Payments have been at the forefront of banking sector disruption over the last decade and this transformation is accelerating. In the US, factors driving ongoing disruption include the moves toward real-time payments; payments as a service (PaaS); open application program interfaces (APIs); and the data exchange standard ISO 20022.
Data is the most significant factor in these transformations - rich, actionable data that is easy to reuse, redistribute and seamlessly integrate in banking or payments. This is the way forward and is the goal of ISO 20022.
Scale of the challenges
Real-time payments are growing rapidly as they support contactless payments, digital wallets, and e-commerce. According to Grand View Research, the global real-time payments market was worth $13.5 billion in 2021 and will grow at 35% a year until 2030.
Vantage Market Research shows that PaaS - software as a service that connects international payments systems - is growing at 8.1% year and will be worth $22 billion by 2028. Increasing regulation to promote payment solutions; plus a bid to optimize customer and merchant experiences is driving the PaaS market.
Open APIs are reshaping the global payments ecosystem by enabling free data flow between providers, which helps customers manage their money more flexibly. The global open banking market is growing at 26% a year and expected to increase from $15 billion in 2021 to $48 billion in 2026, according to Research and Markets.
PaaS and open APIs are already allowing an expanding universe of financial and non-financial players - such as software and other third-party providers - to access accounts and data. This has enabled them to offer new products and services, grabbing market share, and increasing pressure on incumbents.
Meanwhile, ISO 20022 data exchange formats will soon dominate high-value payments, supporting 80% of transaction volume and 87% of value worldwide, according to Swift. This new open standard will unlock huge opportunities for financial firms by increasing operational efficiency, enhancing customer experience, and enabling innovation.
But financial firms need to act now to reap the benefits. They also face a major resourcing challenge in implementing the new standard. Banks are increasingly concerned about how prepared they are for the first ISO 20022 deadline in November this year in areas such as payment processing, clearing, settlement, antifraud and sanctions compliance. The challenge is to find enough project managers, analysts, and developers with payments knowledge to do the work in time, while competing with all other providers over a finite resource pool.
With all these major disruptions happening simultaneously, you will likely need support in the following three areas.
1. Payments expertise
To address these challenges in your bank, you need support from a payments team led by subject matter experts with deep experience across market infrastructures, financial institutions, retail banking and technology. The team will also need in-depth knowledge of the latest technologies, all of which Delta Capita’s specialist consultants can offer.
Your bank should be looking to educate its wider teams in data standards and client outreach to support transition to the ISO 20022 format for cross-border payment messages. Your teams will need to understand and prepare to transition in a way that enhances your client experience, and your post-trade reconciliation and settlement processes.
You will need to modernize technology to mitigate the financial and reputational risks caused by slow legacy solutions. You should support this with workflow, controls and thresholds to minimize the risk of erroneous payments leaving your organization.
Delta Capita have helped banks modernize or transform their payments platforms can help you do this efficiently and effectively. This work has ranged from advisory and discovery work to impact assessments, and in implementing new operating models.
2. Effective partnerships
Delta Capita have assisted payment infrastructure providers such as SWIFT with standards, internal product development, market infrastructure adoption, communications, and client outreach. This deep experience will enable co-creation and collaboration with you through business and technology advice; impact assessments; customer voice; centre of excellence creation; subject matter expert support; payment controls; gap analysis; and project and program delivery.
To accelerate the transformation of your legacy applications, you will also likely need a partner who can support implementation.
3. Shifting from transactions to value-added services
Financial firms are looking to innovate and maximize the impact of their innovations - from digital wallets to virtual accounts, open banking APIs, and buy now pay later (BNPL) offerings. You should look for support from a consultant with experience in diverse backgrounds, including payment wallets, virtual accounts, and distributed ledger technology. They should also be able to support you by looking for compelling ways to implement these value-adding services.
How Delta Capita can help
Delta Capita’s unique market position allows us to bring insight, skills and capacity to help solve your pain points as the payments market evolves. This is all supported by our experience working with financial market infrastructures, sell and buy side, and technology companies - and across our domains of expertise.
Our vast experience and coverage mean we can craft bespoke solutions to help you maximize commercial benefits from the ongoing tumultuous changes in the banking industry.
To find out more and speak to one of our experts, contact us today.
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