Craig Ramsey, Head of Real Time Payments at ACI Worldwide
Banks’ payment platforms died on the vine of being agile long ago as the banking ecosystem changed irrevocably. The industry as a whole has now moved beyond the tipping point of broad disruption and is witnessing the realities of rapidly changing customer behaviours. Banks must now consider cloud modernisation to win the digital real-time race.
Banks are increasingly moving away from legacy on-premise solutions to future-proof solutions that can be deployed on the cloud. There’s a real business need to do so – pioneering the switch can help banks not only retain and win new customers, but also keep up with the evolving industry and bring digital-first products and services to their customers both quickly and at a low cost.
Contrary to popular belief, modernising to switch to the cloud doesn’t require a complex overhaul. With today’s technological advancements, it can be done securely and while ensuring all customer data is kept safe.
Ramp up Payments-as-a-Service models to survive
We live in a world where we expect to pay for everything – takeaways, clothes, and online game extras – in real-time. But this is only possible when institutions are cloud-first and cloud-centric. However, many financial institutions have refused to get their heads in the cloud in any meaningful sense.
This needs to change, and quickly. Financial institutions will only be able to keep and win new customers if they can increase the speed to market of new products while lowering the total cost of deployment. In 2021, 181,261 million real time transactions were made globally, representing a YoY growth of 64.5%. As the volume of digital payments continues to rise exponentially, cloud solutions will help lower the cost per transaction while enabling banks to scale their operations to cope with today’s huge payment volumes and tomorrow’s growth.
The cloud is the undeniable enabler of new core revenue avenues. Not only does adopting an ‘as-a-Service’ model provide financial institutions with complete compliance and outsourced maintenance and operations. It will also help banks compete with Fintechs who are known for their technology innovation, agility and top-notch customer experiences. The ability to harness Payments-as-a-Service models is essential for survival.
What does the cloud offer banks today, and tomorrow?
Historically, payments used to be about the simple idea of who is sending money to whom. But banking based in the cloud allows financial institutions to go deeper into payments, uncovering insights about how people spend their money and providing context that ensures the products and services they provide are to their customers’ benefit.
Today, payments are very much about the contextualised insight financial institutions can gain. Along with helping banks gain these insights, the use of Artificial Intelligence (AI) can also enable them to leverage consumer payment data to offer personalised solutions to their customers. This means banks can cross-sell and upsell other solutions, opening up other revenue opportunities.
For example, harnessing real-time payments has enabled banks to launch real-time notifications to customers – making managing personal finances easier as consumers can now receive app notifications on how much they have spent. Banks can also use this data to upsell products to existing customers, such as giving customers with a good credit score an extended overdraft or credit card.
This also helps in the battle against tackling fraud. A study by the Centre for Economic and Business Research (Cebr) and ACI Worldwide reveals that digital wallet account hacking has risen to 7.3% in 2021, up from 6.2% in 2020. Real-time notifications enable consumers to be more aware of potential fraud. Banks can use AI software to monitor and track potentially fraudulent activity, so they can proactively prevent fraud, rather than taking a reactive approach. Overall, building better trust and increasing confidence levels with customers.
Working in the cloud gives banks access to a treasure chest of data and insight on customers, allowing them to build AI and data tools to better organise the data they currently have at their disposal. As companies respond to the demands of digital transformation, working with cloud technology partners ensures this payment modernisation is done in a secure way that ensures agility.
Greater industry collaboration benefits everyone
Adopting cloud technology is a great enabler for collaborations to generate higher revenue growth and for banks to establish themselves as an innovative leader. In short, augmenting the end-user experience will directly impact adoption and increase transaction volumes.
Anyone who wants to win the digital real-time race needs to be cloud-centric first. Banks must ensure that customers have trust in the safety of their data, but also work to future proof their solutions and ensure their implementations are agile and deployed more quickly than today. In addition, harnessing AI tools helps to generate new revenue streams that lower the total cost of ownership and per transaction and achieve increased scalability.
In simple words, banks must move to the cloud to ensure they keep up with the modern world.
