Efficiency, scalability and cost reduction are required
Outdated systems make it difficult for banks to retain customer relationships via front end services, with both fin- and bigtechs (such as Alipay or Amazon) competing for the attention of end users. On the other hand, the back-end side is under pressure because more efficiency, scalability and cost reduction are required. Feiler: “The speed with which transactions are processed via instant- and mobile payments, among other things, puts the front- and backend in closer contact than ever before. If banks want to remain competitive and relevant instead of simply compliant, they must find a way to refresh and expand these backbone systems so that the efficiency increases, and the huge value of transaction data can be used properly via new digital technologies.”
According to Feiler, this requires a modern and standardized payment processing platform that is fast, flexible, scalable and transparent. This platform should also help to extract valuable information from data and manage transaction volumes at lower costs. Updating the payment platform is a huge effort that requires significant changes to a bank's overall IT-infrastructure. Feiler: “For that reason banks should always take the time to think about their current and future business. Afterwards, banks can decide if they want to develop these adjustments in-house or that they want to use a solution from a specialist third-party provider. Partnering and outsourcing the maintenance and processing of the back-end system is the third option.”
Silos can be integrated into one platform
Concrete steps can already be taken, according to Feiler, including standardization and the merging of a number of silos. “While there is a concrete need for a new infrastructure for instant payments, other payments types also require changes in the infrastructure. For example, both urgent payments in Europe and international payments via SWIFT will use ISO 20022, an international standard for the exchange of financial data, in the future. As this messaging standard has already been built for SEPA payments, it makes sense to also leverage this capability for urgent and international payments. Therefore, these silos can be integrated into one platform.”
Another argument that Feiler wants to point out is that multi-currency and SEPA payments show overlaps because they both can represent cross-border payments. “It is much more efficient and cost-effective to merge these silos. At the same time, SEPA payments and instant payments also show similarities: they have the same messaging standards, same rulebook change implementation timelines and the same scheme owner. You can also combine them in one infrastructure.”
After all, it is disadvantageous to work with four systems or silos. Feiler: “An example: a client calls a bank after he made a transaction, just to check if his funds went through, but the beneficiary bank claims that they didn't receive the money. In that case, the transaction must be checked in four different systems. It is inefficient and therefore frustrating the customer.”
In line with Darwin's theory
To solve this problem, outsourcing is an option. “It is quite an effort for banks to achieve this. It is a multi-year project”, explains Feiler, who states that equensWorldline has built up a lot of expertise in outsourcing projects with banks in the past five years. “In the end, every bank must become more agile. After all, if banks do not adjust, there is a good chance that they will be sidelined and will not survive. Fully in line with Darwin's theory of biological evolution.”
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