By Dale S. Laszig
In an industry that measures success in nanoseconds, speed is always at the forefront, but the game has changed in recent years. Experts are assessing agility with more rigor. Payments analysts who hailed Venmo as revolutionary when it launched in 2009 now consider it a legacy system. In this article, payments leaders share a variety of perspectives on agility and advise how to harness its capabilities in software, application and technology design and deployment.
Dr. Jack Baldwin, chairman at BHMI, has seen explosive growth in digital and real-time payments (RTP), which he suggested has created opportunities and challenges. "The payments industry has experienced more change in the past decade than in the previous 40 years," he said. "Smartphones have become the primary means used by people to access the internet and use different financial services."
Agility is a critical success factor for financial companies that want to thrive during this time of rapid change, and solutions must adapt quickly to whatever comes next, Baldwin noted. This is especially true for the back office, he added, because most legacy back office systems are not equipped to handle the modern payments environment.
BHMI designs "low-code" solutions that are easy to update and configure, an approach allowing companies to control their system's business rules without making source code changes, Baldwin stated. "The business rules are configurable through the user interface," he said. "As a result, many of the unique features or new functionality required by companies can be added using the rules engine. Changes to the rules can be made as business needs arise, without requiring software changes."
Baldwin went on to say today's payments companies need agile back office processing solutions that easily support rapidly changing requirements without requiring time-consuming, costly software development. A low-code approach provides flexibility, he added, allowing companies to work smarter, not harder.
Greg Wilfahrt, chief mobility and marketing officer at AP Technology, agreed businesses need to update, enhance and improve products as payment demands change. "An agile approach to creating payment solutions means that we can create efficient payment products that work with any accounting or bank core system, for example," he said. "We've also positioned ourselves to be payment agnostic, meaning customers can choose whatever payment rail that works best for their needs—checks, ACH, card payments."
Wilfahrt pointed out that agile payments reduce friction by removing barriers to seamless commerce, such as lack of security, trust or access and any number of poor user experiences. Being agile means moving attentively, intelligently, nimbly, and frequently, he noted, while swiftly resolving any impediment to satisfactory commerce for both payor and payee.
AP Technology early on recognized the importance of embracing agility as a means of producing and consuming more modular application interfaces (APIs), Wilfahrt stated. Through this approach, he added, the company creates solutions that can easily port to servers and Cloud environments. Being agile also helps transitioning organizations create better workflows as they shift from in-office to remote operations, he pointed out.
The move to faster payments, whether same-day ACH or RTP, is reducing processing times and bottlenecks, which helps service providers meet ever-changing demands as new payment types and security standards emerge in the B2B sector, Wilfahrt said. And in this dynamic market, he noted, service providers that support faster payments with agile development, testing and release processes will reap significant rewards.
Mathew Hobbis, chief architect, financial service institutions at Solace, noted payment service providers (PSPs) need to enable frictionless payments to keep pace with changing market conditions and regulations across an increasing number of payment channels. Agility is a requirement for PSPs in this space, he stated, as they scale, lower prices and add new systems and services designed to make payments more effective and secure.
"If you are not easy to use and available at the right price with the right level of security, there are alternative providers that are," he said. "PSPs must manage their, and their users', exposure to risk of fraud by integrating new systems into the payment process."
For example, Hobbis noted, services such as Confirmation of Payee allow users to confirm the name assigned to an account before making payment, which reduces user error and mitigates certain types of fraud such as authorized push payment scams.
Hobbis advised new PSPs to build systems with modern design patterns that support multiple microservices, event driven architecture (EDA) and APIs within their software architecture. This will give them the agile performance they need to stay competitive, he stated.
"For incumbent providers, the legacy nature of older banking institution IT systems often means they encounter difficulties when trying to adapt, particularly in terms of scalability, flexibility, reliability, complexity and risk," he said. "In this case, agility is unlocked by adopting EDA and utilizing an event mesh to convert semi-static data in legacy databases and mainframe systems into real-time events that flow through the organization."
With EDA implementation and event mesh deployment, banking and financial institutions can quickly enhance their agility, which Hobbis noted will enable them to innovate their payments platforms. Harnessing the business power of EDA gives providers a flexible platform to innovate, manage the cost of change, and maximize the customer experience, he said, adding that EDA architecture helps organizations scale for higher volumes while maintaining performance guarantees as they adapt to commercial and regulatory trends.
Hobbis has seen strong interest in EDA and event mesh architectures as financial services providers modernize financial services. In fact, he mentioned that Solace's August 2021 survey of providers in North America, EMEA, Australia and APAC regions found 85 percent of respondents initiated EDA journeys, with 13 percent in the "promised land" of EDA maturity.
"For those still on the journey, a number of obstacles lie in their way," researchers wrote. "One critical hurdle is the buy-in disconnect from IT (61%) to Senior Management/Line of Business executives (35%)."
With the approaching November 2022 deadline for supporting ISO 20022 messages to and from SWIFT, researchers predict more organizations will begin to leverage ISO 20022 capabilities. "Using such a standard internally will remove much of the confusion and complexity about data types, taxonomies and translations/transformations that exist between business lines in many banks today," Hobbis said. "Removing this complexity will streamline not just payments."
The Federal Reserve Board is planning a phased roll out of the FedNow Service in the third quarter of 2023. FedNow is designed to facilitate instant payments through business and personal depository accounts. The FedNow clearing and settlement network will enable funds to be transferred from the account of a sender to the account of a receiver on any day and in near real time, and depository institutions and service providers will be able to layer optional features and value-added services on top of FedNow rails, Fed representatives noted.
In a recent interview with The Green Sheet, Craig Ramsey, head of real-time payments at ACI Worldwide, said he expects FedNow to expand RTP in the United States.
"Broad access to instant payments in the U.S. is already a reality with The Clearing House RTP network," he said. "But with FedNow, we will see more institutions starting their real-time journeys and offering customers direct access to initiate an instant payment."
Ramsey further noted that implementation will cover a wide territory, from consumers paying friends, bills and ecommerce merchants to businesses using instant payments to better manage liquidity and re-use of funds. And more financial institutions will embark on real-time payment journeys to enable instant payments for customers, he added.
The Fed stated it plans to notify the public and member bank networks of fee structures and guidelines prior to launching FedNow. Visit www.frbservices.org/financial-services/fednow for additional details and updates.
Fast response times are critical in a connected world, especially when payment rails and connectivity are threatened or disrupted. When the global pandemic shuttered businesses worldwide, service providers and business owners pivoted from traditional in-person commerce to digital payments and from brick-and-mortar venues to ghost kitchens and work-from-home models.
Emily Canarini, vice president, operations at Agility Recovery, observed a permanent shift to remote and hybrid work over the course of the pandemic. This shift introduced a new set of challenges, she stated, as businesses looked for ways to keep critical employees connected and powered at home and remotely, while protecting vulnerable systems against cyberattacks.
Agility is a core requirement for meeting these challenges and for coping with disasters in general, Canarini noted, as no two disasters or their impacts are ever the same. "It is impossible to know exactly what to expect in the face of an interruption," she said. "However, by embracing agility, companies will be able to pivot and work quickly to both respond to and recover from an interruption."
Canarini emphasized there is no one-size-fits-all approach to disaster recovery and every organization has a different set of needs. Agility Recovery experts help each customer identify potential gaps or pitfalls that would delay recovery, she noted, to make sure they only receive the services they need without having to pay for things they don't need.
Canarini recommended implementing a continuity plan to cultivate agile responses to unforeseen events. The best place to start is to assemble a team of employees, each of whom represents a critical department in the organization, and perform regular testing, she stated.
Having a range of voices at the table will help identify all essential business continuity needs and ensure they are addressed within a continuity plan, Canarini stated, adding that testing each stakeholder can help identify gaps and potential failure points. This pinpoints responsible individuals and action steps, and documents and formalizes their roles in the recovery process.
"True agility is the ability to effectively respond or adjust to anything that may come your way," Canarini said. "Having these perspectives, a formalized chain of command and a regular testing schedule allows teams to plan for and respond to a wider range of incidents, as well as establish redundancies or pivot points, should there be any surprises along the way."
Dale S. Laszig, senior staff writer at The Green Sheet and managing director at DSL Direct LLC, is a payments industry journalist and content strategist. Connect via email email@example.com, LinkedIn www.linkedin.com/in/dalelaszig/ and Twitter @DSLdirect.
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