delivery models everywhere — from doorbells to cars, healthcare to banking. Banks for their part are investing billions globally in their digital banking and payment channels, with differing outcomes around the world. In Europe, where Open Banking is mandated, new entrants and fintechs have forced traditional banks to drive up standards around their user experience. In Asia and South America, we’ve seen markets accelerating their adoption of mobile-initiated, non-card real-time payments to drive volumes through the roof. In markets like Brazil, India, Malaysia, Singapore and Thailand for example, these have become routine in just a few years.
However, while each market develops at a different pace, the overall global picture is of a growing (and decisive) consumer and merchant preference for real-time payment services, with user-friendly digital front ends and low-cost payments acceptance. These features, services, and functions — which are increasingly embedded in non-financial apps — have been and will be vital to customer attraction and retention.
Despite the digitisation of everything, cards — a 50-plus year-old concept — and the infrastructure that supports them remain as relevant as ever. In just a couple of examples, the UK’s contactless limit was more than doubled from GBP 45 to GBP 100 toward the end of 2021, with any fear of increased fraud outweighed by a wish to increase convenience for customers. Mastercard Send, for example, allows for real-time P2P sharing between Mastercard cardholders, while some acquirers are adding value to gig economy workers by enabling them to be paid the moment their shift ends (for a small fee, of course).
The challenging part is that, with cards still going strong, issuers are combating ageing infrastructure, silos across card types, and increased burden of compliance, hampering agility and cost as issuers try and scale across a spaghetti of capabilities. Hence, Issuers now need to make investments in technology and increase cost efficiencies and profitability.
Following good results in the cloud with non-critical systems, financial institutions have increased the scope of their ambitions. And, as digitisation accelerates change and diversifies payment types, 2022 saw cloud-hosted Payments-as-a-Service solutions.
Processing payments in the cloud proved to have all the advantages seen with other workloads: reduced management costs, improved commercials thanks to the shift to an OPEX model, and improved scalability. However, going a step further with a managed service also has the added advantage of offloading payments scheme compliance to a third party. As a result, banks can redeploy precious technical resources to ‘adding value’ and ‘innovating’ to gain and maintain market share.
This brings to the forefront partners and vendors with strong track records of managing and processing payments at scale. Payments-as-a-Service is a relatively new concept for the traditional wholesale payments/transaction banking market, whilst in Cards, there have long been huge processors already doing this. The market is now looking for players that can bring functional experience in one of these verticals and merge it with expertise in managed services in a way that enables nimbleness as well as cost efficiencies.
Real-time payments and the move to the cloud have alerted financial institutions to significant overlaps in their processing systems, especially those handling large volumes of diverse payment types. The conclusion for many is that a more strategic, platform-based approach to payments modernisation is required. Particularly as ISO 20022 readiness advances and compliance overheads multiply with every new scheme, regardless of the payment type, the arguments are growing in favour of consolidating systems into a single solution capable of serving all of their payment needs.
Ultimately, this drive to consolidate payment processing into a single hub is driven by a need to nimbly respond to fast-paced market opportunities, combined with stripping out cost and complexity from today’s operating model of continuous, endless system maintenance and scheme compliance. And surely, as it develops, it will enable banks, acquirers, and issuers alike — whether large or small — to dramatically reduce the operational burden of connecting to and managing multiple payment schemes, allowing them to focus on adding value to customers instead.
Dean has been in the solution space for over 20 years. Initially starting out at IBM as an IT architect consulting to cross-industry blue chip clients, it was at IBM where, as lead integration architect on an ePOS chip & PIN replacement programme for a leading UK retailer, Dean caught the cards and payments bug. At ACI Worldwide, Dean has held various product leadership roles covering consumer and merchant management, clearing & settlement, reconciliation, dispute management, mobile payments, and now immediate payments and hub solutions. Dean is working with global partners to support the transformation of payments into a digitally-native, real-time industry, supporting any payment, every possibility.
ACI Worldwide is a global leader in mission-critical, real-time payments software. Our proven, secure, and scalable software solutions enable leading corporations, fintechs, and financial disruptors to process and manage digital payments, power omnicommerce payments, present and process bill payments, and manage fraud and risk. We combine our global footprint with a local presence to drive the real-time digital transformation of payments and commerce.
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