Wholesale payment flows are four times global GDP – and growing at 7% pa. You could double your transaction volume but still lose market share. Around 100,000 payment transactions will have happened by the time you have read this far. Payments are important.
After 300 years of banking making a payment is still problematic. Payments differ in different places. Regulations differ. Standards differ. Clearing systems differ. Expectations differ. Banks need their payment systems to be strong enough to meet multinational ambitions.
A string of regulatory initiatives are driving market transformations and innovations in the continuously evolving payments industry. Real-time payments are on the rise and are changing the way payments are made. While Singapore prepares to launch Immediate Payments G3 scheme in 2014 and Australia develops New Payments Platform (NPP) for low-value payments, other real-time payments platforms already in the market include UK Faster Payments Service and Nigeria’s NIBSS Instant Payment (NIP). More than 45 countries now have RTGS.
Major drivers of the evolution in the payments area are the introduction of new payment products, payment standards and clearing and settlement systems. In India, the Reserve Bank of India (RBI) is proactively taking steps to migrate from paper to electronic systems. For instance, Cheque Truncation System (CTS) has resulted in faster clearance of paper settlements efficiently. In New Zealand banks have adopted the New Payments Settlement System for retail payments. China has developed a national payment system known as China National Advanced Payment System (CNAPS) for processing high value and bulk payments.
Equipped with technology-on-the-go, customers are demanding one-click, one-second payments. The presence of multiple payment processing systems results in lack of consolidated monitoring ability for transactions across channels, interfaces and instrument type. Banks also face the risk of rising payment fraud. Additionally, regulators are moving towards ensuring real-time payments mechanism in each country. Meeting these requirements requires real time status reporting and data connectivity to banks. At the same time, banks need a powerful payment system to comply with regulations for anti-money laundering and sanctions screening like FATF, FATCA and Dodd Frank that combat terrorism financing and payment integration initiatives like SEPA.
A payments services hub acts a single source of truth for all payment transactions. It gives the bank the ability to manage, on a single platform, any type of payment transaction, instrument type, customer, channel and payment standards. With a robust infrastructure it is capable of supporting large transaction volumes reliably. It increases the agility as the time-to-market for new products and channels speeds up. It also enhances the bank’s visibility of the payment flows that are happening. A payments services hub allows the banks to achieve all this at least cost as the fee per transaction is declining.