Banking Fintech Payments

EBAday 2016 – a brave new world for payments

EBAday 2016 – a brave new world for payments. Photo: Denphumi,
Written by Patricia Hines

Patricia Hines reviews an EBAday roundtable discussion about the challenges and opportunities ahead for banks when it comes to payments and technology.

Hosted by the European Banking Association and Finextra, EBAday attracts payments professionals from leading financial institutions and technology providers. This year’s event was held in Milan, with the theme ‘A Brave New World for Payments’. Sessions focused on the dilemma facing the payments industry – enhancing existing payment models while preparing for alternative payments and technology.

I had the honour of moderating day two’s strategic roundtable discussing future challenges and opportunities for banks. The panelists were Paolo Cederle (CEO, UniCredit business integrated solutions), Christophe Chazot (group head of innovation, HSBC), and Damian Pettit (RBS head of payment operations).

The panelists felt that there is a disconnect between the limitations of legacy bank infrastructure and the promise of new technologies. With the majority of bank IT budgets spent on maintenance, the challenge is for banks to keep existing systems running while investing in the future. For customers, there is too much complexity, especially in cross-border payments, and customers want an easy experience at minimal cost.

A new norm

Discussing faster payments in the UK, the panelists said the introduction eight years ago has revolutionised payments, completely changing customer behaviour and paving the way for new mobile-based services such as Paym, the UK’s mobile payments service offered by 17 banks and building societies. For countries having implemented immediate payments, real-time is the new norm, and with that comes expectation and demand from customers.

With the EU PSD2 payment services provisions looming on the horizon, the discussion turned to the prospect of disintermediation of banks by third-party providers. The panelists were optimistic about the future. They feel that regulation is helping to steer banks towards new initiatives and innovation in services, and is a great opportunity to better service customers and push banks up the value chain.

Regarding the question of whether emerging payment models and technology represent an escalating threat, the response was that instant payments brings security challenges. But the panelists overwhelmingly agreed that convenience and speed cannot come at the cost of security. Safety and security is absolutely paramount.

Revolutionary technologies

The discussion then moved on to the theme of disruption: are payments in a revolutionary or evolutionary phase? The panelists felt it was a bit of both. Revolutionary technologies such as mobile and artificial intelligence are pushing payments along an evolutionary path, and banks have an advantage. The fintech startups entering the market don’t have the direct customer interaction and track record that banks have in safety and security. The banks are running hackathons, and are open to working with startups, while improving legacy systems and simplifying the customer proposition.

All of the panelists’ banks are members of the R3 blockchain consortium. Blockchain is bringing a new way of working together for banks and technology providers. Each of the panelists is watching the technology closely, and one area of opportunity cited was the last mile of the payments chain, and in the trade finance arena.

My takeaway from the roundtable was that the global payments industry is transforming. The “brave new world” is one with an imperative to be nimble, keeping your eye on all of the opportunities, both for existing payment models as well as alternative technologies. Collaboration is key, whether through acquisitions, consortiums, partnerships or open source projects.

READ NEXT: Explaining PSD2 without TLAs is tough!

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: Denphumi,

About the author

Patricia Hines

Patricia Hines is a senior analyst with Celent’s Banking practice. Her areas of research include global transaction services and wholesale banking, with emphasis on treasury and cash management, corporate banking delivery channels, and trade and supply chain finance, along with commercial and small business lending.

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