New technological developments are unfolding at a rapid pace. In order to truly benefit clients, this transformation will best come about through collaboration between providers.
‘Fintech’ has become a buzzword in payments, and while the word is mostly associated with an internet-savvy, millennial generation creating a wave of cutting-edge entrepreneurial start-ups, its broader definition encompasses developing technology that is revolutionising transaction banking. This is especially true for payments and, even more recently, regulatory and anti-money laundering (AML) oversight and compliance.
Undoubtedly, technology is enabling significant advances in the world of transactions. For example, over 30 countries across the globe have introduced – or put concrete plans in place to introduce – real-time domestic payment schemes in recent years[1]. In the US, for instance, the Real-Time Payments (RTP) scheme is set to launch in the coming months. This represents a major leap forward with respect to enhancing efficiency and speed, and introducing cost reductions. BNY Mellon will be one of the first participants planning to offer real-time payments in the US.
With such significant innovative advances seen in domestic payments, it was only a matter of time before the industry began turning its focus to applying similar capabilities to global payments. Cross-border transactions are soaring, making real-time solutions – irrespective of location (complete with transparency of payment status and real-time fraud analysis) – a key priority.
While technology will naturally play a significant role, fintech companies cannot address the global payment market’s needs alone. Indeed, to date, it is banks that have been at the forefront of exploring new concepts and their real-world applicability to deliver enhanced global payments solutions. There is therefore a clear role here for collaboration.
Many banks are leveraging the extensive tech know-how of fintech companies to advance their global payments offerings and risk management tools. Such partnerships bring mutual benefits. Banks, after all, have unrivalled payments experience, knowledge of the regulatory and fraud landscape, and an established, extensive client base. Meanwhile, fintechs, as disrupters, are looking at problems afresh, with an eye for innovation, efficiency and marginal gains.
Together, banks and fintechs can combine strengths and optimise their approach to innovation, creating robust solutions that bring enhanced speed, transparency and security – and potentially transform cross-border payments.
Examples of collaboration in the payments space go beyond those between fintechs and banks. One example is SWIFT’s global payments innovation (gpi) initiative, which aims to use existing technology to improve interoperability and transparency between correspondent banks. The focus is on quickly generating visible improvements for B2B customers, such as providing same-day use of funds as well as enriched information and transparency around fees and end-to-end payment tracking.
SWIFT gpi has already attracted the involvement of over 70 banks, representing 227 countries and over 74% of SWIFT cross-border payment traffic[2]. The fact that it is based on a very strong and established foundation – using SWIFT’s existing global messaging network – gives its members and their clients confidence that its use and application will continue to grow and improve. BNY Mellon became an active member of SWIFT gpi for USD payments in June 2017.
Then there are APIs (application programming interfaces), which can help clients connect and integrate with banks’ products and services in a much more efficient and streamlined manner. APIs are a key component of BNY Mellon’s new NEXEN digital ecosystem – which integrates solutions and data from BNY Mellon, clients and select third-parties in one place. Over 100 APIs are currently available in the API store, which will expand and update in accordance with developments and clients’ evolving needs.
Banks, clients and third parties are increasingly working collaboratively to develop new solutions, and bring them to market far more quickly. By involving clients in innovations from an early stage, together they can help to steer the digital journey towards solutions that have clear business applicability. This collaborative approach with clients can be fostered through innovation centres – physical hubs where groups can work together to identify and develop transformative solutions and identify challenges. BNY Mellon now has ten innovation centres across the globe.
Technology is a hugely important revolutionary driver in the finance industry, and banks are positioning themselves at the forefront of the change by leveraging both their unrivalled experience and fintechs’ digital capabilities.
Crucially, innovation should centre on the client – creating solutions that meet expanding needs while solving evolving concerns. Collaboration is one of the best ways to ensure that the client is the principal beneficiary of that journey.
The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.
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