There are always exciting technological innovations afoot in the fintech space, but this year the predominant theme is all about open: open technologies, open partnerships—that is, working with competitors or industry players to help realize mutually beneficial business scenarios—and open customer choice. The new payments ecosystem has its foundations in open practices and this in turn is changing how payments players work together to meet customer needs.
The new wave in open payments technology is all about offering open access to payment infrastructure for innovative payment service providers. The latest move toward openness is actually being mandated at a regulatory and governmental level. Take the example of the U.K.’s Faster Payments scheme, which has been opened up to fintechs thanks to the new access model for direct agency participation. In the past nonbanks had to connect via a sponsor bank; now aggregator services offer cost-effective and scalable access to the rails. To complement this, the Bank of England has announced planned changes to its settlement account policies.
The trend for nonbank access to the payments infrastructure is spreading beyond the U.K. The Second Payment Services Directive (PSD2) requires open access to bank account information, across the European Union, for Trusted Third Parties and Payment Initiation Service Providers—in a word, fintechs. In our recent report FinTech Disruptors 2017, financial institutions (46 percent) and fintechs (44 percent) ranked open APIs as a key opportunity in 2017.
Open is not just about tech, it’s about collaboration. The broader payment ecosystem needs to form open payment partnerships, and trust will be a key factor to achieving this level of collaboration. Fintechs are going to have to learn to trust their experienced counterparts, which include banks, processors and networks. For their part, traditional payment providers can partner for digital innovation to meet customer needs and expectations.
There’s been plenty of discussion around collaboration between the established institutions and the startups, but we’ve yet to see this realized. The opportunity lies in making innovative products and services from fintech companies available directly from traditional bank accounts in a transparent, unbundled format. New kinds of partnerships are being forged across the industry. TransferWise, for instance, recently became the first fintech company to gain direct access to the U.K. Faster Payments scheme by collaborating with Raphaels Bank as a technical partner and using ACI UP Immediate Payments. I predict 2017 will be the year that new partnerships cement the new payments ecosystem, and we will see a kind of ‘Payments 2.0.’
Open Customer Choice
The last “open” in this trio relates to choice for the end customer. Unbundling of solutions must not overcomplicate financial services for the consumer. Rather, it should make it simpler for consumers to create their own personalized product packages. Consumers and businesses are more demanding. Small businesses are looking for ways to make their cash flows more predictable. In our research, 95 percent of SMEs said they believed real-time payments would be useful to them. What’s more, business and individual customers expect to pick and choose from traditional banking providers and new payment service providers, and for their selections to be compatible in a single dashboard. This will require openness or interoperability between solutions and providers to enable any combination of options.
Rachel Hunt is solutions director for ACI Worldwide. Based in Singapore, Rachel is responsible for the management and direction of all aspects of marketing in Asia Pacific. Rachel has 20 years of experience in financial services technology, having held roles with banks, industry vendors including Temenos and Perot, as well as having provided consultancy services for over a decade at independent research firms, such as IDC and Tripliii. In her career, she has worked in various locations across the US, Europe and Asia.
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.