Where is the action in retail payments?

 In the beginning there was gold  followed by cash. Then came the check. And then came technology where we are now.The best analogy to understand  the action in retail payments is that of a kitchen table where the transaction occurs. The table has 4 legs and the table top. The four legs together with the table top  in our kitchen table example are the basic requirements of creating a transaction.Customer:The  first leg...

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Embedded Finance and Payments

 We have seen a lot of exciting developments in the consumer space introducing payments as a way to enhance revenue and customer interaction. Starting with major tech players like Apple and Google offering wallets for paying merchants, Square added debit cards to its Cash App P2P platform, Uber used the Visa  rails to provide instant payments to its drivers to Shopify adding Stripe's payment processing capability for its merchants.These initiatives have led to revenue gains for all parties but more importantly taken away customers which...

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The business of banking and payments

 What does a bank do? From the perspective of a consumer of business here are the core functions:-Offers consumers banking services around their day to day needs of payroll, paying bills, cash requirements, mortgages, deposits and managing wealth.-Offers businesses a way to receive money from customers and pay their suppliers, loans to fund their business, handle domestic and international  payments Between themselves, they offer loan syndication, securitization, investments , stocks and bonds.A common theme is the use of information...

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Barriers to Open Banking

 As the banking industry is wrestles with  the twin challenges of  new customer acquisition and operational costs they are aligning some of their spend on digital transformation to Open Banking driven by the requirement of giving TPP or third party providers access to customer payments data.This has created some additional barriers around competition and innovation. Lets consider these in more detail:Competition:-All jurisdictions with PSD2 have rules around which accounts should be accessible by TPPs. Many banks have even published...

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What is a Data Fabric?

 We are all aware that banks today are dealing with multiple data sources. Each of these data sources or end points  have to be brought into a central warehouse to run analytics on.  All this data movement requires integration capabilities and further the need to manage for security , the information about the data or metadata.Data fabric is a middle layer that sits on top these end points and the connections architecture . You can think of this as a logical or virtual layer. You then build services to connect to the data fabric. ...

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Business in the instant payment world

 Many jurisdictions are working on implementing a low value system on real time rails. Built on ISO20022 payment messaging standards, these promise the availability of instant and irrevocable settlement as well as rich data about the transaction such as invoice details.Some well established business use cases that will benefit from these new capabilities  where payments are available 24x7  as opposed to time delay for ACH and checks are:-Ecommerce vendors buying and selling online-Gig economy payroll for workers for payment of hourly...

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What is LEI?

 LEI stands for Legal Entity Identifier . This is a 20 character alpha numeric code based on ISO 17442 standard. This code helps in identifying the legal entities in a payment transaction. For example in Canada all counterparties to the derivatives transactions need to have an LEI. As faster payments and pay mod initiatives kick  in, more market participants including legal companies, their subsidiaries, government departments, charities...

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The Age of Open Banking

 Let us pivot for a moment from the back office of ISO20022 payment messages to the front office where the customer meets the bank.  Imagine your legacy bank has worked hard to modernize its payment systems and now carries rich data about a transaction end to end.What challenges do banks face? Several in fact. Sharing Customer Data: Who do I share this data with?  What is the risk to the bank, the customer? How is my API strategy shaping up?  Regulations are spotty at best and cant be depended to course correct us.Partner:...

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How to use data from ISO20022?

    The attraction of ISO20022 messaging data is: -It is unambiguous: the meaning of each data element is known -It is credible: the origin point of the data is known. -It is consistent: all ISO messages follow a standard that is universally understood.   These factors lend itself to data analytics at scale. Many banks have data lakes and initiatives to use AI/ML to develop insights. The building blocks are in place. What is payments data? Data generated by providing payment services such as card payments, mobile payments,...

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Case for ISO20022 migration

  Its not about a technical specification and the fact that a lot of data travels with the payment in ISO20022.In making a business case for migrating to ISO20022, its very hard to sell to executives why a change of this magnitude is desirable. I collected a couple of data points both for the bank and its customer to showcase why this migration is desirable.   For Bank: Banks have a very complex legacy architecture that has served them well for most part. However, the cost of servicing failed STP payment transactions is becoming prohibitive. In...

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Compliance a Concern for Banks migrating to ISO20022

As ISO 20022 becomes more prevalent as a message standard of choice, banks are wrestling with the compliance risks that come with implementing this standard. For the last 40 years a name and address in Swift MT consisted of 4 lines of 35 characters each. MT focused on concise information as opposed to clarity since it was developed in the days of low bandwidth and leased data lines were every expensive. In addition, over the last few years there has been the requirement of AML screening against sanctions lists and enhanced KYC including more...

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 Welcome to my blog.Here I will endeavor to post in brief some of the key issues facing the payments industry as banks modernize their financial messaging infrastructure. These are the common themes: ISO20022, APIs, Open Banking. In future posts you can see updates on current thinking on how to approach the major aspects and some more detail of what needs to happen at the frontlines.I hope my content helps executives at banks and product managers who are not payment experts to get a birds eye view of the effort and opportunities in this journey.Stay...

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