Instant payments

Tackling the long-discussed, yet to be achieved goal of instant payments in Europe and across the globe, Vincent Brennan, senior advisor of banking and payments, Accenture led a panel on this topic which included Carmen Dengra, SCIB customer success officer, PagoNxt Payments (a Santander company); Annie Gilchrist, product director, Currencycloud; Uwe Klatt, CEO, GEVA Group; Isabel Schmidt, co-head of payments products, treasury services, BNY Mellon; and David Watson, President and CEO, The Clearing House.

In this session, it was evident that all participants across the banking ecosystem are prioritising the end user and the speed and transparency that instant payments delivers will benefit the end customer most of all. For this to be offered in an efficient manner, the panelists agreed that this will require cooperation from the treasury department and infrastructure is designed in such a way that it will meet the needs of all those in the market.

Furthermore, the purpose of making a payment must be clear – to get internal departments on board and for an infrastructure to be designed that is fit for the purpose. The panelists explored the questions that must be asked, such as: what problem are we trying to solve for our clients? Why is the client moving the money? Is it the result of something else? It is also of importance to make the distinction between the needs of retail, consumer-based use cases and the corporate use cases, as the answers to these questions will be different for each case.

As an industry, when it comes to instant payments, the panelists agreed that we are more familiar with consumer-related use cases because the B2C sector rarely interacts directly with their clients. At the same time, in 2024, the industry will need to acknowledge that transparency is key and while there is a lot of innovation happening, we must always question what the problem we are trying to solve is.

A discussion was also had on remittances. For instance, if an employee can work a shift and receive payment instantaneously, if cross-border, real-time payments were as sufficiently connected, we could end up with a situation where workers can get paid and their funds are deposited into the account of a family member in another country on the other side of the world, instantaneously. However, this use case does not get as much voice and attention as a large corporate demanding to move their supply chain.

Correspondent banking

Another topic that has been discussed for many years, but issues continue to permeate and need to be addressed is correspondent banking. While international correspondent banks face increasing costs and compliance burdens, correspondent could risk losing relevance.

Susana Delgado, global head of consumer & SME payments strategy, Swift led a discussion on this threat and welcomed Dayana Borrero, head of institutional cash management and trade sales & client management – Iberia, Deutsche Bank; Danny Butvinik, chief data scientist, NICE Actimize; Raquel Galan Martinez, senior sales and relationship manager – global trade and international banking, BBVA; Simon McConnell, EMEA head of clearing and FI payments, treasury and trade solutions, Citi; and Jose Maria Seisdedos, institutional banking – Southern Europe, Banking Circle.

While some may consider correspondent banking as a failure, others are looking to new technologies such as distributed ledgers, blockchain and cryptocurrency to ensure that payment market infrastructures in different geographies can interact with each other, without the industry turning to the likes of central bank digital currencies (CBDCs) to fill the gap.

The panelists explored some of the challenges with correspondent banking and reiterated that in 2024, practices around the Swift network must become seamless. Now, connectivity may be being improved at home and in certain areas, but it is not being done so to a fuller extent. Looking at the client experience, players might be driving innovation, but this is also not ubiquitous.

Financial market infrastructures (FMIs), which allow the clearing, settlement, and recording of financial transactions can enable millions of transactions to take place each day. This is a major step forward for operating 24/7 and therefore, a huge opportunity for implementation and software providers to support financial institutions with delivering across borders.

Empowering payments with regulation and customer-centric innovation

Taking stock of discussions over the two days, Sulabh Agarwal, managing director and global head of payments, Accenture welcomed to the stage David Janas, global head of clearing and FI payments, treasury and trade solutions, Citi; Fanny Solano, head of digital and retail regulation, transparency and implementation management, Caixabank; and David Malley, payment schemes and regulatory lead, NatWest Group to participate in a strategic roundtable.

Citing the catalyst for the instigation of change within the financial services industry, the panel agreed that new technologies have driven a shift from safety, soundness, and customer protection to prioritising the cost, transparency, and speed. Doubling down on the conversation of cost, the panel highlighted that executives must consider both the fees associated with the transaction and the effect of the fees.

Today, and in the future, clients will require more choice when sending cross-border payments, and therefore, new channels that are emerging must be regulated and there must be enough upfront transparency when it comes to fees. The bottom line is that clients would like to be able to deliver payments to the beneficiary when the beneficiary needs it, and that should be made possible in 2024.

Further to this, if cost, transparency, and speed is not provided by financial institutions, then they will lose market share, which is quite significant in the regulator’s view because of the network effect that exists within the ecosystem. Just because one bank resolves an issue, it does not mean it is resolved for everyone, and this has got regulators thinking about revising standards such as PSD2, implementing ISO20022 and considering BNPL guidelines.

Payments as a Service strategies

Daniel Hellmann, director, payments, Deloitte led a discussion on the benefits and risks related to implementing a PaaS approach, as well as the strategic enablers that are required to individualise the payments experience.

He was joined by Sara Berujon, executive director, country product head for JP Morgan SE, Luxembourg branch, JP Morgan; Clara Garcia Benedito, head of global solutions and business development for commercial and corporate banking, BBVA; Mario Mendia, senior vice president international markets, TAS; and Andrea Pennacchia, head of banking & PA solutions, Nexi.

The panel kicked off the session by questioning whether what banks have historically provided could be regarded as PaaS; serving payments to all profiles, whether those clients are fintechs or smaller banks, they are also PaaS providers. The goal for all financial institutions is to service their clients so that they can service their own clients, offering them a single gateway or a single point of entry.

There are also many models of PaaS which can be used to evolve the management of existing payment infrastructure as well as evolving the offering that banks are providing. Global transaction banks will continue to dominate the market, but the reality is that the market is changing.

Models for public and private sector collaboration

Gareth Wilson, executive vice president, head of UK banking and capital markets, Capgemini led the final discussion of the day and explored how commercial banks, other PSPs and central banks can improve global reach and interoperability for payments. He welcome David Cunningham, global head of strategy and partnerships for digital assets, Citi; Dirk Schrade, permanent representative of the head of the central department payment transactions and settlement system, Deutsche Bundesbank; Alan Verschoyle-King, head of business development, EMEA, RTGS.global; and Tarik Zerkti, CEO, PRETA.

Cooperation was a word that became prevalent across both days of the event, and during this session, the panel discussed how closer collaboration between the private and public sector can drive increased interoperability, greater transparency, and secure global reach. In order to achieve this, it also requires partnering with regulators to ensure that when new technologies such as digital assets come to the fore, legacy banks must incorporate truly, digital 24/7 capabilities. Whether or not digital assets are digital liabilities, it remains to be seen.

Closing the show, Debi Bell sat down with Thomas Egner, secretary general, Euro Banking Association; Wolfgang Ehrmann, chairman, Euro Banking Association; and Jose Vicente, deputy manager, Banco Comercial Portugues to talk through the key themes explored at EBAday 2023. They also revealed that EBAday 2024 would be taking place on the 18th and 19th June in Lisbon, Portugal.