5 takeaways from EBAday 2019
This year’s EBAday, hosted in Stockholm, focused on three themes: innovation, infrastructure and reinvention. It explored positive disruption, the opportunity of payments and examined the impact of real-time, roadmaps and regulations. Here are five takeaways:
Is Open Banking and instant payments a match made in heaven?
“Yes!”, was the consensus among the panel and audience members at EBAday.
Sungmahn Seo, Head of Payments, JPMC, described the following:
• Instant payments = evolutionary
• Open banking = potentially transformational
• Instant payments + Open banking = transformational
• Instant payments + Open banking + [Mobile] + [Move to eComm] = foundational change
Gene Neyer, member of InstaPay’s Advisory Board, also shared “open banking is just starting, which is different to the status of Instant Payments. We are at the sandbox stage and are trying it out, although some countries like India are quite far along in the process. Progression has been made in concentrated markets; we’ve proven it can be done in the UK, but to scale it to 10,000 banks or FinTech’s, is a different proposition.”
Hakan Eroglu, Global Open Banking Expert Lead, Accenture reinforced this – “in the new age of platform banking, banks should act now. By leveraging existing customer trust and infrastructure, banks can differentiate from the new competition and succeed in platform banking.”
Payments transformation is not just about moving from legacy technology
Banks tend to focus on the infrastructure and then assume the job is done, and as Liz Oakes, Executive VP, Mastercard, shared “and then the FinTechs come in and do all the cool stuff.” Banks need to think beyond the end-goal of just building new payment rails and take a longer-term view of how best to drive a return from the investment. Building overlay, value added services will be key to this, but the challenge is delivering these services against narrow profit margins. However, delay with offering these services open the doors to smaller, more nimble competitors.
Simon Wilson, Global Director at Icon Solutions, shared that currently there is a lack of hard data and insights available to identify the ‘best’ path of transformation. However, early results from Icon’s upcoming research with Aite, highlights that “the banks that are focusing on pushing boundaries and transforming, are also the ones that are making the most money from payments, retaining levels of profitability.”
70% of the EBAday audience intend to re-engineer their systems to use IS0 20022
However, banks should not just think about the technology impacts, but concentrate as well on making sure that users understand the richer layer of information that will come with ISO 20022. There’s a richness to the data that can be used to provide value added services in the future, and it’s important that bank staff are made aware of the potential benefits.
With multiple migrations to manage, banks should look to pursue a gradual approach to implementation rather than a big bang approach. An audience poll in one of the panels suggested that as many as 36% plan to go big bang, while 20% intend to use translation services for both inbound and outbound message transmission.
AI and machine learning play a key role for payments
There is a clear opportunity to implement AI and machine learning solutions to increase automation while reducing fraud in real-time payments. However, this creates various tensions in the process – speed vs security, data vs privacy, etc. that must be resolved to ensure a safe and risk-free environment for both the consumer and the payment service provider. Care must be taken to ensure that the algorithms used by these AI systems are easily understood and explainable when regulators and auditors come calling. Black boxed algorithms that do not provide transparency risk being instantly dismissed by the financial community. Lastly, AI and ML systems and processes must be designed to be ethical, robust and lawful in all aspects of usage.
Data is king and money movement is just a commodity
The nature of transaction banking across the globe is changing rapidly. While the value of transactions is going down the volumes are spiking year on year. Banks can no longer charge exorbitant fees for cross border payments (remember long distance call charges from years ago?) and margins on payments are going down. There is more and more pressure to deliver new products quickly and cost effectively. This is an art that requires a fine balance between technology, business acumen and ever-changing customer needs. Banks will need to evolve their underlying payment platforms to meet the needs of the real-time, open payments ecosystem and to provide the foundations to their innovation – but as John Hunter, MD, Global Payments at JPMC shared, this is a little like “changing tyres while the car is moving.”