Our latest Finextra webinar, ‘SaaS savvy: Preparing for embedded and data driven bank payments’,
hosted in association with Bottomline, discussed the transition to SaaS-based models in banking and payments, emphasising the need for data integration and analytics.
Hosted by Finextra’s Gary Wright, the panel consisted of William Artingstall, managing director and head of e-commerce solutions at Citi;
Amrita Ghanekar, senior director of data and analytics in the client insights & innovation team of treasury services at BNY; and
Sadiq Javeri, head of platform product management at Bottomline.
The webinar set out to answer the following questions:
- In a world where we have more understanding on customer behaviour than ever before, how can banks effectively modernise – not just to operationally improve and save money, but to optimise their positions and maximise their return on investment?
- What are the AI and embedded finance use cases in bank payments, and why is it crucial to start preparing today?
- How can banks and FIs plan SaaS platform migrations in a way that doesn’t only look at the current needs, but sets them up for future trends as well?
- What can banks and FIs learn from corporate treasury teams that are further along the journey of adopting SaaS platforms and their benefits?
Exploring the current payments landscape
To set the scene, Javeri started by explaining why, after years, modernisation and legacy are still such a big topic across banking and financial services. “Financial services tend to be closer to the reluctant follower than the fast follower of a trailblazer.
And there's good reason for that; financial services are a highly regulated industry, and there's a high cost of failure if you miss a payment. Get that wrong, and it can be front page news pretty quickly, because trust is key. So, it's unlikely that we'll
see a day where large financial institutions dealing in systemically important processes are trailblazing brand-new technology,” he stated. “But it's clear now that there's a market expectation over the use of technology that makes things go faster.”
Regulation is playing a big part in driving forward systemic change in order to meet these expectations, with the European Payments Council’s instant payments and confirmation of payee schemes being just two examples. In today’s world, financial institutions
need a sophisticated technology approach in order to meet the trends of the future, and Software as a Service (SaaS) is a key part of that.
Giving her experience from the bank’s side, Ghanekar commented: “Today, we are at a critical inflection point in banking where payments are not just transactional. They're evolving into embedded, data rich, and interconnected ecosystems that are powered
by things like SaaS, artificial intelligence, DLT, or blockchain technologies.”
Artingstall concluded the introduction of the topic by touching on the influence of e-commerce in the space: “There are a couple of interesting perspectives to draw from e-commerce that are a little different to the traditional client bases that banks serve.
For example, payments as a function tend to be outside of the traditional treasury function, whereas there is far closer linkage between the underlying payment and the actual solution/service that the e-commerce client is providing.
“There are two takeaways from that that are useful to set the scene. One is that they push financial services to be better, and the second is – whether it's data, integration, capability – the technology and the solutions in the space are 100% inseparable.
They go hand in hand.”
Facing the challenges in the payments and treasury space
Wright then prompted the panellists about which SaaS strategies will help financial institutions with this significant change that is happening. Javeri started by explaining that banking is now in a similar situation than it was in the early 2000s in terms
of infrastructure challenges. As automation became more prevalent, many institutions developed webs of tiny point solutions that were expensive to maintain. Many institutions today are potentially running into the same pitfalls.
“Today, the drawbacks are less about cost – because a lot of cost with SaaS packages scale with usage anyway – but it's more about data quality and data consistency. If you have 15 different SaaS platforms doing 15 different things, trying to then get the
data amongst those to work together for the eventual AI or embedded finance use case five years from now, or even next year, will be a real challenge.”
Artingstall agreed with Javeri, stating many organisations, with their current set-up, are not ready to meet today’s high level of expectations. “So, what are we trying to modernise for? One is ISO 20022, with a massive deadline for the end of the co-existence
period in November 2025, a the second is 24/7, always-on infrastructure,” he explained.
“The old serial methodology of building a payments system, where you have a front end that collects information, a tool that does queuing which then gets put into a ledger, and the ledger would then onward process. These old methodologies have hand offs
built between all of these pieces of infrastructure, and that's not really fit for purpose in a highly scaled 24/7, always-on system.
A poll showed that Artingstall’s argument is very much the biggest pain point for the audience, with over half of respondents stating that legacy systems continue to be the main challenge in keeping pace with industry trends.
Commenting on the results of the poll, Ghanekar stated: “It is a real challenge, especially coming from the banking side. The payments industry is heavily regulated, and there are a lot of monolithic systems.
“From a treasurer’s perspective, the top concerns are liquidity, risk management, and balance sheet optimisation,” she continued. “Imagine having the ability to deploy cash where it's needed most, exactly when it's needed. That's the power of data driven
liquidity management.”
Data – the ultimate enabler
The conversation then turned toward data, which is the glue that holds most of the other aspects together. “It all comes down to the data in those systems. How do you bring it in a place to truly harness those insights?” Ghanekar explained. “Data is the
new currency. We know that and banks have access to rich data on multiple levels in multiple systems, but pure data enablement is not enough. That data needs to get converted to information, and information needs to be converted to insights.”
Artingstall continued to explain that at Citi, they have changed their approach from inside-out to outside-in, meaning that instead of creating solutions and then validating it with clients, they have started a co-creation approach instead in order to better
use the data accessible to everyone.
“What I would index on here in particular is what the underlying participants in that flow are using the data for. That should drive how you design the infrastructure and the architecture around it,” he explained. ”Not every treasurer is interested in real-time
information or real-time reconciliation or real time data. They're more keen to do things like effectively forecast their cash flow. Today, cash flow forecasting might be a one day, seven days, 30 days, 60 day, 90 day-type event. But if you get to a real time
liquidity environment, you don't necessarily need to be as accurate in your cash flow forecasting.”
Javeri agreed, stating that in order to see, move and manage liquidity in a pre-emptive way, and then proactively address and manage it, you need two things: data and connectivity. As the other panellists mentioned, data is crucial in order to do analytics
and make informed decisions. But there is a second aspect to the equation.
“Let's say I want to make a payment. Do I want to make a payment cross border? Do I need to make a slow payment? A fast payment?” Javeri asked. “There's now a massive proliferation in how you make those transactions, and being able to have the choice to
send a payment over three days or a payment instantly is ultimately the outcome of having this data. Once you've got the data and are able to make a decision, you can then choose the optimal path. But to choose the optimal path, you need to be connected to
the paths and be able to offer things like real- time. So, we see breadth of connectivity being quite a significant prerequisite to really taking advantage of the available data.”
Roadmap to the future
The second poll question asked the audience about the top product priorities in their organisation over the next 12 months. Perhaps surprisingly considering the first poll result, the main priority of participants was not to improve on legacy infrastructure
– but to adopt more payment rails.
“The question I ask is: If you're not replacing legacy infrastructure to improve operational efficiency, but you need to add new payment rails such as real time – which has huge performance requirements both in terms of uptime and speed – doing that on legacy
infrastructure leads to point solutions again. It leads to tactical thinking again,” Javeri commented on the second poll. “You end up in this inevitable circle, where, because you are spending a lot of time maintaining something which is legacy, you end up
having to traverse a more technical, tactical solution on the go forward piece.”
Speaking to whether he sees shifting buying behaviours in his clients, Artingstall explained that he is seeing a definite switch from point services to integrated services. Going back to the treasurer versus payments professional conversation, he explains
that treasurers are buying payments or transaction banking services for proprietary use cases, whether it's making payroll or paying vendors. And it is in this type of activity where e-commerce is far more embedded in actual solution.
“The reality is, when you think about that integrated service, if the e-commerce players are successful, they see scale,” he continued. “And they see scale in a way that you wouldn't traditionally see by banking a single traditional corporate, and that's
primarily driven because of the fact that they're far closer to consumers and small businesses when they get engaged, so the adoption rates are much faster. There’s a lot underlying that, but we absolutely see a big shift into integrated services.”
Ghanekar concluded that as we are moving into an AI-enabled future, AI will get embedded into everything banks do. “Once ISO 20022 becomes standard, there will be a lot of intelligence mining that will happen on payment chains. Until that time, AI-enabled
analytics is helping banks decipher this data, not only for regulatory purposes, but also turn it around to understand clients and the clients’ client,” she emphasised. “AI will continue to play a very pivotal role. But as it starts getting more mainstream,
that customisation will begin in the first offering. It won't be an afterthought.”
Summarising the day’s webinar, Javeri concluded: “As an industry, we're on a journey. We start with a set of legacy, which needs to transition into SaaS, where you can start to bring that data together, and then from there, move to more ambitious use cases.”
Learn more by watching our full webinar, ‘SaaS savvy:
Preparing for embedded and data driven bank payments’, hosted in association with Bottomline.