Banks Race to Close Real-Time Payment Gaps

Narrator 0:04

This is What's Next in Payments, a PYMNTS podcast. Forward-looking insights from industry leaders on the trends and technologies reshaping payments in fintech. In this episode, i2c Chief Client Officer Serena Smith says real-time payments require interoperability so banks can connect compliance and stop fraud.

Hal Levey 0:24

Hello everyone, it's Hal Levey at pymnts.com and for another conversation, Serena Smith who is Chief Client Officer at i2c, joining me for What's Next in Payments: The word of the year. Now, maybe not just a word, maybe a few different concepts are dominant already as we move into uh 2026 more firmly, but clearly there are some trends that are taking shape and maybe some um ideas that are different this time around. Nice to have you. Welcome back.

Serena Smith 0:54

Oh, thanks, Hal. I am I always love talking to you. So thank you.

Hal Levey 0:59

Likewise, likewise. Thanks so much. So let's get right started. Um the um the first thing I think we might discuss is the the idea of a single constraint. Is there a single business constraint that is shaping 2026 in your mind more than any other?

Serena Smith 1:19

You know, I both of us have been in payments for a really long time, and we've been able to see the evolution that's happening. And I think that as we look at 2026, the thing that we are faced with is we have all of these different rails, all of these different regulatory structures that we have. We have more standards than ever before. And so I think one of the things that we've got to figure out as an industry is how do we really make them all work together? Because today there's a lot of standalone, you know, rails or payment channels that are occurring. So when I think about what needs to happen and I think about the word of the year, it really is around interoperability, because we all have to figure out a way, especially with AI, to look across and bring together all of those payment channels so that we can fight fraud, we can create better customer experiences, and we can also make sure that, you know, just from a compliance and a regulatory standpoint, we're doing all of the right things that we need to do in order to service our customers and the industry.

Hal Levey 2:29

In the endeavor to do, as you put it, all the right things, what do you suspect your own customers will notice uh as a change? First, what do they want you to fix or improve for their own um well-being? Let's put it in in the meantime.

Serena Smith 2:49

So what do they expect us to change? So when I think about like all the technology that's now available. So we've been talking about AI for a long time, we've been talking about stable coins, we've been talking about crypto, we've been talking about all the different payment rails, um, the regulatory requirements. I think today um a lot of the regulators are just trying to figure out in the new ecosystem that we continue to evolve in, how do they actually regulate that? And there's not one piece of anything that's happening that's wrong. It's very few of them are designed to work together. And so, as we think about there's more pressure around this real-time processing, there's more pressure around ISO 2022 adoption. We've been talking about that for a long time as well. Regulatory expectations, each of those initiatives makes sense individually, but collectively, they create a coordination problem that really all of us need to start working through better. So, what we see are institutions continuing to add capabilities faster than they're simplifying their architecture. And so we have to think about the underlying architecture that's sitting there. How do you build faster? How do you build with these integrations? And each one of these integrations are gonna add cost, they're gonna add operational friction, they're gonna add risk. And even if we solve them for a short short term, fragmentation really makes it harder to apply consistent controls across, you got to think about fraudsters and how do you fight them from an identity perspective, an authorization perspective, you got to work through settlement. So every growth initiative now depends on how well these systems we connect data across them and how we execute it. So, what you know, what we're looking at. So when we think about the challenge that customers are facing, we think about the industry, we think about interoperability, what works best is when platforms are designed to be extended and configurable rather than stitching them together piece by piece and figuring out how on the back end how to do that individually.

Hal Levey 5:20

With all these moving parts, um, my guess is uh you don't really take uh a breath. You don't have the moment to stop thinking about this stuff. So let's talk a little bit from your own point of view. Uh let's talk about risk. You've mentioned fraud, you've mentioned uh the friction that's inherent in a complex ecosystem. Um so when you are thinking about where we are now, where we need to go, tell me a little bit about what risk maybe is is most um in your mind keeps you up at night, let's call it. Uh and then there's also the ability there are risks that are acceptable, acceptable ones, if they're calibrated well, uh, that are okay to embrace. What would those two different things be?

Serena Smith 6:10

Yeah. So I will tell you what keeps me up at night is really the risk of losing trust in our in what we're actually providing, trust in our systems, trust in our technology, trust in what we're building for the future. So I've talked about you know fraud a little bit. So fraudsters are getting smarter in everything that they do. So when you think about fraud, scams, account compromises, these things are now happening in real time across the entire ecosystem. And the margin for error keeps getting smaller as settlement speeds increase. So when controls lag behind execution, it creates gaps that are harder to close after the fact. So, you know, when you think about fraud today moves across rails and channels, it's not just an isolation. The time to detect and intervene keeps shrinking. Post-transaction monitoring wasn't built for instant or irreversible payment. So we have to rethink how we're actually managing those systems. And the risk you're willing to take is modernizing faster than what traditionally feels comfortable. So one of the things we have to, you know, we have to look at is how do you embed identity, fraud, compliance decisions directly into execution in a practical way that supports the interoperability without increasing exposure. And that's one of the things that we're focused on here.

Hal Levey 7:51

Um with some of these acceptable risks and obviously the faster time to modernization, uh, the payoffs and rewards can be significant. So if we look ahead, let's look ahead a few months. Uh, we're already only a few weeks into 2026. So if you had to define success at the end of the year, you're looking back, and there's one measurable yards to benchmark outcome that you think may uh point toward a um a job well done, what would it be?

Serena Smith 8:25

Well, for me, I think success is being able to move money faster without adding operational risk or complexity. Institutions should feel comfortable scaling your real-time payment channels instead of being cautious about them. So, how do we make that easier for the market to absorb? So you've got to have fewer custom integrations, which means the platform is doing more of the heavy lifting for you versus having developers doing that for you. New payment capabilities being able to be launched without destabilizing what's already in place, and teams spending less time chasing expectation and more time improving uh customer experiences and controls that they have of their own destinies through the ecosystem. So real-time execution becomes predictable and trusted. I think that's that to me would dictate success. And from you know, my perspective here at I2C, success really means that true interoperability, um, allowing innovation and reliability in everything that we do from start to finish.

Hal Levey 9:40

Is it your idea too that um interoperability becomes table stakes eventually?

Serena Smith 9:46

I think it has to. You know, when we think about um, you know, how do you remain competitive? You remain competitive by, I mean, by making these things table table stakes in your your overall business. So I think in order to be successful, money does need to behave consistently, consistently, regardless of the rail, region, or channel that it's in. And so that has to be the definite table stakes as we look at moving forward.

Hal Levey 10:19

All right. So not there yet, but we do have a North Star to pursue, and that would be um frictionless interoperability. And clearly 2026 promises to be um a different year than what we've seen previously. I'm gonna hold you to it. Uh, when we get to the end of the year, we'll see where we are. And thank you again, as always, for your time and your insight.

Serena Smith 10:42

All right, I'm looking forward to it. Thanks, Hal.

Narrator 10:49

That's it for this episode of the PYMNTS Podcast. The thinking behind the doing, conversations with the leaders transforming payments, commerce, and the digital economy. Be sure to follow us on Spotify and Apple Podcasts. You can also catch every episode on pymnts.com/ podcasts. Thanks for listening.