Community

@AndreiC + 1. Branches are also an unexpectedly good place for bankers to come up with "next best offers" that no digital channel can, like the one illustrated in my post Secret Of Survival Of Bank Branches.

I agree with @GaneshG and would go even further and submit that remittance data problems are applicable for all types of A2A payments including BACS (UK) and NEFT (India) as well as for C2B payments. Strangely enough, the situation is not uniform across banks, with some banks in my personal experience providing long enough field lengths to handle narrations for most types of transactions (e.g. Citi UK, ICICI Bank India) whereas others restricting them so much that it became impractical to use electronic fund transfers (e.g. HSBC UK, HDFC Bank India). I remember a time when I had to pay my house rent to a building management company in UK. The company wanted me to specify "MCS MERIDIAN CLIENT ACCOUNT" as reference in my payment instruction. This was in the pre-FPS days and my bank at the time didn't support such a long narration in its BACS payment screen and wanted me to abbreviate it to "MCS CLT AC". To avoid the risk of my payment lying unapplied upon receipt by the company, I had to use paper cheques instead, where I could easily write the required narration in full on the reverse of the cheque!

Legacy hasn't come in the way of banking becoming the most profitable industry or of introducing a slew of innovative products over the decades like credit card, ATMs, Mobile RDC, CDO, CDS, and so on.

FORTUNE Magazine article http://ow.ly/d/3qCc

6 Reasons Why Banks Can't Transform Legacy Applications

Now I know open system vendors facing stunted growth because banks have stuck to legacy. As a Finextra reader, should I care?

IDC's findings resonate strongly with my guess that better ability to sell at branches is the secret to their survival. Personally, I'm an omnichannel fan and don't think too much about going to a bank's branch if I'm closer to a branch or to its online banking portal if I'm closer to my laptop. But there could be others who hate going to branches and I know many banks who are doing a great job of widening and deepening their digital banking offerings to fulfill the preferences of that segment.

Will ANZ soon start asking, "Would you like a mortgage to go with your current account, Sir?"

Nice post. Risk-based Testing is indeed an idea whose time has come. From personal experience, reference data poses another very high-risk area for testing. A leading bank implemented a new software for cross-border payments. The software expected 11 digit BIC code whereas the old reference data fed it 8 digit BIC code. As a result, thousands of messages ended up in the repair queue. With just hours to go before the scheme cutoff, this caused tremendous tension since the bank faced the risk of missing its payment commitments to counterparties and having its solvency questioned, especially in the days of GFC when banks were turning insolvent for other reasons fairly regularly!

Enough proof that innovation center does not necessarily equal innovation:

1. TELCOs squandered away their early efforts to build a nonbanking rail via carrier billing products.
2. Mobile money products haven't achieved mainstream adoption. In extreme cases - hopefully - like mine, they haven't even onboarded customers several months after signing up.
3. A couple of days ago, I received an email from my MNO / ISP saying I'd busted my free download quota for the month and asked me to click a hyperlink in the email to buy a "booster pack" if I wanted to continue getting high speeds. I clicked the link and was taken to a website that showed everything except how to order this booster pack.

On the other hand, after trying out different mobile wallets including one from an MNO, I've settled on PayZapp as the best solution for my bill payment woes. As a payor / customer, I neither know nor care whether HDFC Bank had set up an innovation center in coming up with PayZapp.

Credit cards anyway already provide exactly the functionality you're referring to in the context of retailers: Instant confirmation, deferred payment. Why invest all the money to do the same via A2A transfers? In any case, even if Instant A2A were available, a majority of customers might not opt for it since they get additional benefits by paying with credit card, so I fear that this might end up becoming a solution seeking a problem.

On a another note, well-funded startups like TransferWise (which is already a unicorn) and Jet.com have been founded on the basis of questioning whether customers really want everything instantly. The former is offering very low fees for processing cross border payments in a - let's say - "more leisurely" pace. The latter is offering 10-15% discount over Amazon's prices for everyday items to customers who don't opt for next day delivery.

Chargeback is bad but Mitigating Fraud Does Not Pay The Bills either. Keen to know how much extra revenues this ecommerce company gained by not subjecting genuine customers to the 2FA / 3DS friction and thereby losing them to the common problem of shopping cart abandonment. Maybe this merchant uses Stripe to process his payments: "at Stripe we've so far opted not to support 3D Secure since we believe the costs outweigh the benefits." (https://support.stripe.com/questions/does-stripe-support-3d-secure-verified-by-visa-mastercard-securecode).

Data breaches can happen for credit card or debit card or bank account info. When it happens for credit card info, the money is in my account when I dispute a fraud. When it happens with bank account, my money has already fled and it's much more traumatic to fight the same dispute. Any number of data breaches in the USA is not going to change that. According to a recent article I remember reading, US banks are no longer bothering to replace all breached credit cards since less than 10% of them are actually put to fraudulent use; they're monitoring which 10% and replacing only those cards. This may sound a bit cavalier but it goes to show the inherent security in a credit card. 

If I change my mind after a purchase, I can repudiate the charge if I pay by credit card but I can't do that if I pay by ACH. Hence non repudiation will always be a benefit of credit card and no amount of data breach or whatever is going to change that.  

The draw of deferred payment with credit card is avoidance of overdraft protection charges @ US$ 20 per event, not interest earned, in a low interest economy like USA. No amount of falling interest rate will change that.

My point remains the same: Payors will always want a say in the mode of payment but not of the brand / route within a given mode of payment.