Navigating competitive environment for cross border payment

Navigating competitive environment for cross border payment

By David O’Riordan, Head of Payments, Cards and Treasury Services, AIB.

David, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

My current role is Head of Payments, Cards and Treasury Operations in Allied Irish Banks (AIB) plc.  I have previously held senior roles in the Central Bank of Ireland, within the Payments and Securities Settlements Division, and KBC Bank Ireland, as the Head of Payments and Account Management.

AIB are currently undergoing a major transformation programme across both our Payments and Treasury business lines. From a Payments perspective we are investing in upgrading our Payments technologies and developing our Payments Strategy so we can further enhance our customer proposition and position ourselves for the new era of Open Banking.

At the Payments Forum, you will be giving your insight regarding cross border payments. Why do you believe this is currently a key talking point within the industry?

Research has validated that globalisation is driving significant growth in cross border payments with expectations that the annualised value of cross border payments transacted will exceed $28 trillion by 2020.

The traditional method of executing cross border payments, through the correspondent banking model, is coming under serious scrutiny. These traditional methods of settlement fall well short of customer expectations in relation to speed, cost, convenience and transparency. These service deficiencies are being further highlighted as domestic retail payments transition to Instant Payments schemes. Maintaining a correspondent banking network is also becoming very challenging for banks with ever increasing compliance costs. This is driving banks to streamline their correspondent banking networks.

There is also increased competition with a number of Fintechs emerging with enhanced customer solutions. The industry needs to begin to look at cross border payments from a customer perspective and become more open to collaboration with new technology players.

Without giving too much away, can you outline the best ways to navigate through this competitive environment within cross border payments?

As outlined earlier there are significant issues with the traditional cross border payments model. It is very challenging for banks to address these service deficiencies due to internal challenges in relation to legacy technologies, investment constraints, compliance costs and multiple competing priorities. Banks need to shift from the compete to the collaborate mindset and Fintechs need to move from the disrupt to the partnership mindset. In an Open Banking environment this will allow the banking sector to significantly enhance the customer experience and maintain the customer interface by marrying the digital prowess of new players with the traditional core competencies of banks (customer base, regulatory expertise, industry experience).


How do you see the payments industry evolving over the next 6-12 months?

I would expect that new entrants with the most effective propositions will come to the fore and drive an increase in strategic collaboration between banks and the Fintech community. SWIFT GPI will also be at a more mature stage and this will help to address the issues with transparency of cross border settlement. Assuming banks make the right strategic decisions this will lead to a step change in the service offering to our customers and will help grow ‘borderless commerce’ across both our business and consumer customer groups. As well enhancing the customer experience the compliance and risk management agendas will also stay at the forefront with cyber continuing to be a point of focus for the industry.

Disclaimer: The views expressed herein are those of the author only and may not reflect the views of AIB plc. This does not constitute payment services advice, or any other business or legal advice, and it should not be relied upon as such.