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The payments podcast is reviewing what trends are on the horizon for the upcoming year. While no one could have guessed the outcome of 2020, it led to an accelerated adoption of some of the key trends for the year in the payment landscape. Ed Adshead-Grant is back on the show, this time talking about Brexit, consumer trends, ISO 20022 and new innovations.
Rich Williams: After a turbulent 2020 that has transformed the way the world works and plays, 2021 is shaping up to pose its own challenges and opportunities particularly in the financial services sector. So, what exactly can we expect in 2021?
Hello, I’m Rich Williams, host of The Payments Podcast and in today’s episode I am speaking to Ed Adshead-Grant, General Manager of payments at Bottomline about what key trends he thinks are set to follow over the next 12 months. Hi Ed and a very festive welcome back to the show.
Ed Adshead-Grant: Thanks for asking me back Rich.
Rich Williams: Always welcome, always welcome. Now I’m sure you’ll agree, and one thing is absolutely for sure, 2020 will certainly be, well, perhaps, not fondly remembered but well remembered. As a pandemic locked the world down, the way in which we paid and got paid also changed with industry changes continuing to come into play and, for our UK listeners, economic changes such as Brexit also came into play.
The world is a very different landscape compared to the way it was at the start of the year. Given all of this Ed, how do you think this will impact payments in 2021?
Ed Adshead-Grant: Thanks Rich. This is why we don’t always make predictions. Because if anyone was sitting here, 12 months ago, predicting COVID then they would have had a truly effective crystal ball. There are some themes that are coming through, and we’ve learnt from, that we think will roll into 2021 in the payments world.
Certainly, digital transformation has accelerated at a pace that will continue and open banking as well has been pulled along at quite some speed given the conditions we have been under this year that will have momentum into 2021.
So, probably the biggest story is that cash is king and with businesses looking to have control and visibility over their payments, we’ve seen a big hike in the popularity around treasury management solutions and just putting the financial decision maker in full control of where the cash is in the business.
So, I’d predict in 2021 that the digital acceleration will continue, people will start to adopt new ways of working as we stay remote or hybrid and remote in offices and because cash is king, we’ll have the treasurer wanting to use technology, in the best way possible, to make sure that the businesses can get their money in and out in an effective way.
Rich Williams: What about any differences, Ed, please, between businesses and consumer payments? Will we see any different trends there?
Ed Adshead-Grant: I think this has changed a little bit here. Enterprise technology typically lags behind the consumer, sort of, front of newspaper stories around Apple Pay and things like that. I think that will become a lot closer. There’ll be a much more familiar experience across consumer and business platforms. When I look at some of the regulations and the open banking movement, that is all mobile first which, again, brings a consumer device into the business.
So, although, B2B is a lot more complex, has a lot more layers of authorisation and paper flow and approvals etc., there is definitely a convergence where the technology that we experience as a consumer will be expected and start to move into business so that this complexity can be dealt with, with the latest technology options.
Rich Williams: Now Ed, The Payments Podcast recently celebrated its second birthday, which was very exciting. Since then, we’ve done a few episodes specific to open banking and, certainly, it’s a theme which has cropped up on numerous occasions even when that hasn’t been the case. So, what do you see, if anything, changing, in regards to open banking, over the next 12 months?
Ed Adshead-Grant: So, this is definitely a big theme and I may fall into the danger of predictions. I do see 2021 as being the year of the open banking payments. So, at the moment, when we look at all these API calls that are building around the ecosystems, as they build, only half a percent of the APIs are actually for payments, open banking payments. The huge majority, over 99%, are actually data pools. They are, in the techy jargon, the AISP calls.
So, huge opportunity to expand and we’re already seeing a lot of the corporates, that we service at Bottomline, asking us about how they can make the most of the open banking. So, I see payments coming along at quite a pace in 2021 with open banking.
We have over 200 TPPs now, third party providers in the ecosystem. So, the industry has done a great job of bedding in the basic foundation blocks, the APIs, the standards, and now a lot of the focus is on building the ecosystem and the functionality and the compelling journeys for customers to move across to account to account payments rather than traditional card networks, for example.
I think the banks, as well, will be white labelling, a lot more, to bring open banking to the market and part of that has been accelerated by the pandemic and treasurers looking to control their costs and get visibility over their cash. So, the conditions are right. The regulators are helping here as well.
Open banking, itself, is already maturing into open finance and we had the FCA regulator calling for input from the market on open finance, the journey being, open banking into open finance into open data as the open paradigm moves across those themes.
Then, also, the final thing comes to mind is the non-financial services products. There’s some callouts there from various parties for input on how we take open banking into Telcos and the water industry and energy, a bit like the Australian model. So, we go beyond open banking into open finance and then into the exciting open data world. So, a lot going there.
Rich Williams: That’s interesting. So, we might have an Australian led trade model and an Australian led open banking model as well, to look forward to? Ed, another interesting industry change that we’ve spoken a lot about recently has been ISO20022, clearly very important to a lot of people particularly those listening to this episode. Where do you see this heading in the next 12 months?
Ed Adshead-Grant: Well, this is another great theme for us to pick up on and it’s in that place now where it can’t be stopped. There’s so much momentum behind it, there’s so many milestones being published by various interested parties. So, 20022 is definitely in play, it’s in a lot of the… for example, the SWIFT announcements, on their new strategy about transaction management platforms, it’s certainly in all of our work that we’re 20022 ready.
It introduces this machine-readable structured data which actually, kind of, travels with the payment files, with the XML tag. So, it’s needed, it contextualises the payments, it standardises the payments and brings in this magic word of interoperability which we’re always planning into our solutions as we aggregate various different choices of networks and payment flows.
If you can get standard data with this interoperability then, literally, the choices for running your operation open wide. I often talk about the payments being the flavouring of payments, or the contextualisation of payments, where the data and payment comes together under 20022.
So, things like shipping invoices, for example, they may also contain bills of lading, loading documents and other key information that’s associated with the payment. They can all be brought together for the financial decision maker. Or, perhaps, one closer to home, in terms of convenience.
You can see ourselves soon receiving a payslip each month and on your bank statement you click and the actual payslip document can be associated and tagged with the payment file. So, for convenience, these documents come along the journey with the payment.
So, the use cases are there, the deadlines are published for many of the big players in the payment technology arena, and, I think, we’ll continue to see acceleration around that as new products get launched that start at the 20022-compliance status.
Rich Williams: I think when we talk about compliance, another word that’s often thrown into the mix is regulation and a lot of the innovation and change over the last few years, particularly in payments, has been driven by regulation which addresses a lot of the key pain points of not only consumers with businesses. Do you have any comments of how that might develop?
Ed Adshead-Grant: Well, I’m actually a big fan of the regulators getting involved in some of these markets. Sadly, not all markets work functionally well and optimised. So, you can have a positive intervention from regulators. Probably not exactly the regulator but the piece of work I’ve been looking at recently, we’ve just done a trade mission with the UK government to Saudi Arabia on this, is, the work from the G20 which was chaired by Saudi Arabia this year.
They’ve launched an initiative around the pay points on cross border payments, because cross border payments are going across different regulators, different technology stacks, different languages, currencies. It’s a fairly complex beast to get your head around how to make it smooth, visible, quick.
Now, we have correspondent banking, it has been around for a long, long, time. You can actually go back to Giovanni di Bicci of Medici Bank who passed away in 1492. He set the principles back in Florence years ago on the trading routes of depositing cash in a foreign bank, to help you settle and pay locally. Those principles are still in place, believe it or not, on our correspondent banking network. Yes, it has improved but there’s so much more that can be done in that space.
So, I think, to your question of regulations and oversight, when you’ve got people like the G20 being interested in improving cross border payments and enhancing the correspondent banking backbone that has been in place for centuries, then it’s quite an interesting place to watch and see what else is coming down the line.
Certainly, we’ve spent this year, a lot of time, unpicking this and working particularly with Visa and their Visa B2B Connect solution that has managed to create a global solution that’s multilateral that can do messaging, payments, settlement and FX all in one. That’s proving to be a really interesting conversation with all the banks that want to do business payments across border as, kind of, the new way of running those, sort of, payments.
Rich Williams: Thanks Ed and that’s a really nice segue to move us from 14th century Florence and into the modern day. So, as the industry continues to see innovation in technology, what’s next, what’s the most exciting thing that you see on the roadmap for technological innovation?
Ed Adshead-Grant: So, there’s a lot of buzz out there on technology innovation. You’ve got your machine learning, you’ve got your hyper personalisation, you’ve got your quantum computing we were discussing recently and you’ve got your central bank digital currencies with the technology and block chain under that. That’s all interesting work.
The piece that I find even more interesting when we talk about innovation is actually how to do it and how to do it well. Right now, I’m seeing, in the industry, an increasing use of what I would call overlay technology. By that I mean, we’re overlaying use services and new tech on existing systems.
So, this is how banks can avoid the classic rip and replace approach on their complex infrastructures, their expensive investments on critical national infrastructures where people don’t often even want to touch those, kind of, workflows. So, when I look at things like confirmation of payee in the UK, a fraud initiative with open banking and pay.uk, that is, in effect, an overlaid messaging system.
Request to Pay that’s coming through 2021, that’s a secure messaging system on top of everything else. I’ve mentioned already that the Visa B2B Connect, we actually take the SWIFT MT files in and we ingest those and translate them and push them out to the Visa network. So, we’re not asking the customer to do any changes on existing workflows which can be expensive or high risk and there’s a low appetite.
So, innovation, to me, the smart innovation, even like Apple Pay that really just rides the credit card rails and debit card rails that have been around for many years… so, when I think back to innovations in the industry, that’s where my mind has gone to that the way it’s done, the inobtrusive way of just overlaying on top of existing, that’s an exciting space to watch.
Rich Williams: Thank you Ed. So, as we draw this episode to a close now, let’s talk about something I’ve specifically seen highlighted this year and that is the acceleration of digital transformation and it’s something I struggle to say but, thankfully, it’s much easier to understand.
Now, whilst I think it would have been on everyone’s prediction list of hot topics, for this year, I don’t think anyone quite conceived how important it would have become. So, where do you see digital transformation heading in 2021 and beyond?
Ed Adshead-Grant: I see it continuing Rich. It’s digital transformation, the big DX, is here to stay. A lot of the things that have happened this year, you can’t put it back in the genie bottle. So, I think back to Sibos and I think it was Jamie Diamond, the Chief Exec at J.P. Morgan talking about how for years and years everyone was using wet signatures on contracts, DocuSign couldn’t possibly be used, I think, was there particularly package.
Within weeks, they were, of course, electronic signing and moving on from the old school wet signature approach. There are all kinds of examples around about how organisations have adapted and grown. In some ways, it’s, kind of, a dark blessing behind COVID that this has brought through some interesting changes and accelerated ways of working.
The piece that I’ve observed with interest is actually the cultures in the Fintech world, not just how Bottomline has adjusted and done very well but, also, others. Not everyone, some have struggled, some of the smaller organisations with cashflow issues or start up status, may have struggled.
Where the culture is hardworking and focused on the really important things has actually been a positive change where we’ve moved away from old ways of working and introduced the digital straight through processing, click, enjoy, move on.
So, I’d like to finish on the optimistic, kind of, viewpoint that there is a positive side to it. In fact, even today, out to pick up the kids, earlier on, I left my wallet, and now I’m leaving my wallet frequently. So, everything is on the phone and we are tap and going at £45 in the UK with contactless and Apple Pay allows you to buy other things.
So, the first time in my life, after 25 years in payments, I find myself comfortable leaving the house without a wallet, it’s all on the phone and we’ve gone completely digital. So, let me leave you there on an upside.
Rich Williams: Yes, a very important point and a fascinating change of culture and habits as well, brought about by this increased innovation. So, we’ve seen a lot of change in 2020 and hopefully 2021 allows us to see a bit more normalcy return alongside the adoption of new trends and opportunities that add advantage to consumers and businesses alike.
No matter what the year ahead has in store, the financial services sector and payments, in particular, has clearly got a bright future, if such trends continue to develop. Ed, thank you, once again, for joining us for this week’s episode.
Ed Adshead-Grant: Thanks Rich.
Rich Williams: Unfortunately, that is all we have time for today but in the meantime, as always, you can listen to more episodes on all things payments at the touch of a button using your preferred provider. Don’t forget to like, subscribe and rate this show or leave a comment as you wish and we’ll see you all next time.
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