Flexible tech. The kind that scales as businesses scale, that goes where the payments go — where the technology resides in the cloud rather than on-premise with speed and security as hallmarks as old rails work alongside, and then give way, to new rails.
Firms across any number of verticals are expanding into new geographies, and international transactions now take their place alongside domestic ones.
All the while, enterprises must grapple with changes across various regulatory environments — ones that take shape far from home.
And when it comes to technology, what may have worked in the past may need some … reworking.
In an interview with PYMNTS, Icon Solutions’ Executive Advisor Gene Neyer and Director of Services Darren Capehorn expanded on the ways banking and payments are changing, especially in North America, where Icon Solutions, with roots in the United Kingdom, is making inroads across the pond into North America.
“Generally speaking,” said Neyer, “there’s a sea change afoot. Governments and enterprises have realized that payments are increasingly becoming digital, and the world does not keep bankers’ hours … the reflection of that is real-time payments.”
Government directives use payments to lift economies and remove cash from gray areas of commerce. They’ve made significant strides in universal access to financial services, said Neyer.
He noted that in Sweden, which is already heavily banked and which is largely a cashless society, the emphasis is on bettering that society. In Singapore, he continued, it’s about maintaining and improving that country’s position as a premier financial center of Southeast Asia and moving toward real-time debits and real-time credits.
Among the considerations that come into play as payments cross borders, “one dimension is jurisdictional,” he told PYMNTS, noting, for example, GDPR (General Data Protection Regulation), which will go live later this year and governs data protection across the EU. “Some jurisdictions care less about personal data but care more about data residency in their country.” In other countries, a single person, depending on their activity, might be viewed as a business — and thus not subject to privacy laws, where the converse might be true elsewhere.
There are some differences in data demanded, of course, or in limits placed on transaction amounts. Real-time payments fit into the trend of modernizing the payments ecosystems at large, with an eye on safety, convenience, speed and surety in getting funds where they need to go.
All data is not created equal, maintained Neyer. Transactions that involve consumers have different types of needs than do transactions involving businesses. Said Neyer, the subject of data can be looked at along several dimensions.
Speaking to the subject of complexity, Neyer noted that “retail transactions tend to be quite simple”; business transactions, however, are relatively complex, tend to include large amount of reference data related to the business transaction, may be a partial or a composite payment and will have a data-driven workflow process.
Icon Solutions is also tackling national complexities across its client base in North America, Neyer said. “For the first time, we have a very large and diverse country adopting real-time payments.” Though Europe is similar in size and scope to the U.S., he continued, those real-time payments are being adapted largely on a domestic basis, and key differences remain in stakeholders, how they view payments and even the ways technology is developed and comes to market.
In the U.S., there are roughly 6,000 banks and about the same number of credit unions — and many of them do business across the entire country, he said. And the variety between banks is staggering: JPMorgan is different from a community bank, which is different from a United Nations credit union. All of them differ from farm banks, which make loans to stakeholders in the agricultural community. Regardless of the focus of a particular institution, the opportunity exists for them to improve the speed and efficiency of payments, said Neyer.
“Speed is easily understood,” he told PYMNTS, “but because the U.S. traditionally fostered competition and growth among solutions, you run into the issue of efficiency,” where payment processors can number in the dozens and interoperability becomes important in order to achieve ubiquity. And, he added, the U.S. is home to a sizable venture capital community, which helps foster innovation within payments as startups come to market with new technologies — increasing both the choice and the complexity for the end user.
So, it’s important for financial institutions (FIs) to select a solution which is able to deal with the complexity of the current environment, to keep up with the rapid evolution of the landscape and to support the economics of shrinking margins as the volumes and competition picks up.
Icon Solutions used open-source technology in the creation of its Instant Payments Framework (IPF) in order to give FIs these superior economics now and in the future, since open-source infrastructure is now improving faster than proprietary solutions.
The IPF platform has been designed with a singular focus on real-time payments and is flexible enough to evolve as payments evolve, enabling banks to concentrate on “what” new RTP services they want to offer their customers and not the complexities of “how” they need to plan to deliver them. The goal for payments technology, the executives told PYMNTS, should be that it’s built with the next 10 to 15 years comfortably in mind, leaving room for new innovations.
To clarify, Neyer noted that the framework uses graphical tools to map out payment flows, “so that tomorrow, if a bank requires deployment in a new jurisdiction and the flow is slightly different, recoding isn’t necessary. In this ‘model-driven development,’ we would take the flows that we already have, adjust them and generate a new system based on that.”
Icon’s Capehorn said that when talking to customers about real-time payments, explaining the advantages of a flexible framework “gives them half the story … but if they are grappling with the cost,” they may not be “looking [as far] over the horizon to look at the benefits they may get in a few years’ time. So, it would be great if every bank invested in the vision of the enterprise architect who is engaged to look over that horizon, explaining where the business was going and where the industry was going and where the geography and international landscapes were going.”
Neyer stated that with wires and ACH, there is a built-in complexity amid the ways payments are processed — across use cases, exceptions and separate conditions — giving rise to complex and expensive solutions– it’s almost like running a maze.
Systems such as Icon’s can be likened to a highway “where you get on … and simply get off at your own exit. We built a lean system to handle a lean system paradigm,” he said.
“As the marginal costs of payments are trending toward zero, having a low-cost system that is going to continue to improve functionally while reducing the total cost of ownership is going to be critical; outdated legacy systems will always struggle in this regard,” Neyer emphasized.