Payments innovation is happening in every aspect of our industry and at an unprecedented pace. Why all this change, and why now?
This answer is twofold. First: technology disruption. The rise of mobile smartphone technology was an early onset disrupter and has continued to influence the face of technology. Today we have technology focused FinTechs reshaping how we view banking as a whole. Innovations that promise to that both change and improve the customer experience—along with technology that offers the opportunity to do so—has shifted the way our industry and society as a whole operates.
Second: global awareness. The United States is part of a major global economy and infrastructure, and as we look to the rest of the world, especially Europe and Asia, we see an overall modernization of payments processes and customer experiences. The European Union mandated faster payments sooner than we started exploring our approach in U.S.; as a result, they developed a successful system that moves money faster. However, from accounts to cards to wires to global payments, there’s not a good solution for everyone on the planet—yet. This is because of the friction in movement in which payments can’t always flow easily from country to country. Admittedly, that’s partially because of varying regulations and rules throughout the world, but I believe we still have the potential to collaborate to create a working global system.
Bringing together talent creates industry leaders
Collaboration remains central to other areas of industry evolution as well. Take FI/FinTech partnerships, where it’s critical to maximize both the benefits of the latest technologies as well as balance out established bank reputations to ultimately create the best possible customer experiences. For example, leveraging effective application programming interfaces (APIs) in which systems can connect to each other, improves payment functionality and efficiency. Not to mention these APIs make technology more functional and increases operational efficiencies for all financial institutions.
With this rise in the availability of key technologies, I’m certain that FIs and FinTechs will begin to build systems around real time payments (RTP). This poses a great opportunity for FIs to help mold the future of RTP by getting actively involved in their development. For now, it’s important that FIs explore the benefits of RTP and how it may impact bank operations. For example, one of the great improvements with RTP is the movement to the ISO 2022 standard. This allows for much more robust data transfer in payments. This leads to increased functionality of the payment. Just imagine where businesses could have automatic invoicing updates based on applying a payment and uploading the payment related data. That is just one example of a possible smart use of data. There are countless others. Eventually, I believe, tracking the data components of payments will become as crucial as the payment itself.
And data becomes even more important as technologies like artificial intelligence (AI) and machine learning transform business offerings. For example, FIs are using chatbots to automate call center responses, freeing agents up for more advanced calls. Or take Bank of America’s Erica, which serves as a digital personal assistant, offering advice and alerts based on behavior.
Strategies going forward
With so much change centered on payment-related technology and partners, each FI should develop a payments roadmap to serve as a unique path forward for their institution. These plans should help bankers analyze the environment, identify key players, explore product options, identify competition, and balance all those findings with the regulatory environment and their own unique brand and mission. Not two will be the same. It’s a daunting task to say the least, but in today’s environment, a necessity for continued growth.
At NEACH, we are committed to supporting our members in establishing and implementing their payments plans. We will provide the right tools and information to support those efforts, including communications and education on the:
- Use of data in faster payments
- Understanding various technologies and their role in the landscape
- Redefined role of operations within faster payments
- Importance of strategy and how FIs can create an effective payments strategy to position themselves for the future
- Steps to mitigate risks around digital technology, particularly as relates to cybersecurity
Overall, payments innovations will remain a key part of our focus in 2020. I look forward to continuing our discussions and providing additional information. And, if you have a question or a topic that needs attention, please don’t hesitate to post it here or reach out to me privately. I’d love to hear from you as we shape our programming to meet your needs.