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Payments: supporting the needs of the banking industry

An Interview with Darryl Proctor, Product Director – Payments, Temenos

PaymentsQ. 2017 will be a key year in the world of payments, but what makes the Temenos Payments Hub solution so different?
A. We live in a digital world. Having a true real time digital core banking system with a payments hub designed by banks, for banks, offering excellent breadth and depth of functionality as well as flexibility through configuration is the only way banks can meet the demands of their customers. Our hub is sufficiently agile to work with any core banking solution, however, the additional value and uniqueness it brings is that it allows those banks with our core solution to have a complete, seamless banking system without complex integration associated with separate systems. Banks can now offer their customers a harmonized payment experience with true straight through processing, not available anywhere else today. In addition, the solution provides fully centralised control with a 360° view of all transactions in real-time and weight based processing enabling easy prioritization at customer level or according to payment volume or value.

Q. Payments Hub may offer something extra in the market, but Temenos is very new in the world of payments isn't it?
A. Temenos has actually been processing payments for well over 20 years through our Core Banking solution. We learnt through our core banking software which supports many millions of payments a day across the globe, that building a highly configurable, scalable, resilient, real-time 24/7 platform that supports innovation has to be at the foundation of a payment hub. Temenos built the Payments Hub from the ground up to support that. Instant payments is one such innovation that for a modern platform like ours allows us to easily and readily adapt it to the various types of instant payment schemes on offer, or being developed around the world. Most if not every transaction that is generated in our core banking solution results in a payment. With our Payments Hub solution, we take that one step further servicing a critical part of the bank in a way that no other software vendor can.

Q. The world of payments is moving very quickly, where do you see the market going and why?
A. The global network payment services market is expected to witness growth at a CAGR of 7.7% over the next five years due to the widespread adoption of digital payment solutions by not just businesses and consumers, but also the government, banks, and financial institutions. During the forecast period, non-banking companies such as device manufacturers, technological firms retailers, and e-commerce payment providers are creating new and innovative payment platforms such as mobile wallets, integrated POS systems, wearables, and mobile applications. Digital payments are expected to account for approximately 20% of all retail transactions by 2021.

But it's not just digital in the traditional sense that banks need to be able to manage. Banks and other financial institutions have been active in investing (time and/or money) in the blockchain space. Blockchain technology allows everyone to hold and make transactions as strangers but in a completely transparent manner without a mediator. This concept can be applied to the entire digital world making any kind of exchange/ transactions secure (and not just cryptocurrencies such as Bitcoin).

Instant/immediate payments will play an enormous role in the evolution of the payments market. Across the world, immediate payments systems and infrastructures are being planned or rolled out, following the success of schemes such as Faster Payments in the UK and FAST in Singapore. This rising tide of immediate payments reflects growing consumer demand for real-time transactions, driven partly by the ubiquity of smartphones and other connected devices, which have catalyzed consumer expectation for immediacy. It also reflects the digitization of the supply chain in which real-time payments enable corporates to collect and analyze financial transaction data in real-time, derive financial insights immediately, and drastically reduce the effort involved in reconciliation. As well as meeting consumers' rising expectations around payments, the banking industry is facing rising pressure from governments to create ubiquitous nationwide and regional immediate payments systems that can be used by all financial institutions. Given these twin drivers, immediate payments is expected to become the new standard for banks, acting as the banking world's answer to payment initiatives from new competitors such as Venmo (USA) and BlueCash (Poland). Let's not forget though, that in order to service Instant Payments, you need to ensure that your foundational core banking software can cope too. Many Legacy, in house systems, are just not able to cope with this. Core transformation is as important as a modern payments platform in this space.

Q. Bank needs can vary by region, what requirements do you tend to see within which regions and how can Temenos support these from a payments perspective?
A. Building on my last point around immediate payments, those banks from within certain regions where instant payments are planned or being discussed need to have the right infrastructure to be able to manage these payments according to the schemes rules. We have seen that historically, these rules change continually right up until their launch and regions will have their own particular needs as well. Banks need to be looking now at their payments systems and understanding if they are sufficiently agile and importantly what the cost is to adapt quickly to these changing requirements avoiding any impact on their service. Straight through processing is of course key here. Quite often the cost of adapting is greater than that of replacement.

From a digital perspective, payments requirements vary greatly by region. For example, in Africa many customers use reliable networks for P2P mobile payments through mobile money services like Mpesa, MTN Mobile Money and Airtel Money and banks need to be more active in this space (both in making bank services more accessible to the unbanked and ensuring their payment solutions are as good, if not better than these new competitors. In the USA, it is different, online and mobile payments via banks, however, there is still a high use of cheques and it is essential that banks move their (often older) customer base away from cheques and towards digital particularly if an instant payments scheme is to succeed. And the needs are sometimes very different at a more granular level; the way customers bank in France for example is very different to those in the Netherlands who are also very close to agreeing an instant payments scheme. Regardless, it is essential for a banks payments system to be easily adaptable to the changing needs (and strategies) the bank, their customers and regulations (including schemes such as instant payments).

Q. The digital bank of today / tomorrow needs a digital real time core, how does the payments hub support the world of tomorrow?
A. Being a truly digital bank is no longer a differentiator, it is essential to service delivery and banks are now realising this. To survive (and profit) banks must transform their customers' experience and offer innovative banking solutions:

  • Offering the right customer insights at the right moment, via the right channel.
  • Drive massive efficiencies in the back-office; ultimately, front office differentiation with back office automation.
  • Draw insights in real-time and from multiple datasets; to ensure a quality, user experience.Speed of fulfilment is also critical; the digital solution must therefore be front-to-back.
  • Stay ahead of market trends; with tools to design and deliver new banking products.
  • Open API's must be accessible; ensuring that easy access to innovation and services from third parties using APIs is available.
  • Other elements such as modularity, deployed in stages, allow for faster time-to-value and lower risk and upgradability (perhaps independently).

This ultimately comes down to using a single platform, a recent shift in banks decision making highlighted within the recent Ovum Decision Matrix: Selecting a Digital Banking Platform, 2017–18. The Temenos Payments Hub offers this seamless integration with the core banking platform to ensure this level of straight through processing that's needed for a truly harmonious, customer experience; one that is truly digital.

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An Interview with Darryl Proctor, Product Director – Payments, Temenos

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An Interview with Darryl Proctor, Product Director – Payments, Temenos

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