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Banks Look to Immediate Payments to Drive Revenue

Immediate payments is a key revenue driver for 66 percent of banks in markets with IP schemes, according to new benchmark data from processor ACI Worldwide and London-based consultancy and Paybefore sister company Ovum.

The benchmark report, “2017 Global Payments Insight Survey: Retail Banking,” also found that although 65 percent of banks believe open APIs will benefit customer satisfaction, nearly half of respondents (45 percent) are taking a “wait-and-see” approach to an open API strategy.

One thing banks aren’t waiting on is increasing their IT investments in 2017 (57 percent), with a distinct emphasis on operational efficiency (91 percent) and fraud prevention (68 percent).

Ovum and ACI asked payments decision makers globally about significant aspects of existing payments infrastructure; forecasts for spending; areas for investment and perceptions of where payments fit within their broader strategic objectives. Overall, respondents totaled 1,475 executives across 15 industry sub-verticals in 25 key global markets. The white paper released on Aug. 1, focuses on the survey findings for retail payments organizations.

Why Immediate Payments Matter

In addition to viewing immediate payments as a key revenue driver, 61 percent of banks surveyed believe that immediate payments will enhance their service and proposition to customers, while 60 percent expect them to reduce costs, according to the study.

“The market is rapidly changing—banks must invest wisely in core payments platforms and infrastructure to take advantage of relevant opportunities,” said Kieran Hines, head of industries, Ovum. “Financial institutions that proactively shape strategies around open APIs, fraud prevention and immediate payments will reap the benefits when it comes to both customer experience and revenue.”

Banks are expanding their IT investments in 2017, particularly in Europe, where 62 percent are increasing budgets for payments-related projects, according to the report.

Online payment capabilities, especially around digital wallets and tokenization, also are clear priorities. Globally, 67 percent of banks have or are investing in new online payment propositions, while 65 percent are focusing on projects around the card management platform; in many cases to support digital payment initiatives.

For banks in markets actively moving toward immediate payments infrastructure, or that have a clear road map to do so, the report suggests institutions learn from existing deployments. “Ensure that new overlay propositions and improvements to existing services are top of mind, particularly in the SME space,” the report advises. “At the same time, banks should take the opportunity to reduce legacy technology and add further capabilities when investing in the solutions needed to deliver immediate payments to customers.”

In the U.K. Faster Payments now account for 50 percent of transactions but it’s taken eight years to get there. Meanwhile, the U.S. Federal Reserve’s Faster Payments Task Force recently set an aggressive goal to bring faster (or immediate payments) to the U.S. by 2020.

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