By Reza Rahmani Fard, Head of Product Management, Fime
With the global digital payments market set to be worth some $8,059.3 billion by 2023, at a CAGR of 20%, payments are undergoing a rapid period of growth and transformation. New payment methods such as real-time payments, initiatives such as open banking, and technologies like biometrics, all contribute to a constantly evolving ecosystem. The potential for innovation and optimization is clear. But if this value is to be realized, players must first ensure the security and interoperability of new products and technologies. A robust certification process is one way to achieve this.
What is a certification body?
Certification bodies are independent organizations which work to ensure the security, reliability, and ultimate functionality of a product. With participation from actors across the ecosystem – in a payments context, banks, regulators, Fintechs, vendors and others – the main goal is to agree a technological standard, then ensure compliance with it. Third-party testing laboratories complete the process by testing and confirming a product or service’s compliance.
Through this standardization, it is then possible to ensure trust, interoperability and the security of products, even across vastly different instruments and form-factors.
Why? Payments pain points: What’s certification got to do with it?
When managed effectively, certification bodies can coordinate industry-wide solutions to otherwise significant challenges, easing pain points and ultimately driving innovation. There are several key issues in today’s payments market which a dedicated certification body could ease.
The rapid evolution of the digital payments market is a case in point. Digital transactions soared to in excess of 700 billion by the end of 2019, up from just over 400 billion in 2015. The downside, however, is the resulting rush to keep up with consumer demand, which can lead to poor implementations. Certification has a clear role to play here, establishing standards which ensure control and confidence.
Other examples of ecosystem-wide challenges where certification has particular relevance include market fragmentation, market commoditization, and market exclusivity. But to understand how certification can support and advance specific projects, let’s look at two unique areas of the ecosystem in more depth: open banking and regional payments initiatives.
Certification for open banking
Few areas of the payments landscape demonstrate the importance of a standardized, certified approach better than open banking. Despite the almost unlimited potential, many stakeholders are still struggling to keep to open banking rollout schedules more than two years after PSD2 came into effect. The lack of a standardized approach is acknowledged as a key factor in this, and one the ecosystem is trying to right through initiatives such as STET and The Berlin Group, which are working to establish open access APIs.
If standardization is essential, certification also has an important role to play:
-Enforcing standardization, ensuring implementations’ interoperability and security, while bringing clarity and stability to a complex environment.
-Ensuring harmonization of the secure data exchanges between banks, Fintechs, and schemes would answer the challenging question of industry competition by creating a level playing field for new entrants.
-Supporting banks and Fintechs with their regulatory and legal compliance burden, as well as helping to manage increasingly complex governance issues.
-Fostering innovation. As new payment channels and new authentication methods such as biometrics and tokenization bring new levels of security to payments, certification can streamline and share the innovation through the common standards it defines. This, in turn, drives down the development cost, enabling new players to focus on innovative implementation, rather than commonly-defined baselines.
Benefits for regional initiatives
A growing number of domestic schemes and regional payments initiatives are working to establish a tailored, unified solution for their respective geographical areas. The aim is for these single solutions to enable multiple use-cases; leverage centralized fraud-scoring and prevention to improve security; and, of course, align with the required payment regulations.
A dedicated certification framework, once again, has a lot to offer:
-Cutting through interoperability issues and friction between domestic and proprietary payments.
-Ensuring brand consistency, and the necessary infrastructural alignment of acquirers and issuers with the payment system.
-Driving cost-efficiencies by establishing control over interchange fees and sharing card and terminal payment application costs. Certification can help regional payment initiatives keep costs low.
-Streamlining, simplifying and accelerating the rollout of each independent card and payment terminal application. New, compliant products can hit the market as fast as possible.
How to start?
With the benefits of setting up a certification body so clear, the question is where to start. Collaborating with an expert partner who can simplify the process from start to finish and help stakeholders avoid the mistakes of the past is one option.
Fime’s end-to-end consultancy services can guide organizations through each step from initially defining the specification through to operating the certification board. Its clear strategic advice covers all aspects of the process, including the associated business, administrative and operational concerns.
WHAT BANKS NEED TO KNOW ABOUT OBSERVABILITY
By Abdi Essa, Regional Vice President, UK&I, Dynatrace
More aspects of our everyday lives are taking place online – from how we work, to how we socialise and, crucially, how we bank. To keep pace, financial organisations have stepped up their digital transformation efforts, supported by a shift to dynamic multicloud environments and cloud-native architectures. However, traditional monitoring solutions and manual approaches cannot keep up with these vast, highly complex environments. As a result, many banks are turning to new, observability-based approaches to understand what is happening in their digital ecosystems. These approaches, however, bring new challenges to overcome.
Here are six things banks need to know about observability to ensure they can gain true value, combat the complexities of their modern multicloud environments, and drive digital success in 2021 and beyond.
- Most banks have very limited observability
The scale, complexity, and constant change that characterises hybrid, multicloud environments presents a real challenge to banks’ IT teams. Our research found that, on average, banking digital teams have full observability into just 11 percent of their application and infrastructure environments – not nearly enough to understand what is happening, and why, across the digital ecosystem. Additionally, 87 percent said there are barriers preventing them from monitoring a greater proportion of their applications – including limited time and resources. Without improving observability across the entire cloud environment – by drawing in metrics, logs, and traces from every application – banks’ IT teams are limited in the success they can have driving initiatives to deliver the new banking products and quality user experience customers want.
- You can’t bank on manual approaches
With many banks beginning to rely on more dynamic, distributed multicloud architectures to deliver new services, IT teams are stretched further than ever. More than a third of financial services organisations say their IT environment changes at least once per second, and 65 percent say it changes every minute or less. This rate of change creates a volume, velocity, and variety of data that has gone beyond banks’ IT teams’ ability to handle with traditional approaches – there’s no time to manually script, configure, and instrument observability and set up monitoring capabilities. The need for automation is therefore critical. By harnessing continuous automation assisted by AI in place of manual processes, teams can drastically improve observability to automatically discover, instrument, and baseline every component in their bank’s cloud ecosystem as it changes, in real-time.
- Cloud native adoption is obfuscating observability
To remain agile and keep up with the rapid pace of digital transformation, banks are increasingly turning to cloud-native architectures. Our research found 81 percent of them are using cloud-native technologies and platforms such as Kubernetes, microservices and containers. However, the complexity of managing these ecosystems has made it even harder for banks’ IT teams to maintain observability across their environments. Nearly three-quarters of banking CIOs say the rise of Kubernetes has resulted in too many moving parts for IT to manage, and that a radically different approach to IT and cloud operations management is needed. Such an approach should be based on a solution that is purpose-built to auto-discover and scale with cloud-native architectures.
- Data silos result in tunnel vision
To boost observability, many banks have simply thrown more tools at the problem. Our research found that most organisations use an average of 11 monitoring solutions across the technology stack. However, more isn’t always better, and multiple sources of monitoring data can result in fragmented insights. This fragmentation makes it harder to understand the full context of the impact that digital service performance has on user experience and unravel the nearly infinite web of interdependencies between banks’ applications, clouds, and infrastructure. Instead, financial organisations should seek a single platform with a unified data model to unlock a single source of truth. This will be integral to ensuring that all digital teams are on the same page, speaking the same language, and collaborating effectively across silos to achieve business goals.
- Observability alone is not enough
Simply having observability doesn’t help banks achieve tangible benefits or reach their business goals. To get true value, the data processed must be actionable in real-time. As such, observability is most effective when paired with AI and automation. This observability enables teams to instantly eliminate false positives, prioritise problems based on the impact it will have on the wider organisation, and understand the root cause of any problems or anomalies so they can resolve them quickly. The alternative is to manually trawl through dashboards and data to find insights, which is incredibly time-consuming and makes it almost impossible to act in real-time. Our research found that 94 percent of CIOs think AI-assistance will be critical to IT’s ability to cope with increasing workloads and deliver maximum value to the organisation. AI is clearly no longer just a ‘nice to have,’ but a business imperative.
- Observability isn’t just for the back end
Far from just having observability of their multicloud environments, banking IT teams also need to be able to see how the code they push into production impacts the end-user experience, and how that in turn affects outcomes for the business. This is a major goal for many CIOs, with 58 percent citing the ability to be more proactive and continuously optimise user experience as a benefit they hoped to achieve from increased use of automation in cloud and IT operations. By harnessing automatic and intelligent observability, banks’ digital teams can unlock code-level insights and precise answers to their questions about user experience and behaviour, so they can continuously optimise their banking services.
Observability is key for modern financial organisations looking to accelerate their digital transformation. By understanding these six key things about observability, IT teams will be better placed to master dynamic, multicloud ecosystems, and drive better digital banking services for the business and its customers.
NEARLY HALF OF BUSINESSES NEED MORE ASSURANCE ON DATA SECURITY TO ADOPT OPEN BANKING
- Financial services businesses in the UK and Netherlands call for better education, training and increased guidance on data security issues to propel adoption
- Study of 800 senior professionals from banks, lenders, personal finance management tools (PFMs) and retailers, in the UK and Netherlands
42% of financial services businesses want better support and guidance on data security in relation to open banking, according to the latest research by open banking provider YTS.
The survey of financial professionals including banks, lenders and retailers, revealed businesses want better education and training, alongside increased guidance, to help reduce fears around the security risks of open banking adoption. Respondents also stated that they wanted this support to come primarily from regulators.
This ranked higher than taking a ‘wait and see’ approach by allowing more time for open banking technology to develop (39%), which has often been cited as a way to assuage data security concerns, but as YTS’ data demonstrates, won’t solve the issues businesses are facing.
Lack of customer and business willingness to accept risks around data security were the second and third most cited factors threatening the progress of widespread open banking adoption, on 27% and 25% respectively. Over a third of respondents (35%) also believe that an ‘unfriendly’ regulatory environment is threatening the progress of widespread open banking adoption.
YTS is calling for the entire open banking and financial services industry to do more to empower businesses to adopt open banking technology, creating a more nurturing environment for the technology to thrive. This can primarily be achieved by introducing better education and accessible, transparent support for businesses looking to adopt the technology. This must be the spearhead of an industry-wide effort to banish myths and create more solid foundations for growth.
Roderick Simons, Chief Technology Officer at Yolt Technology Services comments:
“To fully maximise open banking’s potential, we must all do more to educate businesses and consumers about its security foundation . Open banking means their financial data is more protected than ever, with the individual in charge of whether their data is shared or not and secure APIs preventing risks from unwanted third-party access. We want to work with regulators, financial services institutions, and businesses themselves to lead the way in educating, training, and supporting businesses to overcome misperceptions of open banking. Doing so will unleash the power of open banking and create huge opportunities for both consumers and businesses.
“Once there is widespread adoption and trust in open banking technology, stakeholders across the open banking ecosystem can then turn their attentions to creating an open finance framework that gives consumers the ability to access their entire financial footprint in one place.”
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