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Processing payments in real-time is becoming increasingly commonplace and in turn is “dramatically” increasing the pressure on banks’ internal systems, according to Andre Casterman, chief marketing officer at Intix.
The expectation that sending and receiving payments happens almost instantly has only grown since the coronavirus pandemic.
According to a report by FIS over 130 financial institutions in the US implement real-time payments, five times more than in 2019, while 56 percent of all European payment service providers have now signed up to bring cross-border and instant payments to 20 countries.
The internal pressure on banks to process the payments has increased says Casterman, because real-time payments has revolutionised how payments are processed.
“It has moved from an end-of-day or batch processing, where you have a once in a day cut off time to get those payments cleared, to real-time processing of payments,” he says.
“As a result, the internal pressure to get those payments cleared without any interruption, this pressure is huge.”
As client expectations have been “reset” to an instantaneous flow of payments at the B2B and B2C level, the major challenge for banks has been to have the technology capable of keeping up.
“Some of the banks’ internal technologies were designed from decades ago and they were designed from a batch perspective – processing a whole set of payments, then reporting whether it was successful or not,” adds Casterman.
“Now, with the need for real-time payments, it means that the technology must be able to handle each and every transaction on an individual basis, independently of the other transactions.”
The transformation to real-time has seen the market modernise, but there is a further need for banks to have the visibility to work at the individual transaction level, not just at batch level, says Casterman.
Banks now need a monitoring solution that works much like a control tower at an airport, he adds.
“The control tower knows everything about the planes. Planes landing, planes leaving, traffic, analytics – there is no event the control tower doesn’t know about, and that’s what Intix does within the bank.”
Intix provides a solution that gives an end-to-end picture of an institution’s financial transactions across a range of data sources and data formats, effectively monitoring the entire real-time payments process.
Technology fuels expectation
At the B2B level, banks are feeling the heat as clients expect the same level of service that can be found in everyday life on e-commerce sites and in postal services, says Casterman. A report by Deloitte echoes this, saying that expectations had been transformed by rapid technological change and was a key factor driving growth of the real-time payments space.
“The expectation of the client is that it has to be faster, it has to be cheaper, and banks have to offer more transparency,” Casterman says.
“Five or 10 years ago you could tell the corporate you have processed a payment at cross-border level, but you have no news, no idea where it is, and they will have to wait. That kind of answer to a corporate is now considered unacceptable.”
The desire on the corporate banking client side is to get to a similar place with payments that consumers are at already with services like Amazon deliveries – total visibility and transparency, tracking a product throughout its journey to the customer, says Casterman.
Client demand, not regulator, drives change
Deloitte’s report added that regulatory pressure was another key factor behind the growth of real-time payments, but Casterman believes the competitive speed of innovation has been created something of a self-regulating approach. Banks that haven’t updated their systems to handle real-time payments would soon be left behind and so actual regulatory demands haven’t been as critical.
“Banks have introduced real-time payments because they felt the need from their clients,” Casterman says. “And through different market initiatives, they have introduced new capabilities.”
“In some countries, like the UK, there was a regulatory angle to this, but banks have definitely recognised that real-time payments had to become the norm.”
Now the technology is being put in place for real-time, the next step for banks is to ensure they have the monitoring and tracking capabilities necessary to keep the flow of payments functioning properly. Casterman notes that in the world of payments, speed is key.
“Speed of response is everything,” he says. “The customer is expecting the transaction to be processed as quickly as possible, so if there’s an issue, you need to repair it as quickly as possible.”
Whether payments get processed through one or the other platform, Intix offers banks an advanced risk mitigation tool and helps them protect their reputation in an increasingly innovative global payments industry.
“If anything goes wrong, Intix tells you,” Casterman says.
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