Next steps in instant payments, regulation and liquidity management

In the panel “(r)evolution of instant payments” Simon Eacott, head of payments at NatWest; Ingo Faulhaber, Head of Account Payments at Worldline; Wim Grosemans, global head of product management, payments and receivables at BNP Paribas; Hays Littlejohn, CEO of EBA Clearing; and Amelia Ruiz Heras, Senior Director of Global Payment Solutions Consulting at Finastra, explored the potential of the instant payments landscape in Europe.

Eacott said he was not surprised that a majority of the audience voted for fraud, know-your-customer (KYC) and anti-money laundering (AML) as the biggest challenges to implementing instant payments.

Faulhaber expected people to vote on infrastructure/technology as a bigger challenge, arguing that “rolling out instant payments is a journey and it has been a bit of a slow start. We would like to see more transactions, but it is very important that the user experience is at the center. Users are reluctant to use transactions, so there is still a route to travel.”

Referring to the EBA, Littlejohn explained that banks are ready to provide instant payments infrastructure, adding: “I think we have some substantive issues; infrastructure is one part. We need to pay attention to the entire ecosystem from start to finish.”

Grosemans emphasized the importance of mutual cooperation: “As a bank and as a community, we must continue to talk to each other, anticipate and continuously implement KYC and ensure a solid customer journey.”

Eacott spoke about the UK’s difficulties in implementing fraud prevention protocols: “We have done a lot of things in the UK, both at an industry level and at a banking level, to try to combat this. We have not yet built a regulatory system that covers the entire ecosystem. We have a system that protects the consumer in terms of when fraud happens, so we have a refund program, but what’s really more important is stopping it before it happens. In today’s payments, the use of data will be crucial for artificial intelligence, sharing big data and survey data to identify trends. All of these things make up the instant payments infrastructure… We need to address this as an industry, and we need to do it quickly.”

In closing, Heras highlighted another challenge in keeping the end user in mind: “Sometimes instant payments become too frictionless, and banks should sometimes reintroduce some friction into payments to increase the mental understanding that money is being transferred.”

In the session titled “New regulations – new opportunities?” panelists Antoine Cuypers, director of strategic alliances at Intix; Karthik Jagannathan, director of pre-sales and payment solutions at Valantic FSA; Katja Lehr, managing director of payments and commerce solutions, EMEA, JP Morgan Payments; and Julie Timpson, director of high-value and international payments at Barclays, discussed new developments in legislation among European regulators.

When asked about the need and necessity for all these payments regulations in Europe, Jagannathan said that some European regulations, such as ISO20022, are purely industry regulated, not necessarily pushed by the central bank, but can go a long way in making payments more efficient – and this is needed to speed up payments.

“There are many reasons why we need regulation,” he continued. “I also believe that regulations are simply keeping up with reality; “There are situations where we need regulations that simply keep up with what’s happening in the market.”

Lehr believes that consumer protection should be the basis of regulation. Taking into account the European geopolitical situation, as well as the discussion around fintech and big tech, she said the main question financial organizations need to ask themselves is how they can ensure the continuation of cross-border payments in the event of sanctions and how to maintain payment operations if such a scenario comes true.

“When we issue guidance and we don’t actually get it adopted, the regulator has to step in and say, ‘It’s time to make it mandatory so that we actually get some adoption,’ because it’s a chain effect. You can’t innovate if there are no opportunities that allow us to be creative,” Lehr argued.

Timpson mentioned how global banks are trying to reconcile regulations issued by all parties, by multiple governments. It’s hard to keep up.

“Get the data and insights that will help drive adoption,” he suggested. “We have already seen that the original action plan is being questioned in terms of the time frame. It’s not just about FMI and the rate at which they migrate. You really need to take advantage of the opportunity and start leveraging data; use it and thanks to this we can innovate. We try to follow the regulations and just check the box.”

Cuypers said that diversity in data sets is key to complying with all these regulations: “Banks often face pressure from a large number of regulations coming from all sides, but consulting on asset holdings and data management and valorizing this data to better understand it can help “

Lehr commented that at the same time, many other regulations are being introduced that will impact payments, such as artificial intelligence bills and data regulations, which impact how banks operate and how effectively they can determine their compliance strategies.

Cuypers said fintechs can provide banks with additional value in the compliance process by offering different perspectives; easing the pressure to conform.

In the panel “Reassessing priorities in liquidity management” experts Vivek Chikballapur, head of liquidity and accounts specialists in the EMEA region at JP Morgan Payments; Jorge Filipe Nunes, Director of Liquidity and Financing at Banco BPI; Justin Silsbury, Principal Product Manager at Infosys Finacle; and BNY’s Director of Products and Global Cash Management, Varun Yadav, explored how today’s global geopolitical state is impacting the liquidity management ecosystem.

Chikballapur began: “You can’t be prepared for everything, but you can strategically make decisions and evaluate every assumption. You can be prepared for some “known-known” and some “known-unknown.” The way to prepare for the “unknown-unknown” is discipline; prepare a framework for stress tests and consistently invest in your business.”

Nunes said you can never really be prepared for what’s to come, but trust is always crucial to liquidity, and building that trust with customers through partnerships is simple but extremely important: “You really have to build trust with their clients. Build a partnership with them that will help them relax.”

Silsbury mentioned how massive amounts of data can be processed using artificial intelligence and machine learning, real-time analytics, reporting, transaction processing and more: “As a software provider, we manage a lot of the issues at banks, a lot of what we do around advances in technology AI can help forecast cash flow, optimize capital and support liquidity scenarios.

Yadav talked about the importance of customer segmentation and mediation: “A very important factor that I think most banks forget in many cases is how they segment their data. Is it grainy enough? Is it verifiable enough to create a high-level customer segment?”

Salisbury commented on market volatility as a result of geopolitical risk. As a result of geopolitical events, lenders have become risk averse and recessions have occurred, affecting macroeconomic policies and asset prices. He emphasized that liquidity managers need to be aware of how this causes changes in regulations. To prepare, banks and businesses need to increase emergency liquidity, establish solid relationships, rely on more than one financing channel, and leverage these customizable tools to automate mundane tasks and avoid losing customers.

Yadav concluded that it was important to consider both the end-to-end and back-office aspects of innovation.