In 2023, we saw several interesting developments in the payments space, notably a sustained surge in instant payments, embedded finance gaining momentum and the rollout of ISO 20022 to SWIFT cross border. Looking at the year ahead, there are a number of trends that will continue to define the landscape.

Organisations are being hit by a number, if not all, of these key drivers at the same time, leading to a continual need to update platforms and advance one’s capabilities.

Sustainability – and the move to the Cloud

Usually put down the priority list on key trends, this is one that can no longer be ignored and is likely to receive much more focus in the coming months. As financial services firms face growing pressure to demonstrate their ESG credentials, we’ll see more of them attracted to the huge gains that can be had from cloud adoption. With the ability to easily scale up or down according to demand, cloud-based payments solutions can significantly reduce banks’ carbon footprint, as well as driving cost-efficiencies and enabling faster innovation.

Real-time payments

Instant payment clearing services have been successfully introduced to numerous markets, but we continue to see the expansion of such services even in highly developed markets, such as the US and Eurozone markets. Accessibility, scalability, and performance may sound like standard operating procedures but volumes continue to rise and customers expect all engagement services to align with the real-time universe. This is another factor encouraging a move to the cloud, which provides an environment capable of continually expanding to meet these demands.

Artificial intelligence

It’s hard to move or breathe within the world of finance, especially in the world of technology and finance, without hearing a call to action on AI. But be careful of an overreliance on this new technological magic wand, especially using it without transparency or without removing bias within the data. Regulators are waking up to the dangers of over or inappropriate use of AI, and within payments, pressure is being applied in areas such as fraud management, intelligent routing, and exception management to ensure explainability when using AI for audit and compliance purposes.

Cross-border payments

I purposefully call out cross-border payments as a trend, and in particular, the expansion of both available services and service participants in this market. This extremely lucrative end of the market has woken up to the joys of expanded competition. New entrants – fintechs – are exposing market incumbents by offering specialised services for exotic currencies, simpler processes and access, as well as lower costs through smart use of technology and networks. Banks need to up their game, including the ability to collaborate and incorporate some of these services providers into their offerings if they want to hold on to market share.

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Curating collaboration – open banking

It’s not just fintechs focused on cross-border payments that are driving the need for collaboration. They are just one vertical in a market where all players in every vertical need to work as part of an expanding ecosystem. Whether your organisation is offering account or cash management services, domestic clearings or distributions, bill payments or person-to-person services, you cannot achieve success in the market without linking and collaborating with multiple players in the market.

In an ever-greater number of countries, such collaborations can be based on open banking standards as governments continue to expand enforcement of market-wide rules. These create not only a level playing field for new entrants, but also opportunities for incumbents to underpin collaborative ecosystems that lead to increased transaction volumes and revenues.

ISO 20022

Finally, the continued rollout of ISO 20022 based standards to global and local clearing markets will further drive systems change. Be it impending deadlines in 2025 for SWIFT cross border flows or FedWire in the US market, the year of 2024 will see many banks updating their environments to not just support but to seek to leverage the new standards for competitive success.

Mick Fennell is Business Line Director and Head of Payments, Temenos