The transformation of the European payments landscape
FinTech Futures spoke to Isabelle Oliver, Head of Securities Initiatives & Payment Market Infrastructures at SWIFT, about the transformation of the payments landscape and SWIFT’s recent white paper which explores the drivers and likely outcomes of a new European payments landscape.
“Instant payments are becoming the new normal. It’s an accelerating global trend and at SWIFT we see it as the main driver of innovation breathing new life into the financial ecosystem.”
In her view, wholesale and retail payments around the globe are redesigning and renewing, which allows for “greater” operational and collateral/liquidity efficiency. This in turn inspires more innovation – something the entire fintech industry seeks with great ardour.
Within this lively context SWIFT has produced a white paper, “The transformation of the European payments landscape”, which looks at the drivers for change and outlines the challenges and opportunities for incumbents.
Olivier believes the changes in both technology and customer expectation creates an opportunity to innovate and to move away from batch processing and legacy systems. She explains that customers now expect to have a certain quality around their experiences.
“They want fast, frictionless and borderless payments that are embedded in transaction chains and ecosystems. Corporate customers too want the same thing and they also need greater visibility and predictability as regards delivery times.”
It’s a fair point as humanity has become obsessed with the desire for speed. You may well argue impatience has set in but others might respond that great expectations are a reasonable request.
The white paper, ties in these changes with infrastructure renewal. In Europe, the Eurosystem has set a clear path for financial market infrastructure renewal. This, along with regulations such as the Second Payment Services Directive (PSD2), means that the rise of instant payments is well underway with many domestic initiatives either live or in the process of implementation; SWIFT goes live with the EBA CLEARING’s pan-European RT1 and the Eurosystem’s pan-European TARGET Instant Payment Settlement (TIPS) in November 2018.
In addition the global adoption of the ISO 20022 standard is progressing rapidly, with TARGET2 set to migrate in 2021, and EBA CLEARING’s EURO1 and cross-border payments on SWIFT set to migrate in the same timeframe.
Olivier reckons the result is that the industry will benefit from a much richer data environment that will in turn enable better services, making payments just one step of a transaction chain that is fast, frictionless and price transparent. For those seeking clarity, she states that “better transparency as well as speed will also make reconciliation and liquidity management easier”.
The white paper also looks at the other drivers; the maturity of technology and the new entrants to the market that have the technology and the agility to shake up the ecosystem.
“This is forcing traditional players to either collaborate with new entrants or innovate in their own right to compete,” she says.
Having seen or written many fintech stories on partnerships and creativity, it would be hard to argue with Olivier’s viewpoint.
In banking no one can afford to sit still. She explains that the incumbents “need to reinvent themselves and find new ways of doing business that meet customer needs and innovate with technology to make the most of their considerable assets” – such as customer bases and data; risk management capabilities; balance sheet strength; industry knowledge and trust.
With this scenario in mind, Olivier believes SWIFT is at the forefront of contributing to this shift. This comprises expertise with migration and the initial go live phase as well as managing its services within a single window environment.
“One key offering is the training we are putting together on the upcoming challenges and milestones, which will cover ISO 20022 adoptions, deadlines, impacts of instant payments and T2-T2S consolidation project as well as migration approach and project management.”
It will be intriguing to see what this training entails… perhaps all will be revealed at Sibos London 2019.
To download a copy of “The transformation of the European payments landscape” whitepaper, please visit the SWIFT website here.
This article is also featured in the November 2018 issue of the Banking Technology magazine.
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