The payments industry is on the verge of changing and this means that there is an introduction of new payment systems, technologies, standards, as well regulations that come with it. With the new process, there will also be more value created for users as well as providers of payment services. The two biggest changes are real-time payments and open banking in the payments and financial services sector. Open banking and real-time payments are part of a much bigger modernization wave that is bringing change to customer relationship and the use and access to financial services overall.
How to Respond to Real-Time and Open PaymentsTo successfully implement open banking, the concepts will require a fundamental restructuring of the way bank data is stored as well as retrieved, along with various new strategies to change the way bank products and services are developed, marketed, processed and distributed. The main change would be change the bank batch process from a 9-5 operations processes to a 24x7, 365 day process. Banks also have the option to choose how they position themselves by selecting one of the listed banking models:
- Full service provider (traditional method)
- Utility (infrastructural method)
- Supplier (designed)
- Platform (immersive and intelligent method)
Open Banking, Real-Time Payments and the Broader Payments Value ChainThe shift to real-time and open payment flows has a lot of key implications for each individual party involved in the payments ecosystem. This opens up new opportunities as well as challenges that need to be addressed. Real-time and open payments will help in creating opportunities that will help generate increased transaction volumes as well as improved efficiencies across the payments value chain. The parties affected are as follows:
- Third Party Processors (TPPs)
- Payee Bank
- Payer Bank
- Central Infrastructure/ Network
Monetizing Real-Time Payments and Open BankingReal-time payments and open banking create and add value to companies in a lot of ways. They have a lot of potential that will help banks grow revenue as well as attract new customers when the two are combined. The benefits reach the consumers as well as the companies.
Challenges Banks are Facing Today
- Legacy revenue streams
- Outdated back office processes
- Regulatory compliance
Achieving Payments InnovationTo achieve payments innovation, banks will have to create a long-term vision to see how their institution will respond to the challenges of today and the future. The vision will have to include a discussion on the bank's strategy to deal with open banking and real time payments. The expectations from consumers and businesses have evolved, and when users ask for changes, the institutions need to meet the demand to be able to operate successfully. Banks will have to maintain and report real-time balances so that the customers can benefit from from real time payments and open banking.
- The payment industry is innovating with the help of open banking and real time payments
- Banks need to evolve to meet the demands of the consumers and their strategies need to include open banking and maintaining and reporting real time payments
- Banks face a lot of challenges with revenue streams, backdated processes and compliance which they need to overcome to be able to operate optimally