- Increasingly, rich data ecosystems are driving smarter, simpler payment processes.
- Richer data is also enabling a secure payment experience exemplifying speed, convenience and transparency.
Keeping pace with consumer demand
Consumers today are increasingly accustomed to the delivery of instant and seamless digital experiences in many aspects of their day-to-day lives. This is informing the same expectation of digital commerce, and spurring investment in new technologies that can support simple, secure and informed real-time payments. Ultimately, this is delivering an enhanced user experience for participants within the global digital marketplace.
David Scorzelli, Director, FI Banks, Transaction Banking, Commonwealth Bank, says that consumers want a simple and effective payments experience that encompasses ease of use, speed and transparency.
“It is no longer just about making payments for payments sake – it is now about meeting demand for integration of payments within other services and lifestyle experiences; where the transaction event is embedded within the user experience.”
Rapid advances in technology, and in particular, new ways to collect, share and analyse data within the payments ecosystem, are crucial to delivering the next generation of payments innovation and value-added services for consumers and businesses.
However, providing a frictionless customer experience - across any online platform - requires harnessing richer data to increase efficiency at all stages of the end-to-end payments process.
Informing a smarter payments ecosystem
Central Banks and financial services providers in a range of jurisdictions are collaborating to establish payments infrastructure that supports real-time clearing and settlement. In Australia, the Reserve Bank of Australia and 12 financial institutions jointly developed and launched the New Payments Platform (NPP) in early 2018. This was designed to facilitate near real-time and data-rich payments.
The NPP uses the ISO 20022 payments message format - the international standard for data sharing between financial institutions - which is providing a range of benefits to market participants. The first is a universal framework to interpret payments data, which can assist in overcoming challenges in system interoperability.
Mike Baldwin, Executive Director, New Technology Product Initiatives, says one of the benefits that the NPP brings to the Australian market is standardisation. “If you are using the international standard - the ISO 20022 - it allows one system to communicate with another in a consistent, standardised way, where both are speaking the same language. This can allow for greater automation and remove friction from the payments process.”
“In a global sense, the industry will still need to align standards across jurisdictions, but ISO 20022 provides a strong foundation towards cross-border harmonisation over time. For example, the United States is talking about using ISO 20022 across all clearing streams – that wouldn’t necessarily be immediately interoperable with NPP, because the ISO 20022 has 1400 available data fields and we aren’t using all of them.”
The second benefit is that the ISO20022 format enables a richer data exchange between the payer and payee through additional data fields included within the payment message.
According to David Pike, Manager, Payments Strategy, the ability to include more remittance information and provide greater context to the payment, is enabling a number of potential innovations that can enhance the user experience.
“We are looking ahead to the potential to harness richer data to provide additional structure to the payments process. For example, issuing a request for an invoice to be paid, or to settle a restaurant bill amongst friends, the payer is provided with context as to who is sending the request and can then transact in real-time. Additional data elements can also be used to guide the payment - such as a due date, or instructions to pay the amount in part or in full.”
“Because of the real-time nature of NPP and due to the richer information contained within the underlying payment message (the ISO 20022 format), you can create a much higher degree of automation in the full end-to-end payments process.”
Mike Baldwin, Executive Director, New Technology Product Initiatives, Commonwealth Bank
Barriers to reducing friction
- Complexity of legacy systems with older technology programming, or siloed, inflexible and batch-driven processing.
- Identifying and mitigating fraud in a real-time environment while complying with regulatory requirements.
- A need for businesses and financial institutions systems to operate 24/7.
- Interoperability of systems in terms of the ISO 20022 standard, particularly in the differences in payment message format between real-time and cross-border payment systems.
- Authenticating and verifying user identity across platforms.
The role of APIs in streamlining payments
Accessibility of payments across a broad range of online platforms requires collaboration between financial institutions and third parties. The use of open Application Programming Interfaces (APIs) to enable secure data sharing between these parties is needed to facilitate simple, real-time payments experiences embedded within external digital environments.
We know, for example, that over time, SWIFT gpi's strategy for collaborative innovation is to provide common APIs to enable the development of overlay services in their customer channels. This leverages the gpi platform for transactional messaging and end to end tracking, and supports gpi banks in providing those services to end customers.
“Since we are using APIs for our customers to initiate payments, and then source information about those payments that reconcles automatically, it means that payments can transact more seamlessly based on a pre-defined criteria and without human intervention,” Mike Baldwin says.
“This means that payments are becoming less focused on the transaction and instead, are increasingly a necessary, but secondary, function of the digital purchasing experience.”
Adding value for businesses
While consumers and businesses are both seeking a payments experience that provides greater speed and transparency, businesses have distinctly unique requirements.
Consistency of payment processes and regulations across borders, the quality and completeness of remittance information, tracing payments or stopping unwanted payments, are just some of the issues facing businesses today.
Beyond adopting the ISO 20022 standard, and the ability to leverage richer data to achieve better matching of payments information, it is the convergence of different data sets across the payments cycle that is helping to address the challenges for business.
“Enabling a more seamless payments experience for businesses begins at the stage of on-boarding customers, and is deeply rooted in the data accompanying the Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance checks,” David Scorzelli says.
“Increasingly rich payments data can provide the context to speed up fraud and sanctions screening and manage AML and CTF risk through better matching. In addition, using automated processes to identify anomalous transactions can help identify and mitigate risks before they occur.”
“From there, the value add for businesses will be delivered through greater context associated with a payment or receipt, and the ability to automate, track and reconcile the payment from within their own treasury management systems or enterprise resource planning software.”
“Accurate identification and overall cyber security stewardship is seen as a pre-requisite to operate, and this becomes even more prolific at a corporate user level. As such, financial loss guarantees that alleviate security or trust concerns can help build overall confidence, particularly with first time adoption.”
David Scorzelli, Director, FI Banks, Transaction Banking, Commonwealth Bank
The NPP – delivering a data-driven payments solution for business
The NPP will support multiple overlay services to be activated over time. Currently, BPAY is delivering the first three additional services (known as Initial Convenience Services), including:
- Instant payments with information.
- Payments with a link to an attachment.
- Request and pay.
For businesses and corporate users, the NPP can deliver a range of benefits, including:
Optimising working capital
- Real-time, 24/7 payments.
- Reduced exceptions due to enhanced data and smart addressing.
- Request instant payment of late bills through initial overlay services.
Improved customer experience
- Faster fulfilment.
- Ability for end-users to make/receive payments to a smart address.
- Integration with accounting management or business management software.
- End-to-end real-time payment and reconciliation.
- Automated accounts payable and receivables processes.
Automation of the straight through payables and receivables process.
- Opportunity to combine data using the ISO 20022 standard with the amount paid or received.
- Improved payment matching due to richer transaction information – removing need for manual intervention.
- Attach receipts and invoices to payments and confirmations.