Banks Strategic Response To Structural Changes

In collaboration with other industry participants, banks should take the lead in developing a new payments’ ecosystem as a strategic response to structural changes taking place in the industry. In the past, payments were considered a non-core, commodity service and payments processing (especially for cards) were usually outsourced to third parties. At present, payments are a strategic focus and differentiator because of investment in advanced technologies. In transitioning to a future payments state, some banks have started leveraging information from data lakes and other sources. In the future, payments will become part of a larger banking ecosystem in which participants, including the PSPs, interact with key partners to offer services to their customers.

Banks are at different maturity levels within the new payments’ ecosystem. While many leading banks across the globe have taken ecosystem initiatives, others are in the planning stages, while some others lag behind.

Strategic Responses of Banks to Drastic Structural Changes in Payments Industry

Key Enablers of the New Payments Ecosystem

Open APIs, instant payments, blockchain technology, and regulatory standardization are enabling the development of the new ecosystem. Within the ecosystem, open APIs enable collaboration with stakeholders and facilitate seamless data sharing with them. Instant payments not only allow real-time transfer of payments but also provide the central infrastructure for the ecosystem participants to build value-added services on top of it. Blockchain technology is expected to play a vital role in the new ecosystem, facilitating secure and real-time collaboration between stakeholders, and facilitating transparency of payments transactions. Regulatory standardization aids all participants to use a uniform set of communications standards. However, there are still issues such as a lack of harmonization and standardization in the industry, which are impacting the pace of emergence of the ecosystem.

Conceptual Model of Collaborative Banking Platform

Tackling Cybersecurity Vulnerabilities in the New Payments Ecosystem

While the new payments ecosystem provides plenty of benefits to various stakeholders—including corporates—there might be an increase in security vulnerabilities due to collaboration and opening up of systems. Corporates now expect banks to help with necessary measures to improve security infrastructure.

Effective cybersecurity requires organizations to efficiently and quickly identify, mitigate, and manage cyber risks and incidents. All stakeholders must strengthen the security of transactions against potential cyber threats. Banks and other stakeholders have three options available to them: Collaborating with FinTechs, making investments in advanced technologies and monitoring tools, and strengthening internal governance to ensure seamless compliance.

Measures Taken by Stakeholders to Improve Cybersecurity of Transactions