Phy-gital Roundtable: Breakfast Roundup from Germany and Netherlands

02 May '15 | Debjyoti Paul

German Shoppers: Meet Them in the Fast Lane to Phy-gital

15 January '15 | Ralf Reich

Shoppers Will Share Personal Information (But They Don’t Want to be “Friends”)

15 January '15 | Anil Venkat

Modernize or Perish: Property and Casualty Insurers and IT Solutions

14 January '15 | Manesh Rajendran

Benelux Reaches the Phy-gital Tipping Point: Omnichannel Readiness is Crucial

13 January '15 | Anil Gandharve

The New Omnichannel Dynamic: Finding Core Principles Across Industries

13 January '15 | Debjyoti Paul

Technology does not disrupt business – CIO day 2014 Roundup

02 December '14 | Anshuman Singh

Apple Pay – The Best Is Yet To Come

02 December '14 | Indy Sawhney

Digital transformation is a business transformation enabled by technology

01 December '14 | Amit Varma

3 Stages of FATCA Testing and Quality Assurance

06 October '14 | Raman Suprajarama

3 Reasons why Apple Pay could dominate the payments space

18 September '14 | Gaurav Johri

Beacon of Hope: Serving Growth and Customer Satisfaction

05 August '14 | Debjyoti Paul

The Dos and Don’ts of Emerging Technologies Like iBeacon

30 July '14 | Debjyoti Paul

What You Sold Us On – eCommerce Award Finalist Selections

17 July '14 | Anshuman Singh

3 Steps to Getting Started with Microsoft Azure Cloud Services

04 June '14 | Koushik Ramani

8 Steps to Building a Successful Self Service Portal

03 June '14 | Giridhar LV

Innovation outsourced – a myth or a mirage or a truth staring at us?

13 January '14 | Ramesh Hosahalli

What does a mobile user want?

03 January '14 | Gopikrishna Aravindan

Payments Transformation in Banks: 3 Step Process

Posted on: 04 November '16
Vikram Vindlacheruvu
Vikram Vindlacheruvu
Senior Treasury and Payments Consultant, BFSI Consulting

The Payments Industry is in a state of flux and Banks are re-thinking their payments strategy. Fintech disruption coupled with platform innovation has transformed the payments landscape. Regulators are promoting this innovation to level the playing field and in the midst of this disruption is the customer who demands a seamless, Omni-channel experience to be able to make payments that are delivered immediately at the lowest cost possible.

What does this mean for Banks?

Undoubtedly, the new, young and innovative entrants have created next generation payment products and services that provided customers a sound alternative. Fintech companies have been able to provide innovative solutions to manage high payment volumes, facilitate payments to diverse marketplaces and lower the cost and complexity of payments. These are challenges that banks cannot solve easily due to the complex ecosystem that banks themselves operate in, but what Banks have as an advantage is the large and long standing customer base and more importantly the relationships. In order to preserve the customer relationships, Banks will need to create as well as co-create stellar digital payments experiences for the customer.

What should the Bank do to transform its Payments ecosystem?

In very simple terms, the Bank needs to create payment products and services that can deliver value to its customer base. This can be achieved by building Payments as a Platform where the platform can offer seamless customer centric payments experiences, a platform that can collaborate with other internal and external platforms to co-create those products and services, a platform that leverages technological innovation and sustained profitability through lower operating costs. A state of the art payments platform will help the bank win:

  • The Race to Zero-Reducing the cost of payments
  • The Race to Real-time-Facilitating immediate payments
  • The Race to Revenue-Increased and Sustained revenues through payments

How should Banks mobilize this Payments Transformation?

Banks can mobilize this vision by doing the following:

Payments Transformation in Banks: 3 Step Process

  1. Build Innovative products and services to reach further into a customer’s world: Imagine you need to make an urgent remittance back to your home country that needs to be delivered immediately. You don’t want to pay any fees on the remittance and you want to do this using your mobile phone. Essentially, you are expecting a specific channel based, low cost, immediate cross-border payments experience from your bank. It’s essential that the bank create products and services around such experiences. Whether it be a Digital wallet or a Mobile app to replace cash and card payments, the bank will need to ensure that the products and services are fast, less expensive and easy to use. Essentially, the products and services should be useful and usable. Sustained Innovation, though, is possible if it transforms the ecosystem around and that is where it is important to build a payments platform that can co-create value.
  2. Deploy Payments as a platform to leverage the surrounding ecosystem: Banks are often constrained by their existing payment value chains due to the relatively stable relationship that they have with regulators and partners. They spend heavily on transforming their platforms but do not open them up enough, hence the innovation does not reach deep into the customer’s digital journey. In order to innovate and transform the customer experience, it is essential that banks open up their payments platforms to the external ecosystem, especially Fintech, such that the Banks can co-create payment related products and services along with the disruptors. This can be done by plugging into the API economy and create avenues for customers to make immediate payments at low costs. Banks should create APIs such that the ecosystem can create useful services that will help Bank retain their customers. E.g. more and more banks are integrating with Apple Pay and Google pay through APIs enabling single touch payments through mobile phones. Companies like Yodlee, Dwolla on the other end consume bank APIs to personalized banking information like Balances once a payment is complete.
  3. Run the Payment Operations by leveraging the innovation and sustain profitability through low operating costs: Once the payments platform is deployed to support innovative products and services and run smoothly in the ecosystem, it is important that the payments processes and operations are automated to innovate faster and efficiently. Enabling STP, deploying an integrated payments platform which interacts with the Bank’s Risk and Compliance systems and generating predictive and prescriptive payments insights become important. Banks also need to look at possible next-gen solutions such as Blockchain to deliver immediate payments. Implementing solutions through Agile and DevOps helps in rapid delivery of key payment products and services related features.

The time is right for Banks to embark on this transformative journey. Creating customer centric payments’ experiences will need courage-Courage to Innovate and create payment products and services that provide ultimate value to the customer, Courage to co-create with the surrounding ecosystem to retain and eventually expand the customer base and Courage to create an operational footprint that supports the innovation and co-creation.

Author is a Treasury and Payments Consultant and has worked with Banks to implement Treasury and Payment Products in the area of Cash Operations, Disbursements and Liquidity. As part of the BFSI Consulting group at Mindtree, the author has helped banks strategize their payments vision and roadmap.