Financial institutions and payment companies find themselves facing a very different, uncertain world. Yet from this period of unique instability, digital change has been substantially accelerated and foundations have been laid that will shape the direction of banking and payments for years to come.
The monumental uplifts in digital volumes, shifts in customer requirements and broader economic impact would have been (and frankly still are) barely conceivable.
A 2019 survey by Aite Group found that only 18% of banks were moving from a transaction-based revenue model to a data-based approach. Although this figure is unlikely to have changed significantly since, data-driven payments are increasingly on the agenda for banks and we can expect more movement towards this.
This is partly due to the accelerated cost-pressure on payments as a result of events in 2020. More importantly, banks are steadily identifying concrete use-cases and seeing their benefits. Helping corporates manage cash and liquidity through automated data-based actions can start to ease serious headaches for treasurers, for example.
Payments data can be used to provide valuable economic insights to corporate customers. At the same time, retail banks are getting better at making informed offers and suggestions to customers based on payment flows.
With the rise of embedded finance, the ability of banks to support personalised and contextualised payments will increasingly be expected by their customers. But organising data efficiently to undertake such actions is no mean feat. Perhaps in 2021, we will see more ways for actionable and insightful data analytics to help monetise payments.
ISO 20022 will play a critical role in supporting the shift to a data-based revenue model. With constantly shifting timelines and strained resources, it has been easy for banks to put ISO 20022 migration on the back burner. But as deadlines near, it is important for banks to focus on the long-term opportunities rather than the short-term pain.
ISO 20022 allows banks to improve and extend the payments-related services they provide to business customers, enabling the move from pure transaction-based services to value-added insights and advisory services. As banks look to reassess their long-term strategy, expect ISO 20022 to provide a catalyst for banks to embrace payments innovation.
Following years where the focus has been on technical implementation, we are now seeing industry initiatives focused on maximising the value of instant payments.
From a retail payments perspective, we can expect to hear a lot more about the European Payments Initiative (EPI) in 2021. Unlike the several aborted attempts that preceded it, EPI has big bank buy-in and a strong regulatory mandate from the European Central Bank. This may well mean that the long-held ambition to create a third payment scheme in Europe will actually come to fruition and bring the benefits of instant payments to the point-of-sale both in-store and online.
On the corporate side, Request to Pay schemes could prove to be the "killer app" for B2B instant payments. If uptake builds and businesses get on board, the significant benefits could start to be realised.
