Technological advances continue to change the parameters of the payments space, particularly with mobile or contactless technologies. Paul Chandler, Financial Software and Systems Technologies UK’s general manager Europe and Africa explains what banks will need to do to keep up.
The last few years have been notable for the innovative payments solutions that have emerged, and new functionality is developing all the time. The question for banks is whether they are taking full advantage of the new and existing technologies in areas such as mobile and contactless payments solutions.
“Banks could do more. Notwithstanding the fact that they are usually prevented from taking advantage of new technologies by legacy thinking and processes, they say they are innovative but in reality they play a low-risk game and don’t embrace change easily unless it is regulated. That said, it is clear this is changing as the market gets more competitive and banks look for new products and services for their customers,” says Paul Chandler, general manager Europe and Africa for Financial Software and Systems (FSS) Technologies UK.
“Converging channels across the payment ecosystem would in effect bring together existing technology solutions that a bank and its customers use, whereby cutting-edge technology-based solutions like mobile, contactless and virtual cards work together and lead to user adoption and increased efficiency. We at FSS have managed to deliver simple yet effective solutions in the market bringing together ATM, mobile and cards.”
Payment processing provision
Headquartered in Chennai, India, FSS is a global payment systems company providing solutions and services in the areas of electronic payment and financial transaction processing. With an established technology portfolio, 20 years of experience in the payments domain and it has become one of the largest independent payments processors in India. Over 100 companies use its systems, including some of the world’s largest public and private sector banks.
“Our core business is making transactions processing a cost-effective business for financial institutions. We provide tools, products and services that allow financial institutions to offer their customers improved products that both generate additional revenue and also improve ROI on existing investments. We have helped many banks embrace the challenge of monetising mobile and contactless solutions and we delivered some time ago a myriad of mobile and NFC solutions to meet the demands of our banking customers.”
The card market is a prime example of an area where banks must embrace new technology. Chandler sees customers wanting more from their plastic.
“Smart card technology has had by far the biggest impact. Turning a piece of plastic into an intelligent device has and will continue to revolutionise the card industry. The day is fast approaching when the card, intelligent ATMs and cloud banking will mean your bank is in your pocket, linked to your spending, financial planning, bills and so on. I can’t wait.”
The onus on banks is to seize the opportunities that smart card and other technologies present. If they don’t, others will.
“New entrants are clearly the real threat. They are embracing new concepts of banking and have no legacy infrastructures or processes to hold them back. Emerging non-financial institution such as the telcos, payment processors and large retailers will challenge the banks with innovative products and services aimed at the consumer,” believes Chandler. “Banks will continue to dominate the ‘depository’ market because the regulators need to control that area, but we’ll see a growth in consumer-led products from non-financial institutions that will piggyback off the banks. Merger, acquisition and divestment cycles driven by the economy and regulation will continue to occupy the minds of senior executives and the lion’s share of technology expenditure.”
On the positive side, Chandler sees banks viewing IT investments more from the standpoint of value. This approach should see them understand the impact of new payments technologies on their revenue streams, if they choose the right partner for their data and process requirements and as long as it is value to their customers that they prioritise.
“The biggest change is the emphasis on ROI. Financial institutions no longer see investments as a one-way street. They demand good returns on their investments, so we have to have a compelling business case that supports our innovations. Also, banks now look for a much shorter payback period on any investment. Seven-year business cases are very rare these days,” Chandler observes.
“You can deploy new technology and solutions but you have to step away from old-fashioned thinking. Banks tend to pursue their own agendas and have not been open to sharing or using cloud or managed services. Therefore the banks all have costly data infrastructures. Cloud-based solutions will bring down the capex and can potentially bring significant flexibility to a bank’s business team in terms of time to market,” he concludes.