The imminent arrival of PSD2 (championing open banking), has seen a mind-shift within banking in 2017. And payments is no exception.
At Sibos 2017, I noticed that banks now realise there is real benefit in working with fintechs. Banks are back to doing what they do best; focusing on their customers. Trusted third parties (TTP) can offer the services banks need to do this. Everyone is happy.
Our 2017 Transaction Banking Survey, further echoed this; 57%, of 100 banks interviewed, already work with TTPs to improve existing bank payment services. I believe that collaborating to bring value to customers will be a focus in 2018 (and beyond), but how?
Prediction #1: Independent real-time payments collaboration – Market driven change
Without bank interoperability, real-time payments is impossible and until recently, it has been regulation driven. However, in November BNY Mellon and U.S. Bank initiated real-time payments, two years ahead of the Federal Reserves real-time payments deadline. Perhaps, we may start to see independent real-time payments collaboration emerge, even without regulation, in 2018. Why? Our survey showed that in countries with real-time payments, 80%, of 100 corporates asked said it improved their risk management, 77% their liquidity, and 76% their cash visibility. The business case is clear, bank customers expect real-time payments (processing and information). With 35 countries already offering real-time payments, ambitious banks will begin the move in 2018.
Prediction #2: Servicing customers payments AI effectively
Artificial intelligence (AI) in payments offers opportunities in customer initiation, accelerating back end processes and improvements in customer service. The UK's Co-operative Bank are already actively benefiting; cutting wire-payments processing from an average of 10 minutes with manual input to just 10 seconds using robotic process automation (RPA). Similarly, an audit trail for problem transactions was cut from seven hours to 10 minutes on average.
Prediction #3: Payments in the cloud
To service bank customers effectively, costs must reduce. A cloud payments hub offers this. It lowers the cost per transaction, and significantly lowers maintenance costs than on-premis. Faster implementation, instant control and ongoing upgrades are ensured, with little to no risk of downtime. Some payment service providers launched cloud solutions in 2017, ideally as part of a wide range of banking solutions and 2018 will see banks adopting this technology.
Prediction #4: Gen Xers join Millennials in adopting mobile payment apps.
Approximately 70% of Millennials used mobile banking last year, however this is set to change with 67% of Gen Xers now using mobile banking apps (including payments). Banks need to ensure that they can offer a truly omni-channel mobile payments experience, perhaps through TTPs, or risk losing this loyal and valuable market.
2018 looks to be an exciting year for payments; extensive real-time, AI, cloud, wide mobile adoption all fueled by open banking. To truly benefit banks need to adopt fully-embedded solutions, making 2018 the year that their payments business really comes into its own.