Payment models are changing radically, creating both challenges and opportunities for financial institutions. New digital-only banks have accelerated innovation, while the pace of global change has created a new competitive landscape. UK financial institutions also face the additional pressures created by the need to migrate to new technology platforms to support ISO20022 based real-time and high value payments.

In this new landscape, the quality of the experience is paramount – for merchants, businesses and the end consumer. The need to avoid hugely expensive downtime is a given, but banks must also optimise service delivery to meet evolving expectations – and that requires real-time insight into the performance across the entire payment infrastructure. David Guiver, Head of Transact and Infrastructure Products, IR explains the importance of multi-layered end-to-end infrastructure monitoring in a real-time payment world.

Rising Expectations

Every aspect of the payments model is experiencing change and while the UK lead the way in the creation of real-time payments with the development of Faster Payments, the rest of the world has rapidly caught up, even surpassed, the services delivered by UK financial institutions. Customer expectations have also changed, driven by the ease of mobile payments and the rising limits for real-time payments.

The pace of change is significant. The limit for Faster Payments in the UK is now £1 million per transaction. In the UK, the value of products purchased via mobile devices in 2020 was around £65 billion and by 2024, m-commerce retail revenues are predicted to surpass £100 billion. There is no tolerance amongst merchants, businesses or consumers for glitches in these payment processes. Expectations are for 100% reliable, immediate transactions with zero errors. At the same time, of course, banks are facing ever tighter regulatory scrutiny plus financial penalties for failure to process payments within the defined timescale.

Real-Time Insight

It is vital to ensure the critical infrastructure supporting payments is functioning well. But today’s complex and evolving payments environment has multiple possible points of failure. Is a payment failure due to network availability issues? Internal network problems? A lack of telco service causing POS outages in one area? Or a glitch in a mobile wallet update? Are delays in processing a high value payment caused by problems in manual Know Your Customer (KYC) or Anti-Money Laundering checks – and is the bank at risk of missing a costly deadline as a result?

Monitoring in real time has become an essential tool in the financial services armoury, providing the insight required to minimise expensive downtime. Extending traditional open systems infrastructure monitoring to cover application and transaction level activity provides an extraordinary depth of insight to support far more effective and reliable payment operations.

Efficient Operations

The ability to avoid just one outage, and the cost associated with lost business as well as reputation damage, immediately recoups the cost of performance monitoring technology. But it is the depth of insight provided by real-time, multi-layered monitoring that is providing financial institutions with the ability to continuously adapt to deliver an optimal performance. Transaction level insight, for example, allows a bank to rapidly highlight issues, such as excessive declined payments, with a specific merchant or device type and enables remedial action to be taken.

It allows Treasury departments to proactive manage liquidity and risk, through effective control over sanction, fraud and liquidity checks associated with high value payments. Anecdotally, around 50% of high value payments are not automatically processed and require additional manual checks.  Using real-time monitoring to track queue length and automatically reassign workload between operators, allows banks to confidently meet the payment deadlines while also achieving these complex and vital checks.

Continuous Change

In addition to the ability to respond to immediate issues, monitoring is an essential tool to support financial institutions’ understanding of changing business and consumer customer expectations across the evolving payment landscape. It can, for example, provide new insight into trends in payment preference – such as the rise in mobile wallets – helping financial institutions to plan and prioritise investments.

This depth of insight will be particularly important for the UK banking world as it faces up to the challenges of achieving this optimal experience while also undertaking highly complex and demanding migrations to the new payment platforms. This year, SWIFT high value payments are moving from older legacy message standards to more modern ISO20022 based messages – and, banks will also need to migrate the long-established Faster Payments systems from ISO8583 to ISO20022 over the next two years.

Any development on this scale will create significant operational risk. Without real-time visibility across the entire payment process, at infrastructure, application and transaction level, banks will struggle to deliver the new payment platforms without compromising performance or the quality of experience.

Conclusion

The increasingly demanding, complex and competitive payment market is creating new operational risks. Avoiding outage is absolutely essential, but banks need to do more than just avoid outage. They need to be constantly improving the quality of service and ensuring investment is targeted towards the areas of most value and growth to deliver a frictionless payment experience.

Furthermore, while each payment mechanism creates different challenges, they can no longer be considered in isolation. Implementing a single performance monitoring solution across the entire payment infrastructure – cards, real-time and high value payments – is hugely valuable. With an omnichannel view, financial institutions achieve cross infrastructure understanding. This insight can support the new levels of agility required to respond to an unprecedented pace of banking change, and customer expectation for a frictionless experience irrespective of payment type.