Lauren Jones is head of standards for Payments UK, the trade body representing the payments industry in the UK. She has many years’ experience in developing international industry standards and is head of delegation for the United Kingdom to ISO TC68 and the ISO 20022 RMG, the highest assignment body for ISO 20022.
In this interview at Sibos 2015, I talk to Lauren about financial technology in the payments industry, current and future trends, and the strategic objectives that need to be addressed before any decision is taken to use ISO 20022.
Payments is one of the core areas of fintech, where we’ve seen a lot of interest and investment. We have had new payments channels, payments devices, payment models, wearables, smartphones, smartwatches, and so on. Where do you think the fintech payments space is heading?
Payments is clearly a playground for fintechs and startups, as it’s at the bleeding edge of banking and consumerism, though we’re also seeing fintech making waves in the back offices and investment houses. The financial crisis in 2008 provided ripe ground for change and innovation, as consumers questioned traditional banking, and this allowed for a springboard for the fintech industry. They’ve grabbed the opportunity!
In terms of where the fintech space is heading for payments, I think that, of course, progress will continue to be made in the device space, but where there’s great opportunity and interest is how technology such as blockchain and distributed ledger can be used either in place of, or alongside, legacy technology in the market infrastructure space.
What trends have you seen in the UK payments space in the past year?
In the UK market, the volume of non-cash payments exceeded total cash payments for the first time last year, and we’re consistently seeing a heavy increase in debit card usage. The volume of contactless card transactions more than tripled, and 64% of adults used online banking. I think the UK is becoming increasingly more at ease with using multiple ways to pay.
There was a cash-free ‘cash machine’ announced recently. Do you think this is potentially something that could take off in the UK?
UK customers have always been very progressive in terms of what they expect from their banks and the financial services industry, which has helped set the pace of change. Central payments infrastructure services such as PayM, Current Account Switching and Faster Payments in the UK have allowed consumers to make payments in new, innovative ways, and PSPs have leveraged these central innovations for their own commercial offerings. If there was a clear desire from the UK populace to use a cash-free cash machine, I think the UK community would embrace it, much like it has done with NFC.
You work a lot on ISO 20022 and its impact on real-time payments. What are the challenges around adoption of ISO 20022, and what kind of expected benefits are banks looking forward to?
One of the key challenges around ISO 20022 is that it’s often difficult to establish a business case, and the truth is that it’s almost impossible to articulate one. ISO 20022 is an enabler of a great many things: interoperability, enhanced remittance data and reusability (to name a few), and if these are issues that you as a community face, then ISO 20022 could help facilitate them.
Standardizing for standardizing’s sake is never advisable. There needs to be a requirement or set of requirements that ISO 20022 addresses, and a focus on the strategic objectives before any decision is taken to use ISO 20022. This is one of the key challenges. ISO 20022 should always be viewed in the context of business drivers. In terms of implementation, again there’s a myth that ISO 20022 is a silver bullet, but there isn’t ‘one size fits all’. There are differences across markets for legitimate business reasons, and no amount of standardization will change that. However, if we can standardize as much as possible and document the differences in a common way, we will be in a much better place as an industry.
There are a great many benefits that ISO 20022 can deliver once adopted, but it won’t be a quick process. ISO 20022 is fast becoming the go-to standard for payments, and as its usage increases, we can envisage greater interoperability, greater flexibility and financial messages that can be used in a number of different business areas.
The UK small and medium business sector talks a lot about struggling with payments-related challenges such as late payments, poor cashflow, cost of processing payments, and so on. Do you think this is a challenge, and is it something regulatory bodies can help with?
Payments are at the heart of people’s daily lives, and we as an industry need to constantly remind ourselves that we’re helping SMEs. I think that it’s sometimes easy to lose sight of that. I don’t think formal regulation is necessarily the answer, though. However, regulatory bodies can help highlight the issues and raise awareness. Ultimately, I think what we need to ensure is that the appropriate channels are in place so that SMEs and other stakeholders in the payments industry have a voice that’s heard, is considered and can affect change.
I’ve spoken to a lot of banks (attending Sibos) on blockchain technology. Do you see potential for it to disrupt the banking industry?
I really don’t like the word ‘disrupt’. Some companies providing blockchain technology services absolutely want to topple the status quo, but others are seeking to promote the technology as another path. I think traditional banking still has its place and will be relied on by many citizens and users of payments for some time yet.
Blockchain is just finding its place, and I think fintechs are providing a different line of enquiry that challenges the current way as not being the ‘only way’ that payments or banking can be achieved. It’s healthy to have this debate, and innovate and progress. What fintechs are doing is making the traditional players become more inventive in terms of the services they provide their customers beyond savings and lending. The challenge for banks is keeping up with the pace. A lot remains to be seen with blockchain. There’s a lot of noise, but I think it has the potential to be a very valuable addition to the financial services industry.
What do you think will be the three major trends from the fintech space for the coming year?
I think the personal finance management space could be an interesting area to watch, as well as identity and the ability to verify who I am in a much simpler way. This is something the banking industry struggles with. I also think harnessing the ever-increasing amount of data that organizations collect about us every day, to provide innovative services – and how this data is accessed and disseminated – will be a huge area of change that fintechs could really leverage. The PSD2 regulation will definitely help push the latter along.
What advice would you give to women trying to reshape and redefine the banking industry?
Be yourself. It’s probably the oldest cliché in the book, but I see many women feeling that they need to be a bulldog, or if they let their guard down and show their personality it means they’re somewhat unprofessional. You can still be smart and professional while being yourself. Confidence in your abilities is always key, and will win you far more respect.