Future Proof Payments Systems

Dominic Broom, Treasury Services, at BNY Mellon introduces the weekend’s theme and introduces the challenge

The payments business is undergoing a period of enormous transformation.In fact, even our understanding of the word “payment” is evolving, as we explore new definitions and iterations of what constitutes a transfer of value.

So what has caused such unprecedented change?

  • Firstly, the digital era is very much upon us. Technology is embedded in our every-day lives, fuelling greater expectations for flexible and mobile solutions, capable of facilitating modern-day lifestyles. Global commerce has become increasingly digitised and 24/7;supported by sophisticated technology that enables instantaneous multi-channel transfers of value and accompanying data, irrespective of location or payment type. Technology has also enabled the entrance of new types of payment providers, to a market traditionally dominated by banks; thereby creating a fundamental shift in service and product provision.
  • Secondly, shifts in economic power are creating a much more multi-polar and international world, which coupled with changing demographics, is leading to shifts in global commercial activity.  This is resulting in a renewed focus on payment speed, efficiency and cost, which in turn is driving innovation in new types of payments, and the need to navigate a broader range of markets, through a broader range of channels.

But the fact is that banks are struggling to respond. Cross border banking infrastructure has simply been unable to keep up with the pace and extent of these market and customer changes, and most legacy payment systems were not designed to provide real-time payments.As a result, banks face numerous challenges:

  • They need to provide a digitally enabled, seamless and easy-to-use service to clients, when the behind-the-scenes reality is anything but that. This is especially challenging when payments infrastructures, payment scheme standards, business practices, cultural preferences and regulatory requirements currently differ between countries.
  • Banks also need to both comply with and adjust to an unprecedented and increasing onslaught of regulation.This affects the business strategy, revenue streams, and requires far greater transparency and control of the reporting and interpretation of data, resulting in significant additional cost.  This cost is both financial and an opportunity cost, as limited technology resources can result in non-regulatory innovative projects become deprioritised.

So how can we overcome these challenges and provide the commercial payment capabilities that new and future business leaders expect? How can we provide a payment mechanism that is fit for the 21st century: one that can be layered onto or built into legacy infrastructure, whilst remaining flexible to future adaptation in line with market developments, and taking into account the more complex monetary and data components of a modern-day transfer of value?

This is your task: to conceive a future-proof payments infrastructure that seamlessly supersedes existing payment systems,whilst addressing the need to provide greater transaction speed, security, flexibility, accessibility and data-enrichment. This all needs to result in lower cost, while complying with current and upcoming regulation, and take international payment standards and legacy infrastructure into account.

BNY Mellon experts will be on hand to offer guidance and answer any queries. Be creative; as unparalleled change equates to an unparalleled opportunity to reshape the world of payments.I look forward to seeing your visions for the future.

Author of post: Dominic Broom, Treasury Services, at BNY Mellon.