Categories: Digital Payments

Prioritizing Real-Time Faster In The Cloud

There’s little (if any) disagreement that automation has a significant role to play in the recovery by reducing costs, limiting errors and increasing transaction speeds. That’s when it’s handled properly — and it isn’t always. Good will evaporates when middling rollouts of instant payments disappoint, evidenced by the fact that instant is projected to account for 9.3 percent of all B2B transactions, but only 6.3 percent of total transaction values by 2022. There are reasons.

“The ongoing COVID-19 pandemic has slowed cross-border payments’ growth. One recent study predicts that cross-border business-to-business (B2B) payments will total just $27 trillion by the end of this year and that their value will not exceed the $35 trillion reached in 2019 until 2022. The pandemic itself is not the only factor to blame — businesses are expected to be more frugal and cost-conscious as they recover lost traffic and establish new business connections after the pandemic recedes,” according to PYMNTS’ October 2020 FI’s Guide To Modernizing Digital Payments done in collaboration with Red Hat.

Prioritizing instant and understanding its best uses is critical to the prosperity of financial institutions (FIs) and 2021 is just the beginning of that being proven in the field.

Let Automation Do Its Thing

One reason that instant and real-time payments are so hot looks beyond the appeal of getting money immediately anywhere. Another is its transformational effect on operations.

“Real-time processing is an important capability for banks as they seek to differentiate themselves and provide more value to their customers in markets dominated by parity. Attempting to do this with traditional technologies and architectures can be a complex, costly and ultimately ... painful endeavor,” Kelly Switt, senior director of ecosystems and financial services at Red Hat told PYMNTS.

Switt added that, “Moving to a cloud-native architecture means that banks can take full advantage of … automation, but it also provides the ability to perform smaller and more frequent updates so that [banks] can be more malleable to change.”

Driving this activity is the realization that legacy banking systems weren’t designed for mobile commerce, much less remote onboarding or touchless. So, they’re solution-shopping.

“A recent study projected that the cloud services market would hit $266.4 billion by the end of this year — a 17 percent year-over-year increase. One expert predicted that up to 55 percent of all workloads will be cloud-based by 2022: 33 percent are currently,” per the Guide. “This estimation could even be conservative, as the current pace of cloud innovation indicates that such a level could be reached a year earlier. Cloud migrations have become more prevalent during the pandemic as a large share of the workforce conducts business from home rather than the office.”

Cost-Cutting The Cloud Way

All system investments should involve cost reductions, and ideally, several.

It’s no different with cloud investments, which have a good track record at bringing costs down, which is the holy grail of FIs running legacy core systems in an incompatible environment

“A recent PYMNTS study found that up to 15 percent of businesses’ annual operating costs go toward maintaining outdated procedures,” according to the October FI’s Guide To Modernizing Digital Payments. “Cloud and AI technologies can modernize and streamline these processes, however, allowing SMBs to devote their resources to more productive endeavors.”

Productive endeavors. Exactly. “Cloud platforms have powerful, built-in service recovery capabilities that can detect system communication issues and take automatic measures to recover without impacting the customer experience,” Kelly Switt told PYMNTS. “Making the change can seem daunting at first, but advancements in cloud technology can enable banks to take incremental steps as they adopt cloud platforms to support their real-time needs.”

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About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.