Payments can cover a broad spectrum of areas from regulation, FinTech’s, Fraud, AML, cross border payments, real time banking, open banking to list a few. Payments is a very large area and very important to the banking system, as it refers to any system used to settle financial transactions through transfer of monetary value. Payments services are a core facility provided by banks to transfer money through a range of means including credit and debit cards, electronic funds transfers, internet banking and direct debits. Alongside consumer payments banks also use payments systems to transfer products in different markets to transfer funds between institutions.
There are a range of regulations that fall under payments including real time payments, PSD2, SEPA instant payments. Given that digitalisation has increased within the banking industry, payments are at the forefront of innovation which will increase competitive advantage in the market. For instance, there are a range of apps entering the market from both banks, and FinTech’s offering money saving solutions or accounts to manage all open credit and debit accounts in one easy assessable app. Due to this there is a large focus on technology and innovation and how regulations are supporting or hindering these efforts.
PSD2 was implemented in January 2018 and on the September 2019 all players will have to abided to the regulation. This will mean that banks and providers will be regulated to open customers information and share this with their competitors. To do so a licence will be required, but when accepted all players, banks and providers are able to access the sandbox of information when and if their customers allow them to do so. With this in play alongside Open Banking, what will the future outlook of banking look like?
How will the requirements enable full implementation to deliver PSD2 and open banking? As of course all changes will have a ripple effect of pro and cons to the structure of what was once there or what has been generated. Historically the payment industry has been monopolised by the core banks but with PSD2 and Opening Banking being put into place could this potentially change and will this allow non-banks to compete and challenge banks role in payments.
There is speculation that there will be potential loopholes for banks to withhold information based on interpretation of the regulation and therefore keep the upper hand. The question is how will regulators regulate interpretation? The regulation needs to stand resilience to any loopholes for the industry if this is going to successfully secure customer authentication and limit vulnerability.
Ensuring systems resilience to adapt to the evolution of the NEW payment landscape is crucial. However, we also need to consider that banks infrastructure become outdated as lots or relentless regulation are imputed on a yearly and quarter basics. There is an infrastructure limitation of large financial institution to keep up with regulatory changes due to their systems already in place and catching up with the start-ups whom can start from the beginning. Throughout the life cycle of change will Banks and FinTech collaborate to advance customer options. As the end goal is customer satisfaction as the consumers, with out this how can the banks and non-banks ensure customer confidence and ensure that mass customer adoption is successful for the boast the industry requires.
Following the NEW payment landscape, the evolution of FinTech and Challenger Banks impact the existing banks position and enforce change. New services that are developed create an outcome for competition and innovation in the payment sector. Such as the competitive pressures from FinTech’s, which are the likes of Amazon, Apple and Facebook. These are the game changers striving to have the next new product and service. But how far is this innovation able to really cut costs and improve internal process and security and will the mass consumer confined or refrain and stay loyal to their banks.
The payment industry is in a rapid evolution with new players continuing to enter the market and the future outlook is extremely exciting. Payments is a very large area and very important to the banking system and todays regulation and innovation will implement the future outlook for the payment landscape. However, with the constant implementation and innovation the mass consumer is the biggest unknown of what they will adopt and where they will remain loyal to for all players.
These are only a snapshot of some of the challenges within the payments industry. The findings of this research will be illustrated on February 12-13, 2019 at The Centre for Financial Professionals Payments Forum in London. We invite you to join your peers for two days to discuss upcoming payment trends, technologies and regulatory requirements, including SEPA instant payments, PSD2 and the GDPR.
The agenda can be viewed at www.cefpro.com/payments
For further information, please get in touch with a member of the team on +44 (0) 20 7164 6582