Banks will lean on technology and data to compete in 2023

Banking And Financial Messaging

John Gaffney

Jan 31, 2023

Our 2023 payments trends outlook is complete. We’ve surveyed several subject matter experts at Bottomline and partner companies, spanning the general theme of how banks will bring new technologies and overlay services to their customers. As we look back on our series, we see five trends banks should focus on as the year progresses:

The nuances of real-time payments: The move to real-time rails is about much more than speed. It will bring to the fore new views on liquidity, cash management, treasury forecasting and the customer experience. And the move is global. One big story will be the FedNow launch sometime in the spring or early summer, and the other is the EU’s consideration of new mandates to make instant payments, as referred to in those geographies, easier for businesses and their consumers to access. Beyond the need for speed, we also see a need for real-time to gain more traction as a B2B payment. A recent US Bank report said real-time payments could be a positive factor in “reducing anxiety and de-risking money movement.” According to Bottomline’s VP of Product Management, Jessica Cheney, raising the transaction limit in the US from $100k to $1 million will help.   

“It now allows real-time payments to become more of a true lower-cost wire alternative for such things as mortgage closings, commercial loan funding, etc.,” she says. “But in general, it really just takes away another perceived barrier of adoption.” 

Data is spelled I-S-O 20022: Real-time payments are closely associated with ISO 20022, and banks supporting this data structure are the winners. ISO 20022 messaging connects rich data to instant payments. In the process, payments are tracked from beginning to end, carrying associated data with the transaction, which becomes part of the bank’s comprehensive database. Just as there are nuances to real-time payments, there are nuances to ISO. As UK banking veteran and New Payments Architecture consultant Mike Chambers told us recently: “If we’re really clever, we have the option of using this extra ISO 20022 functionality to do things like track and trace [a payment] and give that better predictability of where it is and the certainty of that payment. And, of course, if we take two or three payment systems and lump them into one with a common structure and a common data set, we've got the option for better automation, for better interoperability.” 

Insider fraud won’t quit: Banks all over the globe have seen staggering increases in insider fraud incidences and the volume of stolen assets. In fact, several UK banks have raised their hands recently for help in this area, and the good news is that in 2023 banks have more tools than ever to mitigate insider fraud, among them better data analytics to show aberrations in employee behavior and “record and replay” application-level analysis of online interactions. The problem, as Bottomline’s Head of Solutions, Ruud Grotens, shared on a recent ACFCS podcast: “We are currently seeing an increased interest from medium to large financial institutions in our Insider Fraud Risk Management solution. There's clearly a shift taking place. I hear from banks that there is often a suspicion of insider fraud, but there is no evidence, which is why insider fraud is often unreported or not detected at all. “If you don't fully understand the nature and scale of the threat, then it becomes difficult to create a business case and invest in an insider fraud risk management solution.”

Building the perfect network: Network architecture upgrades will be a telling issue this year. The UK has undertaken its ambitious “New Payments Architecture (NPA)” rebuild and, more generally, high-speed rails (including the US FedNow) will gain more traction. But as Bottomline’s Strategic Customer Success Manager, Richard Ransom, told us, new networks and upgraded architecture will modernize how both banks and their corporate clients connect. “Because cloud-based solutions are relatively new, we’re seeing how new architectures can create entirely new applications like open banking and faster payments,” Ransom said. “This new architecture enables massive increases in payment volumes and potentially new types of payments. Package that with enriched data from ISO 20022 and the ability to accommodate cross-border payments, and you have a new environment, making it easier for banks and enterprises to connect.”

New life for the customer experience: The digital experience will lead to a better customer experience in 2023. If you look at the onboarding process alone, everything starts and ends with the workflow and the client experience. That user experience must be reliable and worth the money your bank charges for access. And perhaps most importantly, it needs to be reliable. “We need to establish track records everywhere, whether it’s the largest banks or mid-market banks,” Bottomline’s UX senior director, Jonathan Grassis, told us. “Workflow and reliability are what we hear from our clients, and I think those are the factors that will lead the market.”

It will be a year marked with great opportunities for banks and financial institutions but moving very quickly. Whether or not you believe in such things, according to the Chinese calendar we are moving from the year of the tiger to the year of the rabbit. Given banks don’t have the luxury of merrily hopping along, maybe the need for speed is written in more places than this post. 

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Real-time Payments

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