This week I was at the annual Salone Dei Pagamenti conference and exhibition in Milan. The themes are the same as at any other payments conference – open banking, PSD2, instant payments, big data, machine learning, etc, but here were a few things that caught my eye.
A strong start for RT1
I joined a panel to discuss Instant Payments. With RT1 (the pan European SEPA Instant Credit Service) having gone live a few days ago with the initial set of banks – including many in Italy – this panel was partly celebrating the successful outcome of this project. Hays Littlejohn from EBA Clearing was able to report on initial volumes and noted that even though the service had only been available for a few days there was a significant number of transactions early in the morning before 6am so some people are already taking advantage of the 24 by 7 availability.
Javier Santamaria from the European Payments Council, in considering future issues, commented that there is already discussion about raising the current cap of €15,000 and I am not surprised. Similar schemes in other countries have started out with a modest cap and as the system gets established, and there is confidence in the processes and controls, then the cap is moved up and up. In the UK the cap is now £250,000, but was £10,000 was the system started.
The keys to Instant Payments success
Of course a significant factor in allowing the cap to rise are the risk controls that are in place. As these transactions are irrevocable, there needs to be good real time fraud detection capability in place to ensure fraudulent transactions are captured and stopped. Experience from elsewhere indicates that enterprise assessment of the risk (looking at everything that is happening on the account and not just one channel) is really essential as fraudsters find innovative ways of getting round controls.
In the UK, fraudsters have found the controls on internet banking are now so good that they cannot attack by stealing credentials. Instead, they phone the customer and persuade them to move money. Simple checks on a customer moving a large amount of their balance to an account they have never used before are the sort of controls needed. However whatever is put in place, the fraudsters will move on, so a responsive fraud detection system is essential.
Adapting to the always-on environment
At another session I, with two NCR colleagues, were covering the topic of coping with the world of ‘always on, always there’ that is expected of financial institutions today. Many organisations still have a siloed systems architecture that makes it very difficult to deliver consistent enterprise services that are available 24/7. Changing this architecture to include a ‘middle office’ that sits in front of the core banking system is one way of solving this problem. This enables the creation of enterprise services for transaction processing and fraud detection enabling banks to think about a digital first future.
Often the challenge is identifying where to start with the process, and determining this comes down to analyzing the current environment. It could mean assessing branch transactions to understand why customers come into the branch and then identifying a new way of delivering the most common transactions – perhaps using transaction pre-staging that can speed up the branch service and reduce queues. Or it could be looking at where there are duplicated elements of technology that could easily be delivered through a centralised service thus reducing the maintenance effort.
Whether discussing Instant Payments, Enterprise Services or PSD2, the conversations all pick up on one common challenge. The payments world is changing fast and it is difficult to predict how it will look in ten years’ time. Therefore, the key is ensuring the systems in place today have the flexibility to respond to whatever emerges in the future.