Money20/20 in Amsterdam comes at a pivotal time for the payments industry. Europe itself is seeing a surge in instant payment initiatives set to reshape the payment landscape. Embedded finance is gaining momentum, allowing companies to seamlessly integrate financial services into the customer experience. Additionally, ISO 20022 SWIFT and RTGS rollouts and the proliferation of cross-border payment services are driving further change, but nothing is disrupting our approach to delivering payments processing solutions as much as the cloud.

Whether you are a brand-new start-up operation looking to build a profile in payment processing, or a long-standing market incumbent needing to keep up with market initiatives and customer demands, no matter where you are on your journey, some or all these initiatives will have an impact on your business.

Instant payment rollouts gather momentum

In Europe, we’re seeing new instant payment initiatives taking place in multiple markets, with various initial rollout milestones being set for 2023.

In the Single Euro Payments Area (SEPA) – the payment-integration initiative of the EU – the European Commission has set an expectation that they will mandate all payment institutions to support pan-European SEPA instant payment services. This means that every bank must provide support for either the TARGET instant payment settlement (TIPS) service (from the ECB) or RT1 (from the EBA) at a pan-European level, which can be through a local, connected instant payment service, or directly through the ECB or EBA. This approach will enable payment service providers to offer funds transfers in real time across the entire SEPA zone.

Meanwhile, the SIC5 service in Switzerland is progressing in 2023 towards the initial go-live dates in 2024 , and the New Payments Architecture (NPA) program in the UK is also continuing to gain momentum. As a result, we’re already seeing UK banks seeking to modernize and elevate their capabilities in preparation for the change over the next couple of years. In fact, many organisations who implemented real time payment rails in the past are reviewing their capabilities with a view to re-platforming for the extended future. Their experience has shed light on the impact of instant across their entire processing ecosystem and the need to elevate all boats with the rising tide that is real time.

Growth in embedded finance driving payments-as-a-service

Already a hot topic, the role of embedded finance is positioned to become an even bigger driver of change. Embedded finance enables companies across industries to cater for their customer’s financial needs at the point of context.

Most importantly, it equips technology companies and retailers with the ability to provide a payment experience in a seamless and convenient way by providing financial services naturally integrated into the customer experience.

We’ve seen the rise of new BaaS and PaaS players offering various elements of the processing chains, and these new players are leveraging technologies such as APIs and cloud services to cement their partnerships with their customers.

Woe betides the bank that is not investing in the same level of technical and product flexibility and quality needed to compete successfully in this space.

ISO 20022 SWIFT & RTGS rollouts

This feels like a never-ending story, but 2023 is the year of the initial go-live deadline for phase one of the SWIFT Cross Border Payments & Reporting (CBPR+) program, as well as the revamped TARGET2 RTGS service in the Eurozone.

We are seeing how disruptive these migrations can be, and whilst these are probably the two highest profile migrations taking place during the year, they are by no means the only such initiatives on the go.

Markets such as Hong Kong, Singapore, the US, the UK, South Africa, and more have various ISO 20022 based programs on the go, and so banks should be continuing to invest in their ISO 20022 capabilities, especially for supporting services like reporting and analytics.

Proliferation of cross border payment services

I don’t think it will have escaped many people’s notice, but there continues to be an ever-expanding list of cross border payment services entering the market. Whether it is the traditional banks providing liquidity services in specific markets, traditional remittance networks with long standing payment corridors and retail businesses in place, or newer Fintech service providers offering niche propositions, there is pressure on payment service providers to offer comprehensive market coverage at the lowest possible costs.

In both the retail and corporate space, volumes for these cross-border payment flows are projected to continually increase beyond pre-pandemic levels. Be prepared to see banks investing in expanding the options for customers through onboarding a range of new cross border service providers, especially those smaller financial institutions seeking to compete with the global market leaders.

The shift to cloud and SaaS payment platforms

As banks navigate these changes, embracing modern, cloud-based payment solutions becomes crucial. The market leading solutions offer scalable performance for handling higher transaction volumes with wide functionality and great coverage from a local scheme perspective. They also provide agility for faster launch of new payment offerings using pre-built modules and APIs to facilitate integration with third-party services and fintech partners.

In an increasingly competitive and dynamic market, the shift to cloud and increasingly to SaaS platforms will accelerate, helping all players in the payments ecosystem keep pace with evolving customer demands and market trends.

Sustainability in payments

At Money20/20 many of these evolving customer demands and market trends will take the center stage including advances such as wearables, the Metaverse, and even Central Bank Digital Currencies. However, no topic can be viewed as being more important than ESG and the need for sustainability in solutions. Ultimately, this need is what has elevated the importance of the move to cloud and SaaS based services above the other drivers listed in this piece, and that is why I’ve ended on it.

We know that the cloud delivers the results we need to lower the carbon footprint of the payments industry and, as such, it becomes the disruption that we all must learn to fully embrace, and let’s do that sooner rather than later. 

Mick Fennell, Line of Business Director – Payments, Temenos