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What are the key considerations for adopting Request to Pay technology?

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When it comes to new ways to pay, consumers are making their preferences known. Overwhelmingly, today’s customers want fast, easy, and secure transactions and are increasingly willing to try new and emerging payments forms.

When you think about emerging payment forms such as Request to Pay, and the impact they might have on your organisation, what comes to mind? A complex, costly, and time-consuming undertaking?

It doesn’t have to be that way. Simply put, Request to Pay is a new, more flexible way for payments to be made between people, organisations, and businesses. It allows payments to be initiated, approved, monitored, and actioned via a secure messaging system. And it has the ability to influence both your technology strategy and roadmap.

Let’s take a look at some of the important considerations to keep in mind when evaluating Request to Pay technologies.

Request to Pay-type proposals

In the past few years, both Fintechs and Neobanks have introduced new Request to Pay-type propositions to the market. These propositions, though commercially different, do share similarities with Request to Pay, such as the ability to create a payment link which must then be sent from the payee to the payer. Some of the propositions also allow the payment reference and/or amount of the request to be changed and some even support multi-currency.

Although these solutions do share some similar functionality with Request to Pay, they differ in that they can be deemed potentially less secure since the payment request itself isn’t necessarily delivered over a secure channel. Furthermore, when the request is paid, users also need to make sure that the reference and amount haven’t been modified. This can mean additional work for payment reconciliation teams.

Adherence to different standards

Beyond security, Request to Pay propositions also face challenges when it comes to issues surrounding availability, interoperability, on/off boarding processes, performance, reachability, security, and standardisation.

For example, within the European Economic Area, two sets of standards exist, with Pay.UK governing the UK market and European Payments Council publishing standards for the rest of Europe. These standards differ dramatically with regards to API standards, message flows, and the types of payments supported. This makes it extremely difficult for banks to support both.

Pay.UK

Pay.UK is the UK payments governing body that is responsible for setting out the direction of all payments and payments overlay services frameworks, that anyone who wishes to operate in that space must comply with.

The Pay.UK Request to Pay framework is made up of three layers, representing the front end, the back end, and the guidelines within which the Request to Pay proposition must operate:

  • Applications
  • Repositories
  • Framework

The framework has been created as a proprietary API overlay service to the UK’s existing payments infrastructure. This enforces complete separation of the secure Request to Pay payment request messages with the payment itself, enabling you to continue to use your existing payment rails to facilitate Request to Pay payments.

SEPA RTP (SRTP)

European Payments Council noted the requirement for a Request to Pay proposition within Europe and have created a scheme to meet demand. SEPA Request to Pay uses the Request for Payment (pain.013) and Response to Request for Payment (pain.014) ISO 20022 messages to facilitate Request to Pay. The rulebook suggests a generic four-corner model (one payee, one payer and two service providers), though they do note that three-corner models and payee or payer direct models are viable alternatives.

There isn’t a standardised Payer Identifier for the requests which leaves room for divergence and all payments made via SRTP must be made in Euros using SEPA Credit Transfer or SEPA Instant.

General principles

Message and payment security within any Request to Pay model are critical for success. Customers will be more confident when accepting or initiating a payment request if they feel like they are doing so in a secure manner, or if they can log in to an existing mobile application or website with multi-factor authentication and see a record of outstanding requests and payments already made.

To promote confidence in the security of a Request to Pay solution, organisations should have solid underlying data definitions and data structures (ideally in ISO 20022 format) to provide reconciliation, data analytics and management information for all relevant stakeholders.

The value of an open-source modular platform for Request to Pay

To accelerate adoption and drive value, organisations should consider deploying an open-source technology platform to enable a Request to Pay solution. This makes the transition to Request to Pay both cost-effective and straightforward.

The right modular payments platform, for example, relies on open-source technology to provide orchestration support for Request to Pay out of the box. It allows for quick integration with existing payment rails by generating Faster Payment (ISO 8583) or similar messages for existing payment engines or provide a low-cost per payment solution for Euro SEPA Credit Transfer / SEPA Instant payments. A low-code, cloud-native, open-source technology platform can help organisations accelerate payments transformation, address both critical non-functional and functional requirements, and deliver more value and unlock new revenues – all while lowering costs and risk.

Icon recently conducted a survey of global retail and corporate banks, which revealed that standardising message content and exchange are seen as key challenges limiting adoption of Request to Pay, alongside bank readiness which was overwhelmingly viewed as the main barrier to adoption. With banks already at the limits of their technological and strategic capacity, trusted third parties promise to play an important role in helping banks to adopt Request to Pay while embracing regulatory changes, enabling innovation, and driving new revenues.

 

Banking

Wealth Managers and the Future of Trust: Insights from CFA Institute’s 2022 Investor Trust Study

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Author: Rhodri Preece, CFA, Senior Head of Research, CFA Institute

 

Corporate responsibility is more important than ever. Today, many investors expect more than just profit from their financial decisions; they want easy access to financial products and to be able to express personal values through their investments. Crucial to meeting these new investor expectations is trust in the financial services providers that enable investors to build wealth and realise personal goals. Trust is the bedrock of client relationships and investor confidence.

The 2022 CFA Institute Investor Trust Study – the fifth in a biennial series – found that trust levels in financial services among retail and institutional investors have reached an all-time high. Reflecting the views of 3,588 retail investors and 976 institutional investors across 15 markets globally, the report is a barometer of sentiment and an encouraging indicator of the trust gains in financial services.

Wealth managers may want to know how this trust can be cultivated, and how they can enhance it within their own organisations. I outline three key trends that will shape the future of client trust.

 

THE RISE OF ESG

ESG metrics have risen to prominence in recent years, as investors increasingly look at environmental, social and governance factors when assessing risks and opportunities. These metrics have an impact on investor confidence and their propensity to invest; we find that among retail investors, 31% expect ESG investing to result in higher risk-adjusted returns, while 44% are primarily motivated to invest in ESG strategies because they want to express personal values or invest in companies that have a positive impact on society or the environment.

The Trust Study shows us that ESG is stimulating confidence more broadly. Of those surveyed, 78% of institutional investors said the growth of ESG strategies had improved their trust in financial services. 100% of this group expressed an interest in ESG investing strategies, as did 77% of retail investors.

There are also different priorities within ESG strategies, and our study found a clear divide between which issues were top of mind for retail investors compared to institutional investors. Retail investors were more focused on investments that tackled climate change and clean energy use, while institutional investors placed a greater focus on data protection and privacy, and sustainable supply chain management.

What is clear is that the rise of ESG investing is building trust and creating opportunities for new products.

TECHNOLOGY MULTIPLIES TRUST

Technology has the power to democratise finance. In financial services, technological developments have lowered costs and increased access to markets, thereby levelling the playing field. Allowing easy monitoring of investments, digital platforms and apps are empowering more people than ever to engage in investing. For wealth managers, these digital advancements mean an opportunity for improved connection and communication with investors, a strategy that also enhances trust.

The study shows us that the benefits of technology are being felt, with 50% of retail investors and 87% of institutional investors expressing that increased use of technology increases trust in their financial advisers and asset managers, respectively. Technology is also leading to enhanced transparency, with the majority of retail and institutional investors believing that their adviser or investment firms are very transparent.

It’s worth acknowledging here that a taste for technology-based investing varies across age groups. More than 70% of millennials expressed a preference for technology tools to help navigate their investment strategy over a human advisor. Of the over-65s surveyed, however, just 30% expressed the same choice.

 

THE PULL OF PERSONALISATION

How does an investor’s personal connection to their investments manifest? There are two primary ways. The first is to have an adviser who understands you personally, the second is to have investments that achieve your personal objectives and resonate with what you value.

Among retail investors surveyed for the study, 78% expressed a desire for personalised products or services to help them meet their investing needs. Of these, 68% said they’d pay higher fees for this service.

So, what does personalisation actually look like? The study identifies the top three products of interest among retail investors. They are: direct indexing (investment indexes that are tailored to specific needs); impact funds (those that allow investors to pursue strategies designed to achieve specific real-world outcomes); and personalised research (customised for each investor).

When it comes to this last product, it’s worth noting that choosing advisors with shared values is also becoming more significant. Three-quarters of respondents to the survey said having an adviser that shares one’s values is at least somewhat important to them. Another way a personal connection with clients can be established is through a strong brand, and the proportion of retail investors favouring a brand they can trust over individuals they can count on continues to grow; it reached 55% in the 2022 survey, up from 51% in 2020 and 33% in 2016.

 

TRUST IN THE FUTURE

As the pressure on corporations to demonstrate their trustworthiness increases, investors will also look to financial services to bolster trust. Wealth managers that embrace ESG issues and preferences, enhanced technology tools, and personalisation, can demonstrate their value and build durable client relationships over market cycles.

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Business

How to Build Your Credit Up Safely

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by Taylor McKnight, Author for Compare Credit

 

What Is Credit?
Credit is money owed by a person that allows them to pay off debts at a lower interest rate. Most banks use your credit score to determine how much they should lend you. Any business loan or mortgage requires that you have a good credit history. However, if someone has poor credit(www.comparecredit.com/credit-cards/credit-range/poor/), they may struggle to pay back these loans, resulting in higher interest payments, making it more difficult than ever to repay the debt. Lenders are aware of this issue and keep a close eye on your credit rating to ensure that no negative information gets reported. This could prevent you from getting another loan in the future. It is important to note that having a bad credit score does not mean you have had a bankruptcy or other kinds of defaults. Many people often face this problem because of unpaid bills or late payment fees. However, this does not mean that you cannot repair your credit – it simply means that all parties involved must work together to solve the problem.

How to build your credit safely
Building your credit score is a major concern for most people, especially if they plan to purchase something as big as a home or car. A good credit score will help one get better rates in the future and make it easier to finance their next venture. Here are some things you should know to improve your credit to be used for the best possible purposes.

1. Keep paying down your balances every month: One of the biggest mistakes that could hurt your credit score is not paying your balance down each month. People who don’t pay their credit card down within the agreed-upon time typically have high-interest rates and expensive monthly costs.

2. Pay your bills on time: The same goes for making payments on a bill. Not paying it within the specified timeframe will result in negative information being added to your report, further lowering your credit score. Ensure that your bank statements are accurate and that all accounts are up to date.

3. Become an authorized user: Some companies will allow customers to become authorized users after meeting certain requirements. Take a look at the terms and conditions before applying for this option. These programs usually give access to one particular service, such as checking or ATM transactions, but are helpful when you need additional coverage.

4. Set up automatic credit card payments: There are several ways to set up auto payment options on your credit cards, including sending them directly to your checking account via email or the phone. In addition, you may want to consider enrolling in online banking services that automatically make payments from your checking account into your credit card accounts.

Other tips when it comes to credit
1. Learn how to manage debt responsibly. This is true for both personal and business debts. Many people tend to spend more than they earn, especially during rapid growth and expansion. If you find yourself facing difficult circumstances, you can seek assistance by talking to friends and family members, getting professional advice, or using online budgeting tools.

2. Don’t skip any repayments. This rule applies specifically to late payments. You need to continue making regular payments, even if you’re behind by a few days or weeks. Once you miss a payment, you’ll start accumulating late payments that negatively impact your score.

3. Try consolidating your loans. Consolidation involves combining multiple small loans from various sources into one large loan, thereby lowering the total interest cost of the loan and reducing the risk associated with it.

4. Be wise with your credit report. One huge mistake most people make is neglecting to pay their bills on time or paying only the minimum due balance each month. As a result, bad information remains on their reports, impacting their scores. All outstanding balances must be paid off completely. Otherwise, negative items that remain on your report can keep you from achieving the best borrowing potential.

5. Get your questions answered. If you have any questions regarding your credit, ask for answers now rather than waiting until you’re experiencing trouble. With a little research, you should be able to learn enough to begin repairing your damaged credit report.

What to look out for that can harm your credit
1. Not checking your credit report: Most people use their credit cards frequently but fail to check their credit reports periodically. Checking at least every 12 months can give you valuable insight into whether or not there are errors on your credit.

2. Paying your bills late: Late payments can lead to hard inquiries affecting your score, which means it appears that you’ve applied for more credit elsewhere. Make sure you never miss a bill.

3 You Close Old or Inactive Credit Cards: If your close old cards, they may show up on your credit report for some time. Closing accounts can impact your score by causing “hard inquiries” that appear on your credit report. Before closing them, look for inactive or closed card accounts on your credit report.

4. You Have Negative Records: Many people think they’re protected because they haven’t had past credit problems. However, many factors may cause a “bad” rating to linger. A single application for a credit product with a low limit may count towards a negative review.

5. There Are Errors on Your Report: Mistakes such as missing debt or inflated balances can damage your credit report. Find out how much money you owe and what types of products you purchased, then try to dispute those entries on your credit report. Ensure you correct any information that needs to be corrected. Failing to do so could hurt your chances of getting approved for future credit.

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