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Payment Systems

Banks are facing a perfect storm of conditions that threaten to disintermediate them from their traditional roles — James Wester, research director, IDC Financial Insights


ayments are a pretty common part of finance — they have been around as long as money has — but the next year or two may see unprecedented change in personal, banking and national payment systems. More than 35 countries around the world either have developed or are developing faster settlement networks for consumer payments, according to James Wester, research director for global payments at IDC

Financial Insights. In Singapore, DBS FAST allows instant movement of up to $10,000 between accounts at participating banks. A mobile application in Singapore lets small businesses pay for deliveries with a mobile phone, which links the payment to an invoice. The payment is immediate and records generated automatically. In Australia, home buyers no longer need to bring bank cheques to the closing; the money to purchase a house can be moved in real

time when the title is transferred. Some businesses in the UK have been using Faster Payments to improve their working capital. “By using Faster Payments, they can order more frequently, reducing their inventory,” said Zilvinas Bareisis, a senior analyst within Celent’s banking group. It was an unanticipated use of the country’s real-time payments network, he added. “Businesses think it is phenomenal,” said David Yates, CEO of VocaLink. “Employers with regular payroll for irregular amounts can pay employees on time without having to submit their payments days in advance, which is very important. The UK government can provide emergency funding for people who are in trouble and deliver the money instantly, and that matters.” The government is the largest user of the UK payment system. As new national real-time payment systems roll out, they will require banks to modify or replace their own payments systems, moving to what Wester in a December whitepaper called nextgen payment infrastructure, which will reduce costs and has the agility to create new products and services based on data analysis that shows what customers want. “Banks are facing a per-


As payments become increasingly embedded within other services, we will see a shift in the relationship between buyer, merchant and payment service provider, with banks facing ever stiffer competition to keep hold of the precious customer relationship Michael Laven, CEO of Currency Cloud

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