Even if the Covid-19 epidemic was a significant force behind payment innovations in 2020, regulation will probably determine financial institutions’ top priority payments for 2021-22 throughout much of the globe.
The U.S. is still lagging behind as interventionist regulation like RPS pushes much of the globe toward rapid payments. At the earliest, real-time payment services won’t be offered by the Federal Reserve, which connects almost all financial institutions in the USA.
The Clearing House Payments Co., LLC (TCH), which the largest banks in the nation own, has advanced more significantly in the meantime. Although there are still allegations of “patchy network coverage,” TCH stated in September that its links to core processors could possibly bring online approximately 70% of U.S. deposit accounts.
Consumers are driving real-time payment adoption in the U.S. without regulatory pressure, promising to maintain fast payment technologies at the front of U.S, financial institutions’ agendas throughout 2021-22.
If under the priority payment meaning we understand providers and methods of payment solutions, then we can say with confidence that the priority of payments is obviously changing today.
The analog to digital transition
The number of real-time payment transactions was expected to rise from $734 million in 2019 to $4.2 billion by 2024 in the US alone, even before the effects of the Covid-19 outbreak were apparent. The real-time payments industry is now expanding and is crowded with companies as concerns about one’s health and the state of the economy continue to fuel the need for contactless payment options and rapid access to cash.
According to Deloitte, real-time payments are accessible in forty nations, and more than a dozen more are prepared to launch before 2023. We predict that this well-defined market will spur widespread digital transformation in 2021. For instance, platforms for real-time payments like Solidgate and others are created using APIs. With APIs, financial institutions may quickly connect to various tools and services.
Since real-time payment APIs are now available, credit unions and banks are free to integrate additional API-supported technologies, increasing the range of goods and services offered to corporate and consumer consumers. In other words, the transition from analog to digital banking will happen faster in 2021-22 as a result of the quick adoption of real-time transaction capabilities in 2020.
APIs, a cutting-edge technology, allow improvements like ISO 20022 and greater data access. The ISO 20022 standard for sending and receiving electronic communications enables senders to provide far more data with a transaction than was previously possible. With improved data, business AP procedures may be automated more widely, leading to quicker reconciliation and reduced days of outstanding sales.
Financial institutions will become more effective by adopting the new standard. For example, the highly structured message style of ISO 20022 enables automated reading and allows faster and more precise machine reading.
Although SWIFT won’t permit ISO 20022 messages for cross-border transactions and cash reporting firms until the end of 2022, many profitable payment services, such as those in Japan, Switzerland, and China, have already migrated to the new standards, according to Accenture. Over the following five years, a number of other nations intend to implement ISO 20022.
Recognition of clouds
A year ago, cloud-based payment systems were viewed with much skepticism. There is a rising acceptance as 2023 approaches. In favor of more rapid transformation initiatives, on-premise needs for software, hardware, and administration are being relegated to the background as nations continue to look for control over cloud placement and security standards.
Financial companies may use evergreen technology that is always upgraded to meet current necessities and regulatory requirements, thanks to the cloud’s endless accessibility and adaptability. Banks are able to direct funding and resources to more revenue-generating initiatives, such as client acquisition campaigns, without having to constantly keep on-premise software and systems up to speed.
Open banking
In 2021, the transition from analog to digital will be supported by deploying both cloud-based services and APIs. Financial companies are shifting from a posture where innovation is fixed and incorporated within the finance company to a flexible position, where innovations and transformations are easily attainable, as they continue to adopt the platform economy.
Innovative software vendors are already collaborating with fintech to foster innovation, offering easyy adoption of third-party solutions to financial enterprises through APIs. The straightforward functionality gives banks the flexibility to embrace new products as needed, such as those that lower payment risk and handle regulatory obligations. APIs also provide benefits for customers, allowing people and companies to combine their world of financial management more securely behind their banks.
A Bankrate poll found that 54% of customers use an external app to handle their finances and payments, but that 84% were unaware that these third parties also keep the usernames and passwords for their bank accounts. Financial enterprises can address security challenges like these by providing comparable payment services through easy plug-and-play adoption in 2021.
Overall, the rapid acceleration of the digital economy in 2020 has prepared the ground for the next stage of the development of digital payments, enabling banks to more successfully and efficiently respond to legislative demands and those of the market using creative plug-and-play solutions.
