Now that we on the way to achieving a truly interconnected, global economy, it’s past the time for full transparency on business and government activities surrounding the worldwide mélange that is the financial arena. And beyond the fact that most news (and
opinion) of any kind is largely ‘public’ now – shared nearly everywhere across the internet and through every conceivable social media channel – there are many opportunities in our emerging much-more-free-than-ever market to step up the private/public collaboration
to upgrade the universe and utility value of payment processing for everyone – whether using it or profiting from it, or both.
This is an excerpt from Future of Payments 2023.
The only thing constant in payments is change
On one side, traditional and emerging financial services players are constantly raising the bar from a technological and customer experience standpoint. Meanwhile, regulators around the globe are scrambling their experts, analysts, and lawyers to help make
sense of new products, nascent services, and spiking trends and potential hang-ups associated with the maturation of payments and banking.
Their aim: to ensure the constantly changing best practices of the financial services industry don’t impinge upon the best interests of the populace. And maybe even make things better for commerce among humankind and their interactions with business enterprises
too.
In fact, the
World Bank weighs in on the subject with its own support of the interoperability that is emerging in payment systems all across the globe, stating that the “increased transparency for national authorities and system participants” can allow all sides to
“gain a more holistic view of payment flows […]while helping to combat fraud more effectively,” as well as open up new “corridors” for more participants around the world, which is a good thing for everyone, in their view, and potentially could result in “boosting
revenue” for payment system providers as well.
Payments innovation: Everybody’s doing it
For everyone involved, banks, non-bank financial institutions (NBFIs), and the fintechs that help innovate or power the systems of some or all of most of the foregoing, balancing all the facts, factors and fears that the evolving, increasingly complex financial
world presents is no easy proposition.
To learn more about the challenges and solutions confronting financial institutions, their partners, and the regulators they must answer to, we asked a number of banking industry leaders to weigh in on why collaboration among government and private business
interests must increase, especially in the financial arena. And how such joint approaches to making banking better for all are, in fact, growing in use and shared sensibility, across the globe.
Alexandre Maymat, head of GTPS at Société Générale, one of the largest banks in the world at #21, according to S&P Global, clearly ‘gets’ the importance of collaborating with the public side of the financial system, and note that even as payment system providers
work to reduce payment costs for end-users, “it will be necessary for market players to leverage on the already existing services and develop standardised and interoperable market solutions.”
And for that to occur, Maymat says to Finextra that: “World payment authorities will indeed also have a key role to play to make payments more affordable, inclusive and faster. They can help to reach this goal by harmonising disparate compliance and payment
control rules across jurisdictions and by avoiding redundant investments, (e.g., by choosing not to develop public payment infrastructures locally when regional infrastructures are already available).”
When talking about changes in the ways and means of making payments, the subject of Swift and its strong quasi-regulatory position in between governments and the marketplace invariably arises. In Maymat's view: “The effective interoperability for payments
also relies on the ability of financial markets to converge on common international standards and a political will to drive the adoption of those standards. This will imply a coordinated action of regulators and associations like Swift to limit variabilities
in the implementation of those standards.”
Annelinda Koldewe, global head of wholesale banking and payments for Netherlands-based ING (ranked #8 by assets among European banks), shares more on the recent innovations Swift has brought to market, and how some of its newer services will specifically
come into play, in this growing payment interconnection and efficiency movement.
“Swift gpi, Swift Go and SWIFT Pre validation are examples paving the way to increase speed and transparency, improving the straight through processing rate while reducing costs of international payments. Key in these solutions is avoiding deduction of fees
as the beneficiary end, which is the most important client criterium in the international payments service offering next to speed.”
In her view, blockchain will also become a much greater factor in future payment processing innovation. However, that won’t occur without a few challenges along the way. “The market is exploring several initiatives interlinking instant payment or blockchain
based payment infrastructure with each other. For these alternatives to be successful, reach will be the determining factor.
“Adoption will depend on models that are viable for all parties concerned. Legal and compliance frameworks are the most challenging issues to solve, not so much technology or formatting of messages.”
Yves Longchamp, head of research at SEBA Bank, a Switzerland-based global crypto challenger institution, agrees, and sees lots of possibilities, and mostly pluses, in this emerging record-keeping tool, even across borders and time zones.
And as a potent protection against errors and other mistakes, not to mention fraud and money laundering too: “Blockchain is a technology made for increasing speed and transparency while reducing the cost of payments. It increases speed as the transactions
are happening instantaneously — there is no delay between the order and its execution. Blockchain works 24/7, 365 days a year.
“Consequently, opening hours, weekends, and bank holidays are irrelevant. Blockchain is a public ledger and is transparent by definition but that transparency does not mean all information is public, a layer of privacy can and must be added. Transparency
helps to trace any movements between funds, identifying any illicit use.
“Commercial banks, PSPs, and central banks can potentially connect to a public blockchain and use it as a common ledger of all transactions and payments. Imagine all financial actors were to use one or several interoperable blockchains; it would give all
participants access to the same truth and thus the risk of mistakes would be limited.”
The focused view of Cecabank, headquartered in Madrid and with wholesale banking offices in major European centres, is that: “Payment infrastructures are called to facilitate the largest number of payment instruments available to public administrations,
so that the payment experience for users in their interactions with government agencies is as seamless as possible.”
The Spanish bank offers examples on one side of the public/private banking equation: how people and public entities actually pay each other, how this can be made more efficient, and in fact is already occurring. It’s not just about improving the ease of
use via traditional methods, but adding emerging instruments, like digital currencies, as well.
“In Spain, for example, there are an array of successful integrations between municipalities and banks enabling the payment of taxes and municipal fees, within a secured and integrated customer journey provided by the public entity’s’ website.
“Another use case can be found in integrations with the central tax administration enabling payments by direct debit, credit cards and bank transfers while generating the payment receipt reference online. In this regard, the potential arrival of a digital
euro will offer a new universal instrument to make payments even more convenient for users.”
None of the banking providers we surveyed are shying away from the obstacles that need to be overcome in pursuit of the opportunities coming with greater public and private collaboration on payments capabilities and regulatory issues.
Maymat says that “efficiency and robustness of payment systems being key to the development of international trades, interoperability and global reach also are an economical and national sovereignty issue”, and that, like Cecabank, ING, and SEBA Bank, their
institution is convinced that it must actively take part in financial standardisation and interoperability facilitation initiatives.
“This is a challenge which requires us to partner with all the stakeholders of the payments’ ecosystem (peers, fintechs, regulators, users’ groups, solutions providers).