Geoffrey Tunbridge, Director Solution Consulting, APAC, ACI Worldwide
I keep hearing that it’s “an exciting time to be in payments,” and I certainly agree that there is a lot of noise. However, when I look below the surface, I’d argue that the interesting activity is not with the payment itself, but with all the related events and steps in the value chain. Therefore, as you plan your payments strategy for 2019, it is important that you know your organisation’s view on a few topics—to make sure your payments ecosystem is ready. I believe that what you need to know from your stakeholders can be covered by these four key questions:
1. Who are my APIs for?
As you create APIs, which make your payment services and related data available externally, you need clarity on your audience—to whom does your organisation want to give API access?
Clarity is required because enabling fintechs to provide services directly to your retail banking customer base is a very different proposition from supporting those providing capabilities to your corporate banking clients. With the former, there is a greater risk that you will lose the focus of your customer, as the fintech becomes the centre of their financial world. It is critical to remember that consumers do not experience APIs, they experience the apps that use them. Therefore, if you do not tightly manage your enablement of external parties using APIs, you could see your customers moving towards any bank preferred by their favourite fintech.
2. What consent are we getting?
Payments—and the associated data—are sometimes left out of an organisation’s data strategy. However, payments are a key source of real-time, structured data giving insight into your customers. GDPR and other regulations relating to data rights, usage and privacy make it critical to align your payments entitlement models with the data consent model.
In the emerging consent world, you may need to have received consent to use the data in a payment message as part of your orchestration. At a basic level, I expect this will be necessary to meet financial crimes regulations, but what about post-processing? It is unclear if the consent for processing automatically gives consent to retain all the data after the processing.
Payments and their related services have become instrumental in the delivery of change across financial services and business
Without this permission, you must scrub your data stores of specific fields and use meta-data models that enable you to extract value from the data.
There is also an opportunity here—very often as consumers we click through EULAs (end-user license agreements) to just do what we need to do, but this could create a situation where a bank has permission to hold detailed transaction data long-term. The resulting Lazy Data can become a profitable source of insight and revenue, in the same way that ‘Lazy Balances’ have over the years.
3. What methods of payment am I missing?
We need clarity from those on the frontline as to the methods of payment their customers (and their customers’ customers) want. With so many new methods emerging, especially across Asia, with local fintechs delivering new wallets/schemes, your payments strategy cannot deliver them all. So, which do you prioritise? To me, asking the business the ‘Three Rs’ will shape your strategy:
a) Relationship: Will it drive up customer satisfaction?
b) Revenue: Can it increase the business/revenue of customers?
c) Reputation: Will it show us innovating and being agile?
Even with these answers, you will only have their current opinion. It is therefore essential to shape a flexible strategy around the current answers, which will act as a foundation to deliver what the business asks for next.
A final consideration—some will be dismissive about emerging or alternative payment methods. However, for any bank capturing balances is a foundation of the business, as it funds lending. If your organisation does not offer the methods of payment that your customers want, they will form relationships with organisations that do. Thus, the balances used for these new methods of payment will reside outside your business.
4. What volumes should I expect?
With the growth in fintechs, the 4th Industrial Revolution and the Internet of Things (all buzzwords I know), we will see an explosion in the number of transactions. However, due to the costs and risks of payments, this will not mean an explosion in the volume of payments. As the nature of payment systems makes them very suitable to support secure, high volume, low complexity messages, these transaction-based ecosystems are an opportunity. So, do you need to support these ecosystems?
In addition, other initiatives are growing the transaction (non-payment) volumes—governments pushing cashless societies, the emergence of micro-payments, businesses seeking efficiency from e-invoicing and the establishment of global standards for business process messaging (e.g. ISO20022). Serving these new transaction flows could increase your transaction volumes, the quantity of message data you need to process and store, and generate new revenue streams. Ensuring you can scale and respond will be critical.
Payments and their related services have become instrumental in the delivery of change across financial services and business. For your payments strategy to support this change, it is critical that you have visibility of your organisation’s goals with customers, in markets and with partners. Having this understanding will enable you to develop a payments ecosystem that provides the foundation for growth.