Smarter Payments

Searching For Payments Infrastructure Ubiquity

Making payments move faster cross-border is something of an old refrain. But Manish Kohli, Citi’s Treasury and Trade Solutions head, says speed is only as good as the interoperable, ubiquitous rails that exist to move money and data on a global scale. In the latest Smarter Payments Tracker™, Kohli tells PYMNTS about the importance of standards and security in achieving that goal.

From processing payroll for overseas employees to delivering payments and trading with partners in their local currencies, companies struggle with a host of challenges when it comes to taking business to the global stage. They must use the right set of underlying payment rails if they want to quickly deliver and settle funds.

But it isn’t just speed that matters, according to Manish Kohli, Citi’s global head of payments and receivables for its Treasury and Trade Solutions division. Businesses eager to participate in the global economy look for payments infrastructure that can deliver a consistent experience, while reducing or eliminating the pain points associated with making payments across borders. Kohli recently spoke with PYMNTS’ Karen Webster about how the shifting nature of cross-border trade calls for a payment rail that can ensure consistency in varying global regions.

Need for (More Than) Speed

As the need for faster payments has increased, clearing systems that are incapable of operating on a 24/7 basis could quickly lose their relevance.

“Whoever hasn’t evolved in this new paradigm is at risk of being left behind,” Kohli said.

In the U.S., a new expedited payment method has already taken effect. The first of three same- day ACH phases were rolled out beginning in 2016. With Same-Day ACH available, legacy batch systems used by banks and financial institutions (FIs) can deliver payments at a much faster rate, settling any ACH payment — credit or debit — on the same day it’s submitted.

One of the largest benefits of these faster payment rails is that they can quickly move money between parties, making them preferable to paper checks or costly wire transfers.

Speed is actually less important in the grand scheme of payments, compared to other factors like lower costs, greater transparency, convenience and security. Businesses participating in the global economy have come to expect payment rails to deliver on all five of these payment “pillars,” as Kohli calls them. Banks and other financial players that fail to meet these standards could be undercutting their clients’ abilities to compete in the broader digital economy, and therefore could end up being abandoned by clients who want a more efficient payment infrastructure.

“[If] I’m only doing one or two of these things, then I am significantly underleveraging [payment rails’] potential,” he said.

A Move to a Common Payment Standard

To keep up with the competition, players in the payments space must work toward using common payment standards.

Kohli pointed to the financial industry’s adoption of the ISO 20022 message dashboard as a step in the right direction. ISO 20022 supports better connectivity, improves messaging and can include information that helps with reconciliation-related tasks.

“The move to ISO 20022 is very positive,” he said. “We’re seeing it happen in more and more markets and real-time payment systems.”

Many instant messaging systems are being created using the ISO 20022 standard, which could expand the use of instant payments globally. The adoption of a common protocol potentially opens new doors for more players to expand their reach, participate in cross-border commerce and improve interoperability between systems.

“If I look at the future and I see more systems adopt a common protocol, then it’s only a matter of time before [others] can connect, too,” Kohli said.

The players that will develop this standard remain to be seen. If the financial services industry does not take the lead, new offerings might end up being developed by non-bank players, such as FinTechs.

“If clearing systems do not evolve and become faster, then you’ll see … alternative clearing systems that might be bank-led, [or] might not be bank-led, gain prevalence, because money is going to find a way to settle faster,” he added.

Building a Ubiquitous Payment Rail

In the long run, Kohli is confident that banks and the financial industry at large will move toward faster payment and settlement solutions that meet consumers’ expectations.

“My fundamental belief is that problems will always chase solutions,” he said. “Ubiquity will [happen] if the underlying solution is [one] that solves the problem.”

A possible solution that provides consistency and integration to 20,000 global banks and clearing systems could require a new payment rail and infrastructure network that could take decades to create. But a system that strives to deliver a common financial language in global payments is a worthwhile endeavor — especially if it improves customer experiences.

“Until the world becomes absolutely globally consistent, our role is to make this simple for our customers, build the intelligence into our platforms and deliver a simple, global and digital experience for them,” Kohli said.

As businesses and consumers become more active on the global stage, they will expect their banks to not only give them faster access to funds, but also ensure their payment experiences are as smooth as possible.


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