Reviewing digital payment methods and the movement to a real time payment environment.

The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.

Fulco Werner, Director Transactions Services Americas, ING

How has the development in new payment methods impacted the banking industry?

Significant changes in society due to technology and digitization are the reason that clients now expect a seamless digital delivery of financial products and services. As such, instant or real time execution of payments is getting more important, both for retail as well as corporate customers. It is up to the banking industry to use this technology to improve existing customer journeys and payment services. However, new market entrants and fintech are also set to offer (payment related) services, lifting on banking segmentation. So, the payment landscape won’t be just different, but also bigger, with more competition. Banks need to be ready for this new reality, to sustain their market position in payments.

Why is it so important for financial institutions to move towards a real time payment environment?

In a fast moving world where so many things have become available on a real-time basis (music, video, social interaction), Instant Payments are a “must have” to stay competitive. Especially the ability to support the online/ecommerce experience of retail customers and in the corporate market to optimize their supply chain/logistical processes will be critical going forward. As companies are revisiting their business models to reap the benefits of real-time payments, they are looking for banking partners that can support them during this transition.

What are the challenges around sharing data to facilitate instant and real time payments

Customers trust banks with their money and their personal data so safeguarding customer data and data privacy is a responsibility wetake very seriously. This becomes even more relevant when viewing instant payments as part of Open Banking solutions. In the European Union this is already well regulated through PSD2 and GDPR whereas the absence of such frameworks in the US have led to more industry-led initiatives.

Within the EU there is a clear regulatory trend towards more data portability and more data sharing cross sector/industry. Under the Digital Markets Act (DMA), Big Techs will be required to facilitate data portability as well and we expect the future Open Finance proposal to establish PSD2-like data portability.

Can you outline the importance of harmonizing ERP and treasury management systems?

Ultimately, we believe that the most successful future treasury teams will be teams that have adopted a digital treasury approach. This implies that they create a treasury/finance ecosystem that provides them with real-time data. A harmonized ERP system and a centralized and interconnected treasury management system are a prerequisite. APIs will be a key factor in building this ecosystem.

On the back of the data that will become available on a real-time basis, treasuries will benefit from better informed decision making. It will help them to better manage risk, to improve cashflow forecasting (reducing their cost base by reduced lending) and to act as a strategic partner to the business.

One important question remains, though, as incoming instant payments may hit current accounts on a 24/7 basis going forward: are corporate treasuries ready to adopt a 24/7 model where they can manage their liquidity any time of the day, even during weekends?

Why is it important to embed payments into application functionality for a seamless experience?

To realize the full potential of real-time payments and (transaction) data exchange, corporates need to also consume and process the information and messages shared with their banks in real time, to allow business actions to follow up seamlessly.
An API connection is very suitable to provide data at the required level at client’s (front-end) ERP / CMS applications to automatically trigger the necessary follow-up actions, on a 24/7 basis.

Corporates can integrate ING’s payment and reporting API directly into their ERP systems, front- and back-end applications to allow real time messaging (payments and reporting) and make (single) instant payments on a 24/7 basis.

Key benefits are high levels of automation, cost savings and the ability to offer a seamless customer journey. It also paves the way for embedded finance solutions.

How do you believe digital payment methods will continue to evolve?

Looking at the European marketplace, we already see a high adoption rate of digital payments. In combination with instant payments, ie 24/7 availability, this paves the way for corporates to adopt new business modes. Embedded finance, touchless payment solutions and event triggered automated payments open up myriad possibilities to improve the customer journey.

Fulco was a speaker at our 2022 Customer Experience & Digital Banking Congress.