2022 showed a tremendous amount of promise for a total of fifty-one days with economies recovering, offices opening back up, and a job market that was white hot for top talent. Then, the Ukraine invasion created regional, if not global turmoil, and inflation began to tick up to double-digit levels, causing central banks to raise interest rates, and mortgage rates to more than double in less than twelve months, raising concerns about recession and the hoped-for possibility of a soft landing even as job figures remain positive.
And yet against this historical backdrop, the financial services industry has continued to make great strides, inching ever-closer to real-time payments and full(er) ISO 20022 adoption, along with a strong desire to make better use of data and collaborate across infrastructures.
Looking to the future
Although many of these topics will look familiar from past reviews and predictions, 2023 shows particular promise across the following dimensions:
- Payment scheme interoperability is an expressed desire – as ISO 20022 adoption gets closer to becoming a reality, the possibility of cross-scheme interoperability, both domestically and cross-border, shifts from being a practical aspiration to being a simple rules discussion. In other words, banks and payment scheme operators are quite emphatic that interoperability is a matter of when, not if – a major improvement over past discussions and a real benefit to commerce on a global scale.
- Liquidity management is important again – Much of the economic damage done during The Great Recession of 2007-2009 was the result of a lack of effective liquidity management solutions. Now that we are on a path where real-time payments will take on an additional parameter – cross-border, and thus geographic complexity – the need for banks to offer or advise on effective liquidity management solutions, especially for their corporate clients with global reach (or at least global aspirations) is growing.
- Delivery models are going to change – perhaps drastically – and that’s good – the current economic environment has many banks looking to change the way they consume software. And while gaining access to banking services via a SaaS model has been increasingly important in the past few years, the time has come for banks to consider pushing even further by asking their vendors to provide business process outsourcing (BPO) and other services to gain even greater efficiencies.
The reason for this is that the price of investment in current technology – including the resolution of past technology debt – is becoming a major challenge for banks that are not in the top tier. Therefore, an enhanced SaaS or even a utility model could provide banks with ways to access key services without having to manage infrastructures or staff, freeing them to focus on more strategic issues.
- Request to Pay will make QR codes a vital payments technology – the QR code has received a lot of negative press in the past few years because many see it as “just another barcode”, adding little to the payments landscape. However, the lowly QR code is very efficient in communicating key information, including payee data, which is why firms like Venmo have been using them to make payments easier to initiate. Request to Pay has many of these same needs, and leveraging this technology in bills, emailed payment requests, mobile applications, and even point of sale (POS) will make it easier for request to pay – one of the key value-added services of any real-time payment scheme – to gain traction worldwide.
- Data as a shared resource across banks and regulators – the sharing of information can make everyone – banks, corporates, regulators – smarter because it enables them to better see and understand facts, transactions, and trends. This is especially true in the onboarding and financial crime markets where data accuracy and pattern-matching are key tools in providing prospective clients speedy access to the offerings they want, and safeguarding these offerings once they’ve been obtained.
By following the card industry’s model of sharing information that can be used to identify fraud schemes and fraudsters more quickly, banks will be better able to stop crime and money laundering before it has a chance to take hold. Enterprising banks will leverage this information to sell services to their customers based on observed behavioural patterns, one of the key elements of any anti-financial crime offering.