Volante: Change is the only constant for payments processing infrastructures
04 December 2018 London
Image: Shutterstock
“Change is the only constant for financial institutions’ payments processing infrastructures”, according to a new whitepaper, produced by Finextra, in association with Volante Technologies.
The whitepaper, entitled ‘Clearing and Settlement: the new battleground for payment innovation’, suggested that this change through preparation needs to be based on a core premise.
The paper said: “Payments transformation is imperative, to deliver the business agility and customer experience differentiation required to run a modern payments business. Once committed to the payments transformation journey, banks then need to plot out the exact shape of the route and the territory it will traverse.”
It added that this “new paradigm must look at the bank holistically, understanding that payments will originate from both bank-owned as well as third-party application programming interface (API)-driven channels, carry rich data payloads, require differentiated processing in the middle office, and then distribution to an increasingly diverse set of clearing and settlement mechanisms”.
It also said it was essential to ensure that banks retain that flexibility and agility as regulations, formats, standards, APIs, business requirements and technologies continue to evolve.
The paper stated that though complexity in clearing and settlement is “not a new phenomenon”, it is “widely tipped to be a more significant trend in the coming years, and with good reason”.
This is due to the “number of initiatives vying for attention”. Financial institutions “need to find ways to provide compelling business services based on new methods of payment initiation and novel customer experiences, while keeping pace with the multiplicity of back-end clearing and settlement options—all while managing costs, staying ahead of compliance, and growing market share”.
Concentrating more specifically on payments, the paper said the “significant innovation and competition afoot in the world of payments initiation, [has been] driven by consumers and corporates on the demand side, and traditional banks, fintechs and challengers on the supply side”.
It added: “This is mirrored by what can reasonably be called a revolution in the world
of clearing and settlement. Real-time/instant payments, blockchain and distributed ledger, new solutions to the old problems of cross-border correspondent banking, and many other initiatives all have the potential to transform how payments are processed, cleared and settled.”
The paper also discussed the significance of distributed ledger technology (DLT).
It describes the emergence of a new trend where banks and fintechs will “explore distributed ledger technology to transform cross-border payments”.
The paper stated: “This seems a safe bet for the coming years considering the wealth of activity that has already taken place in this area.”
It concluded: “Momentum is building around the development of DLT-based solutions; digitisation is pervasive in financial services and there is no sign of it slowing down, be it in the form of currency exchange, information exchange or clearing and settlement mechanisms.”
The whitepaper, entitled ‘Clearing and Settlement: the new battleground for payment innovation’, suggested that this change through preparation needs to be based on a core premise.
The paper said: “Payments transformation is imperative, to deliver the business agility and customer experience differentiation required to run a modern payments business. Once committed to the payments transformation journey, banks then need to plot out the exact shape of the route and the territory it will traverse.”
It added that this “new paradigm must look at the bank holistically, understanding that payments will originate from both bank-owned as well as third-party application programming interface (API)-driven channels, carry rich data payloads, require differentiated processing in the middle office, and then distribution to an increasingly diverse set of clearing and settlement mechanisms”.
It also said it was essential to ensure that banks retain that flexibility and agility as regulations, formats, standards, APIs, business requirements and technologies continue to evolve.
The paper stated that though complexity in clearing and settlement is “not a new phenomenon”, it is “widely tipped to be a more significant trend in the coming years, and with good reason”.
This is due to the “number of initiatives vying for attention”. Financial institutions “need to find ways to provide compelling business services based on new methods of payment initiation and novel customer experiences, while keeping pace with the multiplicity of back-end clearing and settlement options—all while managing costs, staying ahead of compliance, and growing market share”.
Concentrating more specifically on payments, the paper said the “significant innovation and competition afoot in the world of payments initiation, [has been] driven by consumers and corporates on the demand side, and traditional banks, fintechs and challengers on the supply side”.
It added: “This is mirrored by what can reasonably be called a revolution in the world
of clearing and settlement. Real-time/instant payments, blockchain and distributed ledger, new solutions to the old problems of cross-border correspondent banking, and many other initiatives all have the potential to transform how payments are processed, cleared and settled.”
The paper also discussed the significance of distributed ledger technology (DLT).
It describes the emergence of a new trend where banks and fintechs will “explore distributed ledger technology to transform cross-border payments”.
The paper stated: “This seems a safe bet for the coming years considering the wealth of activity that has already taken place in this area.”
It concluded: “Momentum is building around the development of DLT-based solutions; digitisation is pervasive in financial services and there is no sign of it slowing down, be it in the form of currency exchange, information exchange or clearing and settlement mechanisms.”
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