Topmost Challenges in Payments

Greater payments visibility 

The siloed systems that handle multiple payment types deprive banks of the holistic visibility they want across the full environment.

Many institutions lack reporting and analytics that would enable them to spot trends, better manage liquidity and risk, and pinpoint anomalies amid vast transaction volumes. Banks face new payments challenges in a fast-changing industry Poor visibility is not just an internal liability.

It also means that banks are hard-pressed to satisfy customer demand for real-time transparency into payment status, particularly across a wide range of payment types, and risk a competitive disadvantage that can drive churn and revenue loss to more advanced rivals.

Increased operational efficiency

Banks pay a high price in operational inefficiencies in managing fragmented payments environments. Duplication of data and effort across systems is not uncommon, driving up administrative costs and introducing the risk of discrepancies in information.

The IT resource requirements to maintain and evolve a sprawling payments infrastructure are also high. Dozens of technical interfaces, transactions, database schema message types, and standards such as ISO 20022, SWIFT and ACH are costly and time consuming to maintain update.

Many custom integrations developed over many years are critical to operational integrity, yet are often poorly documented and difficult to manage when the individuals who developed them move to another role or company.

Improved compliance and risk management 

The limited visibility in siloed legacy payments systems also compromises a bank’s ability to maintain regulatory compliance and to effectively manage risk. Financial institutions devote substantial resources to document information to comply with anti-money laundering (AML), FATCA, Dodd-Frank, SEC, Basel III and a host of other ever-changing requirements.

Payments infrastructure consolidation can significantly ease the compliance burden and improve confidence in regulatory reporting. Similarly, internal risk management is complicated by the sheer volume and speed of payments data across heterogeneous systems.

As the financial services world evolves towards real-time or faster payments processing, the importance of greater transparency to track and assess risk is magnified.

Readiness for real-time payments 

In the U.S. and other nations, Banking needs to prepare for the adoption of real-time payments.
The U.S. is well behind other nations in payments speed, including the U.K., Japan and Singapore.

Yet driven by business and consumer expectations for immediacy and strongly advocated
by the U.S. Federal Reserve, NACHA and the Clearing House, real-time payments in the U.S. and elsewhere are becoming more a question of when, not if.

Banks in the U.S. and other nations are understandably apprehensive about the transition.
The consultancy McKinsey estimates the cost of supporting real-time payments in the U.S. is between $4 billion and $7 billion, including the cost of adapting legacy systems and introducing new technology to facilitate the change.

As it is, payments infrastructure generally lacks the flexibility to accommodate such a large-scale change, and makes it difficult for banks to take advantage of opportunities to deliver innovative products and services oriented around real-time payments.