Financial technology, or “fintech”, has become a huge mobiliser of change in the transaction space. While fintech companies have been a key catalyst for the recent innovation surge, the onus is now on banks to ensure new capabilities are leveraged to the full to meet ever-increasing corporate client demands. Christopher Mager, Head of Treasury Services Market Segments, BNY Mellon, discusses how banks are not only embracing technological change, but leading the charge to transform global payments and deliver a significantly enhanced client experience.
Digital developments are spurring a payments ecosystem shake-up, resulting in the emergence of new user-friendly solutions. This, combined with the growing millennial influence, is leading clients to expect ever-more effective solutions at their fingertips – anywhere, and at any time.
While innovation for corporate banking has been slower to progress than in the retail sector – primarily due to greater transaction complexity, regulatory requirements and security concerns – demand for a radical overhaul of corporate transactions to bring them in line with modern day needs is certainly gaining momentum. Indeed, with fintech innovation gaining traction in retail payments – consider ApplePay, PayPal and Alibaba, for instance – users are beginning to expect similar breakthroughs in a corporate context. This presents banks with a significant challenge – namely, how best to deliver an enhanced client experience fit for today’s digitally-driven clients.
In an endeavour to address evolving client needs, fintech companies have attempted to enter the payments space in droves. These nimble non-bank providers have been able to enjoy somewhat of a head-start over traditional banking providers in terms of digital innovation, for two main reasons: firstly, fintechs have somewhat been flying under the regulatory radar, meaning they have been able to focus energies on customer-centric developments. Yet, as certain fintechs begin to scale up and become more important to the financial system, it will be interesting to observe how the regulatory landscape will evolve for fintechs. As it stands, the stance that regulators will take remains to be seen. Secondly, unlike banks, fintechs are unrestrained by existing legacy systems, giving them the freedom to push innovation to its limits.
Furthermore, fintech companies – of course – have exceptional know-how when it comes to digitisation, and a great affinity with the needs of millennials, which makes them well-positioned to create new, experience-changing concepts. That said, while technological talent is vital to exploring and understanding the extent of what’s possible for banking innovation, it is merely the tip of the iceberg when it comes to its delivery.
It is here that banks’ role in driving the future of payments really comes to the fore. Indeed, banks possess invaluable qualities in this respect – notably an unrivalled grasp of the regulatory system, capital, market trust, and a far-reaching client base that fintechs, for all their technological nous, cannot match. That is why banks are gearing up to lead the charge to transform the global payments ecosystem; leveraging core bank strengths and building upon the possibilities created by fintech to drive forward new industry developments and make them a reality.
Banks and fintechs unite
Given core payment systems have seen little in the way of significant technology advancements in many years, modernisation of legacy infrastructure is long-overdue. The advent of fintechs has changed the perceptions of what could be possible for global payments, and banks are now adopting a number of approaches in the quest to deliver an enhanced, real-time global transaction experience to clients.
Banks and fintechs – in increasing numbers – are now recognising the incomparable benefits that fusing their strengths through bank-fintech partnerships can provide. In this respect, banks are structuring such alliances via various methods, from venture capital investment to accelerator/incubators and sponsorship models, as well as by engaging the fintech community by hosting “hackathons” and establishing innovation centres to promote interaction and the exploration of new ideas.
Such a collaborative approach is not exclusive to bank-fintech alliances. Banks, spurred by new technology capabilities, are starting to work more closely together to promote a more harmonised and interoperable global payments infrastructure. Certainly, cooperation and standardisation are crucial if the ultimate goal of implementing a real-time, cross-border payments ecosystem is to be achieved. And key to this is establishing the network effect – having a critical mass of industry players involved. Importantly, as a growing number of banks collaborate on industry-wide initiatives and work groups to modernise payments, the network effect is gaining traction in this area.
Here, we consider three important collaboration initiatives currently being pursued by the traditional banking community that – if stitched together successfully – could ultimately mark the genesis of a real-time global payments infrastructure: the SWIFT global payments innovation (gpi) initiative; domestic real-time payments systems and ISO 20022 – the global standardised messaging system; and collaborative efforts to harness the possibilities of the distributed-ledger technology, or “blockchain”.
The potential of SWIFT gpi
With SWIFT’s global network and expertise of local banking processes, the SWIFT gpi initiative has the potential to overhaul cross-border transactions – and significantly enhance both payment transparency and efficiency. Its objective is to establish new service level agreements (SLAs) and global standards that will enhance the correspondent banking sector’s ability to provide interoperable and transparent services. Currently in its pilot phase, with some services expected to be available as early as 2017, the project hopes to provide transaction parties with real-time updates of any transaction’s payment status, a clear indicator of transaction fees, and improved fraud screening capabilities and pattern recognition services.
The project exemplifies a turning point for inter-bank collaboration. With more than 70 banks already signed up (including BNY Mellon), the consortium constitutes almost three-quarters of SWIFT’s cross-border payment traffic. Certainly, it is hoped that with such industry backing, the project will have a significant impact in the global payments space, and will act as a blueprint for what can be achieved if the network effect gains considerable traction among the industry’s leaders.
Importantly, the gpi project becomes increasingly attractive when we consider that domestic real-time systems that are being developed – such as the US real-time payments system (to be introduced in 2017) – are incorporating ISO 20022 standards, the common messaging framework for cross-border payments. Should this occur as planned, the framework would be in place to enable various countries’ individual payment systems to eventually become inter-connected to establish a truly global cross-border real-time capability in the future. With this in mind, discussions between a number of payment system operators, including from the UK, the US, Canada, Australia, and Singapore, have already taken place – a promising signal of intent that real-time cross-border payments are a matter of when, not if.
Blockchain’s potential to empower
While its chances of success are less clear-cut than the SWIFT gpi initiative, the possibilities of blockchain – the distributed-ledger technology – are swirling around the finance industry with tremendous anticipation.
Blockchain – the foundation technology for bitcoin – can be deployed in various other applications (not necessarily involving the bitcoin digital currency) to enhance transaction efficiency and transparency, as well as mitigate risks, owing to its cryptographically-secure nature. A great deal of investment is going into exploring blockchain’s possibilities, with banks and fintechs working collaboratively on proof of concept projects. Elsewhere, the R3 consortium has brought together over 50 banks to focus on pushing blockchain’s capabilities and testing its compatibility for corporate transaction usage in the future.
Of course, while blockchain can address many questions, it leaves just as many unanswered, especially with regard to regulatory and legal scrutiny, and whether its advantages could be leveraged through other means entirely at a lesser expense. Despite its inherent complications, however, blockchain remains a key priority for exploration.
While banks may initially have reacted with uncertainty at the prospect of fintechs on “their patch”, they have not lost sight of their role as the vanguards of the payments sphere, and are crucial to the myriad of inter-bank and bank-fintech partnerships that hold the optimal chance of making substantial progress. Investment into fintech innovation has grown significantly in recent years, and as the charge to introduce an enriched payments experience gathers pace, banks are positioning themselves at the forefront of new, key initiatives; taking action to drive forward valuable advances that can truly transform transactions in order to ultimately create an optimised global payment ecosystem for the future.
The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.
U.S. inauguration turns poet Amanda Gorman into best seller
WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.
Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.
“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.
Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.
While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.
“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”
Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.
“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.
“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”
The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.
“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.
A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.
She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.
Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.
“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.
Gorman’s books are both due out in September.
Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.
(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)
Why brands harnessing the power of digital are winning in this evolving business landscape
By Justin Pike, Founder and Chairman, MYPINPAD
Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.
As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.
As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?
Digital is an essential survival tool, and even more so in a COVID world
No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.
In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.
Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.
The challenges that rapid digital transformation brings to businesses
Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.
Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.
The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.
As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.
But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.
A digital world post-COVID
Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.
There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.
Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.
Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.
Brexit responsible for food supply problems in Northern Ireland, Ireland says
LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.
British ministers have sought to play down the disruption of Brexit in recent days.
“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.
The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.
(Reporting by Guy Faulconbridge; Editing by Tom Hogue)
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