Are payments infrastructures fit for purpose?

During the spring, we reached out and asked readers and FSClub members to provide their views, via an online survey, of the world's largest payments infrastructures and whether they are fit for the purpose they are being used for today.

Last night, we released the results of the research at a dinner hosted by survey sponsor, Cognizant, and with a panel discussion of the report's findings with:

• Chris Dunne, Strategy Director, Vocalink;
• Gilbert Lichter, Secretary General, the Euro Banking Association (EBA);
• Arun Aggarwal, Managing Director, SWIFT UK;
• José Beltrán, Director for SEPA at STET; and
• Tony Virdi, Head of Financial Services Division EMEA, Cognizant.

If you would like a copy of the report (3MB PDF) then email our administration and they will send you a copy.

Some of the report's headlines include:

•  96% of retail banks cite the internet and 82% cite mobile technologies as having most important impact on payments infrastructures

• 63% expect significant or major changes to payments infrastructures in complying with regulatory change

• 49% expect Fedwire to face regulatory challenge 

• 40% will be using two to three key payments infrastructures in ten years’ time, compared to the nine used today

• 19% expect VocaLink will be most impacted by developments in mobile payments 

• 27% expect SWIFT and Eurogiro (24%) to be most impacted by Internet developments

 

The key messages from the report are:

• There will be consolidation as well as increased competition. The process of consolidation will be slowed by certain national and domestic interests, with the largest countries of the world – the BRICs and America – protecting their national infrastructures

• There will be fewer payments infrastructures in ten years than there are today and increased competition from both existing and new payment providers

• European Clearing houses for retail payments – such as Equens, VocaLink and STET – will be locked in a competitive battle

• Asian and other clearing services will also be consolidating and some panregional or potentially global players are likely to emerge

• Common standards will drive the process towards renovation and consolidation, as XML and ISO20022 work hand-in-hand to make interoperability easier

• Whilst payments infrastructures were viewed on the whole as being ‘fit for purpose’, Fedwire, Eurogiro and CHIPs scored highest in the ‘out of date’ category

• SWIFT, VocaLink, Equens and EBA are viewed as innovative, although banks and non banks views varied in this regard SWIFT and the EBA have very strong support for the long-term from their banking community advocates, and are likely to remain central to payments for the foreseeable future as standard setters and low-cost processors

• Payments processors need to be on top of rapid developments in mobile, internet and cloud computing to continue to be fit for future purpose. In Retail, changes will be driven by changing customer behaviours relative to social media and the way we pay, with mobile contactless and online payment systems driving real-time connectivity

• As the number of providers and the pace of technology increases there will be greater need for payment risk forecasting, monitoring and the real-time tracking of payments processing by the customer 

If you would like a copy of the report (3MB PDF) then email our administration and they will send you a copy.

Comments

[Neil Burton]

Chris & Cognizant, compliments on a very interesting piece of work.

I wonder whether the apparently relatively low interest in cloud and outsourcing, which seemed anomalous to the panel and at least some of the audience, would have a different response if the q were asked about payments service providers? Are some of the infrastructures inhibited from insourcing payments processing because they are not regulated as payments service providers? Will they be at a disadvantage to those which do choose to, or are permitted by their members to, become regulated?