Being Future-ready with Payment Modernization
Ove the last few years, one area of banking that has undergone a massive shift is Payments.. Rapid urbanization, advances in technology, and the proliferation of smartphones and digital wallets have spurred a surge in online and digital transactions sparking a move to a cashless society. The advances in payment technology have helped in connecting consumers, banks, and payment processors in a seamless manner.
Millennials expect on-demand banking as well as fast, seamless, contactless, and one-click effortless payment options. Regulatory institutions and payments industry leaders too are driving this change by putting in place measures to streamline payments standards and rein in risk.
The COVID-19 pandemic has led to an acceleration of these trends, shrinking the cycle of change from years to months. While these shifts were driven by the unprecedented situation brought about by the pandemic, a lot of these changes are here to stay even post the pandemic. As real-time payment solutions become the norm, we’re likely to witness increasing demand for retail and peer to peer payments, even across borders.
The quantum of change is putting pressure on incumbent banks to evolve their payments technology strategy and be future ready. Already, fintech firms, low-cost digital payments platforms, technology giants, as well as upcoming challenger banks are riding on digital prowess and differentiated business models to deliver cheaper and better payment services.
Therefore, the time is ripe for traditional banks to look at new ways to deliver value to their various stakeholders. The changing landscape will revolve around:
Early Mover Strategy by Tier 1 Banks
A great example of this is the Qatar National Bank (QNB), which operates across more than 31 countries in Africa, Asia and Europe. In 2018, the Bank consolidated its multiple payment engines and replaced them with the unified, multi-currency and multi-entity enabled enterprise payments hub from Finacle. This was aimed not only at boosting business efficiency a boost but making QNB fit for a truly digital future.
Emirates NBD partnered with ICICI Bank in India to pilot the first blockchain-based network for international remittances and trade finance. By replicating the paper-intensive international trade finance process as an electronic decentralized ledger, the new framework enables all the parties within the framework to access a single source of information in real-time. This facilitates quicker, transparent and secure transactions as well as instantaneous remittance transactions.
Liv. Bank, the digital-only lifestyle bank operated and managed by Emirates NBD Group is a great example of a digital native bank, which is targeted at millennials. It was built on the principles of simplicity, intuitiveness, smart analytics, and API connected ecosystems. The bank attracted more than 370,000 customers at 20% of the acquisition costs of a traditional institution, emerging as the fastest growing bank in the UAE by customer acquisition. With more than 80% of new customer coming by way of referral, Liv. enjoys a high customer satisfaction rate. In addition, Liv. Is bringing a whole new market place of various service providers to attract millenials to buy and spend through Liv.
Non-traditional alliances such the partnership between telecom player Bharti Airtel and Axis Bank to launch ‘Airtel Money’ is a great example of disruptions in the payments space. This alliance leverages the companies’ respective strengths in telecom and banking sectors to bring banking products and services that can empower financially excluded citizens of India.
Paytm, which transformed itself from being just a digital wallet player to launch a mobile-first digital only bank in India, is another great example. Paytm saw the addition of 42million accounts in 18 months in addition to
500+ corporate clients within just a few months of launch. Paytm drives 30% of open banking transactions in India and witnessed a 400% increase in average daily transactions, clocking 5 billion transactions annually
The last few years have seen immense growth in using emerging technologies to support Non-Card based payment transactions. Blockchain as a technology with its inherent capabilities has helped address requirements of traceability of funds from source to destination, providing the support for AML / fraud checks while payments are instantaneous.
For Instance, VISA B2B Connect, a non-card payments rail, helps corporates send money to over 97 countries in real-time, with the sender and receiver having the necessary transparency regarding the payment. It’s partnership with technology players like Infosys has helped to bring this capability to Banks across the globe.
Furthermore, with more and more countries becoming crypto-friendly, we have also seen the rise of the crypto-exchange platform. The platforms enable customers to use their cryptos for money transfer where the receiver gets paid in fiat / crypto currency. They can use it as an asset pledged for a loan. Crypto-linked payment cards where customers make payments using their crypto wallets is picking up pace. For Instance, VISA has recently announced that it facilitated more than $ 1 billion in transactions via crypto-linked VISA cards.
With so many disruptive technologies and Innovative Banks entering the fray, writing on the wall is clear. Modernizing the Infrastructure becomes paramount and embracing seamless digitization, real-time payments and open banking lays the foundation to embrace any new payment technology advancements in the near future.
Sriranga N Sampathkumar, VP and GM - MEA, Infosys Ltd.