New technology developments are transforming the payment and banking industry. Already the industries are under pressure from customers expecting real-time, personal and secure experiences. Meanwhile, tightened regulatory requirements are encouraging digital advancements, further pressurising the banks to modernise payments. Briony Richter writes
Introducing effective, fast and efficient payment capabilities is a key priority for the industry. Payments advancements in 2017 have been monumental and will continue to be. SWIFT launched its GPI service and Australia will be going live with its ‘New Payments Platform’ in early 2018.
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Sibos 2017 was held at the Metro Toronto Convention Centre (MTCC), in the heart of downtown Toronto. Emerging technologies and payment landscape structure were at the heart of the discussion.
Major trends across real-time payment landscape
How is the payment landscape in Australia developing, especially with real-time payments due to go online as well as the emergence of open banking?
Anne Collard, head of payment capabilities and industry, wholesale and payment transformation at ANZ, stated: “It comes from initiatives that were taken quite a few years ago with the RBA and the Payment Systems Board which established the Australian Payments Council.
“The Australian Payments Council is a strategic body made up of a number of the key banks and key partners in industry, retailers and technology companies who are looking at what the landscape in Australia is going to be like in the next five to ten years.
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By GlobalData“We are currently testing the ‘New Payments Platform’ which goes live early next year and this is a completely new infrastructure for Australia.
“It’s not actually leveraging the rails of the old, low value system value that we have, it’s a completely new environment and what that means is it gives us an opportunity to look at future proofing the environment for the next five to ten years.
“We can then add different value services as overlays on top of that infrastructure and create new services for the benefit of our customers be they consumer level or companies.”
Brian Barry, head of cross-border payments and clearing at ANZ talked of the developments in cross-border payments.
Cross-border payments are active across a number of different technologies. In October 2017, IBM announced that they were leading a project that would be using blockchain to improve cross-border payments processing.
Barry described what the major trends are across retail, SME and corporate.
He emphasised how the customer drives the change in these trends but also that there is a need to provide convenience, speed and a more value driven cross-border payment outcome.
“Customer knowledge around cross- border payments has increased substantially in the last five to ten years. Also the change is being driven by a big increase in competition from the non-bank sector. Customers have a much broader choice and it’s that competition that is driving the need for banks to respond.”
With real-time being implemented soon in Australia for domestic transactions, Barry stated that it is very likely that real-time will be integrated into international cross-border payments.
“As the market infrastructures evolve and move to real-time then it is only inevitable that cross-border becomes a part of it.
“The market infrastructures are for local entities but if they are cross-border active and are receiving payments across borders they will want to see the same access to liquidity for a cross-border payment as they do for a domestic payment.
“We see a future in connecting our local market infrastructure with a cross-border flow, certainly coming into Australia.”
Effects of emerging real-time
Originally created for the digital currency, Bitcoin, blockchain has been at the centre of debate for banks and the tech community as to whether it has potential in other area.
Do banks see potential in blockchain? Collard answered: “We’ve really stepped back from saying blockchain is going to be the new best innovation and the next best thing and started talking about what that means to our customers.
“We’ve been involved progressively in establishing proof of concepts based on what we believe were the right kind of use cases for our customers. We were the initial founders of the use case that SWIFT are now looking at because we recognised that between ourselves and our corresponding counter parties there are issues in relation to reconciling our settlement environments.
“We wanted to prove that you could use a technology that would enable you not to have to do that reconciliation. Due to the sheer scale, we couldn’t take it to the next level and so we gave the concept to SWIFT. We felt that they were an organisation that could take it further and they have established a multilateral environment.
“We are also looking at proof of concepts in the area of bank guarantees, other trade approaches, understanding the underlying focus around how distributed ledger technology could be used in a way that benefits the customers.”
Who are the winners and the losers?
Barry concluded: “Technology is really just one element of the whole manufacturing process. I think the future is not so much technology because banks are reasonably good at technology; we invested in core infrastructures like SWIFT.
“I think it is how we use it. It’s not just the technology but it’s the pricing, it’s the service overlay, it’s the insides around the flow, whether it is for corporate or institutional clients. Banks bring richness to a relationship and we use the technology to interact with our clients.
“Banks have a real role to play but we have to integrate our services together. It’s not just about selling a payment; it’s about creating the flexibility around customer needs. I don’t see it as a threat but as an opportunity.”
In terms of cash management, payment transparency and reconciliation, the new systems being implemented have immense benefits. Domestic real-time payment systems have already become the new norm. Innovation is crucial to the continuing success of any industry, and through collaboration, ANZ can ensure that customers will be the priority going forward with payments.
