How to future-proof payments: key questions to ask at EBAday

Matt Piper, Head of Pre-Sales at Icon Solutions, explains why flexibility is key when it comes to future-proofing payments but, to understand the steps that must be taken, there are fundamental questions that must be asked…

EBAday opens its doors this year against a captivating backdrop of regulatory changes and industry initiatives. From the EU’s Instant Payments mandate to new SEPA regulations like Verification of Payee and industry initiatives like One-Leg Out Credit Transfers (OCT) schemes, there’s no shortage of new developments contending for banks’ attention.

While these changes have major implications for the payments industry, they are just some of the drivers compelling banks to act. There is a growing convergence between payment types, catalysed by new regulations and initiatives, which is another major shift that is requiring banks to re-consider their approach to payments processing.

Payment type convergence: the new norm

Traditionally, payment types have been siloed in banks, with there often being specific engines that will take care of a given payment type (e.g., high value payments, or low value ACH payments etc.).

But the distinction between different payment types is softening -we see how this is happening already in the cross-border space, where the inter-linking of different market infrastructures is making it possible for banks to leverage domestic real-time rails for cross-border transactions. One key example is the IXB initiative between EBA Clearing in Europe and The Clearing House in the USA.

For banks, it therefore no longer makes sense to silo different payment types in to separate payment engines. Instead, first-mover banks are working to consolidate payment applications into a single system that is agnostic to payment type, currency, scheme and clearing settlement mechanisms. They do this by decoupling the value chain and distinguish Order Management (or Pre-Processing or Initiation Management), Execution and Clearing & Settlement.

This will achieve the flexibility needed to quickly implement new payment functionalities now and respond to new requirements in the future. It can also significantly reduce the costs and risks that are involved when it comes to payments processing, which is a business-critical advantage.

Lay the groundwork for future success

To add to this, there is the much-hyped emergence of generative AI, as well as the progression of other recent technologies like digital currencies.

Many banks that we talk to are actively trying to seek out tangible use cases for generative AI which  is driving innovation. Some of the key use cases we see are in the areas of enhancing STP through reduced intervention (e.g., unstructured to structured address mapping) and increasing developer efficiency. This looks set to deliver more value for customers and drive cost-efficiencies in banks, which will lead to a competitive advantage for those banks that capitalise on this opportunity successfully.

This too needs flexibility. It requires a strategic payment solution that can scale to support new alternative settlement methods and integrate AI-based services, without increasing the cost and time of future development, customisation, testing and maintenance.

Tangible steps for future-proof payments

In light of new regulations, initiatives, payments convergence and the opportunities arising from new technologies, banks are turning away from traditional vendor solutions and monolithic architectures, recognising the need for a flexible framework approach. Indeed in a recent RFP (from a bank that is now one of our clients) the opening statement read: “We are not looking for a traditional payments engine, but a flexible framework that will enable [the bank] to facilitate Instant Payments, upcoming future use cases and gradually shift existing flows from our legacy payments systems to the new infrastructure”

While larger players have been making strides in this respect, it is not too late for any bank to capitalise on the opportunity to transform their approach to payments processing. But it does require the ability to answer some fundamental questions.

The first question starts with a clear understanding of the ultimate destination.

1. What is our payments vision / strategy?
2. What is critical for the customer experience?
3. And finally, to achieve our vision and the customer experience we want, what actions can we take and what is the roadmap to get there?

Meet Icon at EBAday

At EBAday we will be helping banks to understand and answer these questions, determining the steps that can be taken to accelerate the journey to future-proof payments.

Whether you need consultancy, help developing a strategy and / or technology roadmap, or finding a flexible payments solution, meet us at the event to see how we can help.

Stop by our stand (#33) our set-up a meeting with us here.