The payments modernization journey
As we ease into the early years of this new decade, many global financial institutions have reached an inflection point in their payments processing. Can the current infrastructure, and the capabilities it provides, address the challenges presented by an ever-advancing market?
These challenges include:
- New Instant payment rails and accompanying services
- Expanded ISO 20022 based data models and validation sets
- COVID-19 inspired accelerated uptake of digital payment methods and channels
- New, innovative competitors stealing market share
- Increased and diverse customer demands.
The overwhelming response within banks to these challenges is realizing that they must elevate the organization’s payment processing capabilities to remain relevant. To do so, they must embark on a strategic payments modernization journey.
The key factor – Sustainability
The first step of any modernization journey is to define the destination and direction of travel. In this case, that means creating a list of key factors and criteria that will guide selecting the components, technologies, solutions, and partners.
That list must include a range of high-level concepts like openness, architectures, scalability, resilience, flexibility, empowerment, and compatibility. One aspect which is seldom highlighted as the key factor in such assessments is sustainability.
One cannot view the news on TV, open a newspaper or access an online news outlet without being told that all businesses, industries, and even individuals, need to be held to account for their sustainability credentials. It’s impossible to argue against the importance of such accountability, not only for the world, but also for the world future generations will inhabit.
What is sustainability in the context of payments processing?
But how should the concept of sustainability manifest itself in the selection criteria that defines solutions and partners? What qualities and characteristics should a bank look for in a credible partner?
In essence, sustainability in payments processing equates to longevity. Banks are looking for a long term partner, someone who will bring value to their organization year after year, enabling them to maximize their return on investment. After all, a payments hub is not just for Christmas. It’s for life!
So, what qualities and capabilities must they possess? What value must they deliver to the business to sustain?
While there may be many capabilities and values, Temenos gives prominence to the following competencies:
- Ability to efficiently renew
- Ability to maintain compliance
- Ability to deliver leadership
Ability to efficiently renew
Payment processing modernization is a journey, a constant striving to stay relevant, to keep up with an ever-changing market, ever-changing technologies and services.
The ability to support constant change is essential but not an easy discipline to master. The technology platform underpinning the solution is vital. It must be continually updated and invested in to ensure a steady, managed evolution over a long, active lifespan.
The payment processing solution is a project delivery platform, where a program of innovative updates and enhancements must be delivered, sometimes even daily. Does the platform support the continuous integration and delivery services required to bridge the gap between development and operations through automation? Does the provider of the solution, your partner, invest and manage such services?
Is there a capability and a managed process of continuous renewal to leverage for the future?
Ability to maintain compliance
There is a fundamental discipline at the heart of payments solution provisioning, and that is the need to maintain compliance. Whether it’s an update to an existing standard, an additional delivery mechanism from a clearing service, or a changed mandated process flow, a bank will seek and expect support from their vendor/partner to maintain compliance. That means staying ahead of the changing market and delivering promptly.
For many new Instant payment schemes, performance throughput deadlines are involved, but for all schemes there is a market deadline for compliance with the new regulation or service, e.g. November 2022 for SWIFT CBPR+ ISO or Target2 ISO. The challenges that such deadlines create are only accentuated when faced with a multi-jurisdictional processing environment.
For such multi-country institutions, the question is how exposed your partner is to every market? How committed are they to the discipline of regulatory compliance? Is it central to the business ethos of the partner? Do they provide contractual certainty in the longer term?
Ability to deliver leadership
The ultimate goal of leadership will only be achievede by finding a solution partner that will support your ambitions by exhibiting two crucial qualities – Investment and Attitude.
Investment is not just about developing specific features and functions; it’s about the entire product set, the technology platform and stack, the processing ecosystem and supporting applications, the systems support and management environments, the wider community and the market knowledge base.
It is the foundation that delivers the ability to efficiently renew one’s environment as well as commit to maintaining compliance.
Investment is fundamentally about the ability to sustain leadership. What is the investment profile of your partner? How much of their R&D is targeted at the environment that can be leveraged in payments?
How ambitious is your partner, and do they have a track record of sustaining that ambition?
Continually delivering pole position
Fundamentally, that is the conclusive litmus test for sustainability. Which organization has a proven track record for delivering pole position in market solutions year after year?
At Temenos, we believe that our ability to efficiently and continually renew our customer’s environments, combined with our commitments and ability to deliver timely regulatory compliance across multiple markets, and backed up by the investment in the environment required to drive a continued leadership position in the market, makes our organization the pacesetter in delivering sustainability in payment processing for the digital age.