Welcome to the payments C-suite circa Summer 2022. We’ve read a lot of what has been written about the changes for the Chief Financial Officer as digital transformation demands capital expenditures and financial data needs to connect to the whole organisation. We’ve seen the Chief Information Officer’s role change as technology and automation become a competitive necessity to pay and get paid. Last, but not least, we now have to consider the Chief Operating Officer. How do operations fit into the current imperative to fast-track payments modernisation initiatives and the migration to cloud-based infrastructure?
Quick answer: Right smack in the middle. The office of the CFO, especially if treasury is part of the remit, has a clear job: Manage cash. The CIO: Manage technology. The COO: Bring it all together to achieve the digital vision, overall payments infrastructure integration and the improved customer experience it enables. Not easy. But as ISO 20022, real-time (instant/faster) payments and the cloud become ‘table-stakes’, the COO now arguably becomes the star of the payments show for banks, as well as corporates. The COO, and other senior operations executives, build and manage the roadmap. Their decisions will make or break speed-to-market to achieve seamless cloud migration for legacy systems as part of an ambitious digital transformation agenda.
Or as SWIFT’s EU head of payments Francois Maigre told me in our recent webinar 5 Tips for COOs to Improve Efficiency via SaaS Platforms about the potential rewards from the cloud: ‘Some of the benefits include improved mitigation of financial crime risk and data-driven insights on the purpose and context for payments. So, this is the first pillar when it comes to operational gains. But better data also means a platform for innovation, enabling banks and third parties to offer new value-added services for customers. Improvements in data need to happen consistently across clients’ payment initiation, domestic payment systems, financial institutions, and their payments provider’.
As you can see, it’s an ambitious agenda. And an urgent one. When we surveyed over 300 global banking executives in late 2021, we found that 47% of respondents were still struggling with legacy infrastructure. Polling on our webinar this May reinforced this pain point, with 55.6 % of attendees listing legacy systems as their greatest concern, followed by access to multiple rails and lack of operational efficiency. All of which centre around the COO and how the resolution of the issues can be accelerated by a hybrid cloud or full cloud migration. As Maigre says, we’re in an era of migrations. Therefore, let’s address each one of these three concerns through the lens of the COO with cloud/SaaS front of mind.
Maigre says we’re in an era of migrations and I would complement this by saying the era of legacy payment hubs for RTGS and traditional cross border being the chosen solution, is well and truly over. My mantra for clients these days is: connect, control, comply and compete. None of these verbs can be active with a legacy system. But look what happens when a company (financial or non-financial) migrates to a hybrid cloud strategy that accommodates a staged approach to breaking down legacy infrastructure. The cloud is first and foremost there to control and avoid fraud. Only in the cloud can fraud defence, AML compliance, and payments compliance thrive in the same operating environment. The cloud also provides better liquidity management for corporates, as managing clearing and cash management are automated for better visibility and control. The cloud is a single standard point of connectivity with centralised processing and monitoring. If you’re a COO, you will streamline and standardise your process and controls. Your general model will be aimed at reducing friction and the overall cost of operations. The former will improve your customer experience. The latter will make you a hero at work and help you get your next promotion.
Back to the customer experience. The cloud migration is a ticket to multiple payment rails, which will improve the speed, accuracy and data quality of your operations. The access to multiple payment rails will provide an immediate competitive advantage because corporates will expect banks to provide instant payments anywhere in the world. Without cloud access, your cross-border payments will be slow, hard to track, and complicated. It connects to domestic clearing Bacs, CHAPS, and Faster Payment (FPS, SIC IP, SEPA INST, Tips, RT1), or combines with SWIFT to host direct connections.
And without the cloud, your access to the ISO 20022 messaging standard is limited to simple connections rather than complete ‘ISO native’ status. As Mark Sutton, senior manager of treasury management consultancy Zanders told us in the webinar, ‘data and the structure of that data will be an important issue for corporate operations in the short-term’. Sutton, who was instrumental in the creation of the ISO standard earlier in his career, believes that advances in artificial intelligence and machine learning will only be accessible to corporates if they adopt and effectively deploy ISO 20022’s data – ‘data is an operational concern, and will not fulfil its potential as a competitive advantage without access to the cloud.’
Finally, let’s look at the lack of operational efficiencies that was mentioned in our early research and recent webinar poll. Stepping up to a competitive position – or risking that position – requires being SaaS-based. SaaS-based infrastructure makes APIs the orchestrator of digital transformation - just as the COO orchestrates its usage. Your competitors have the APIs that provide agile architecture that enables them to work on a partnership collaboration model. That’s important to the end customer experience. It’s a serious operational matter and will determine a bank or corporate’s relevance in the market.
The cloud is simply a better banking operational system that will lead to a new and improved payment infrastructure. It is not to be tackled as a solo venture. Get a partner that can help you Connect, Control, Comply, and Compete. If you follow this mantra then the cloud is a land of opportunity, not just a land of mandatory compliance change.
To find out more watch our supporting webinar or read the accompanying market report - How Banking Heads of Operations & COOs can Leverage Centralised SaaS Platforms & Hybrid Integration Models to Win Competitive Advantage.
Charles de Rougé is Head of SaaS Solutions for the Financial Messaging business at Bottomline Technologies that helps banks, financial institutions and large multi-national corporates to pay and get paid in a simple, smart and secure manner. Charles is a payments and connectivity expert, with over 15 years’ experience in Corporate & Transaction Banking, Asset Management, Private Banking, and Treasury Management.
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.
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