The rise of digital-only banks has accelerated innovation, while the rapid pace of global change has given birth to a new competitive environment in the Payments industry.
In the UK, financial institutions face additional pressure as they need to migrate to new technology platforms to support ISO20022-based real-time and high value payments.
In this transformed landscape, delivering a high-quality payment experience is exceptionally important for merchants, businesses, and end consumers.
Avoiding costly downtime is a given, but banks must also optimise service delivery to meet evolving expectations. This requires real-time insight into the performance of the entire payment infrastructure.
Increasing limits
Every aspect of the payments model is undergoing change. While the UK led the way in creating real-time payments with Faster Payments, the rest of the world has rapidly caught up and even surpassed the services offered by UK financial institutions.
Furthermore, customer expectations have been reshaped by the convenience of mobile payments and the increasing limits for real-time transactions.
The pace of change is remarkable. The limit for Faster Payments in the UK now stands at £1 million per transaction.
In 2020, the value of products purchased via mobile devices in the UK was approximately £65 billion, and predictions indicate that m-commerce retail revenues will exceed £100 billion by 2024.
There is no room for glitches in these payment processes, as merchants, businesses, and consumers expect 100% reliable, immediate transactions with zero errors.
Simultaneously, banks face ever-tighter regulatory scrutiny and financial penalties for failing to process payments within defined timescales.
Many potential failure points
Ensuring the smooth operation of critical payment infrastructure is vital. However, the complexity and evolution of today's payment environment introduce many potential points of failure.
Is a payment failure due to network availability issues, internal network problems, telco service deficiencies leading to point-of-sale (POS) outages in specific areas, or glitches in mobile wallet updates?
Are delays in processing high-value payments caused by problems in manual Know Your Customer (KYC) or Anti-Money Laundering (AML) checks, putting the bank at risk of missing costly deadlines?
Real-time monitoring has become an essential tool in the financial services sector, providing the necessary insight to minimize expensive downtime.
By extending traditional open systems infrastructure monitoring to encompass application and transaction-level activities, we gain an extraordinary depth of insight that supports more effective and reliable payment operations.
The importance of real-time monitoring
Preventing even a single outage and the associated costs of lost business and reputation damage immediately justifies the investment in performance monitoring technology.
However, it is the depth of insight provided by real-time, multi-layered monitoring that empowers financial institutions to continuously adapt and deliver optimal performance.
Transaction-level insights, for example, enable banks to quickly identify issues such as excessive declined payments with specific merchants or device types, facilitating remedial action.
Real-time monitoring also allows Treasury departments to proactively manage liquidity and risk by exercising effective control over sanction, fraud, and liquidity checks associated with high-value payments.
Anecdotal evidence suggests that around 50% of high-value payments require additional manual checks and are not automatically processed. By using real-time monitoring to track queue length and automatically reassign workloads between operators, banks can confidently meet payment deadlines while fulfilling these complex and vital checks.
In addition to addressing immediate issues, monitoring serves as an essential tool for financial institutions to comprehend evolving customer expectations in the ever-changing payment landscape. It can offer new insights into payment preference trends, such as the surge in mobile wallet usage, assisting financial institutions in planning and prioritizing investments.
ISO20022 and the impacts on financial institutions
This level of insight will be particularly crucial for the UK banking sector as it grapples with the challenges of delivering an optimal experience while undergoing complex and demanding migrations to new payment platforms.
In 2023 SWIFT high-value payments are transitioning from older legacy message standards to the more modern ISO20022-based messages. Additionally, banks will need to migrate the well-established Faster Payments systems from ISO8583 to ISO20022 within the next two years.
Undertaking such large-scale developments poses significant operational risks. Without real-time visibility across the entire payment process, spanning infrastructure, application, and transaction levels, banks will struggle to implement the new payment platforms without compromising performance or the quality of the user experience.
Conclusion
The increasingly demanding, complex, and competitive payment market brings forth new operational risks. While avoiding outages is crucial, banks must go beyond mere outage prevention. They must continuously enhance the quality of service and ensure that investments are targeted toward areas that deliver the most value and growth, thus creating a seamless payment experience.
Furthermore, individual payment mechanisms can no longer be considered in isolation. Implementing a unified performance monitoring solution across the entire payment infrastructure, encompassing cards, real-time payments, and high-value payments, yields tremendous value.
By adopting an omnichannel perspective provided by tools like IR Transact, financial institutions gain a comprehensive understanding of their infrastructure. This insight enables them to meet the unprecedented pace of banking changes and customer expectations for a frictionless experience, regardless of the payment method.
