Payments Transformation

Payments are critical in any business, and the challenge to modernize as we continue to dive into the digital age is becoming more prevalent than ever. Organizations and banks are striving to find optimal ways to leverage real-time payments (RTPs), deliver their goods and services quickly, all while reducing costs as much as possible. Cash is proving to be less and less critical for daily operations, even more so now due to the COVID-19 pandemic,  and the shift to virtual card and electronic payments is taking over. In some countries, like China and Sweden, cash is almost non-existent, as they have shifted to using digital and mobile payment methods, including QR codes and virtual cards. Organizations, especially those with global outreach, need to stay current on payments transformation trends and deadlines to ensure they don’t fall behind the curve.

 

Payments in the Digital Age

 

One of the main drivers in payments transformation is emerging markets, as they house the majority of the global population and favor the growth of online transactions. Most banks are already shifting to accommodate this trend, as they are starting to prioritize virtual card wallets as mobile money. This shift makes it even easier for international transactions to occur and promotes the inclusion of additional countries to participate. The rapid growth of these emerging markets and electronic payments are bringing a new breed of mobile and FinTech innovators to the payments market. The banking market has essentially been opened up to non-banking players, meaning that it’s never been easier for people to gain access to a full spectrum of financial services without needing to go through banking institutions. Real-Time Payments is another emerging technology driving payments in the digital age. It is a software solution that enables both businesses and consumers to make and receive payments instantly, in “real time.” Many of these technologies are often facilitated through advanced programming interfaces, or APIs, that allow interactions between separate softwares and programs. They allow 3rd-party software to interface with banks systems and facilitate accelerated payments.

 

We are living in a technologically-driven world with new generations becoming more tech savvy than the one before. Mobile phones are everywhere and the world of payments is changing forever because of it. Bank’s legacy systems are no longer able to cope with the volume and nature of electronic payments and are starting to be replaced with dedicated core payments processing systems, separating them from the core banking processing that they have been tied to up until this digital revolution.

 

Changing Regulations

 

As payments transition into a digital medium, security concerns continue to soar. New regulations are in the works and are starting to take effect that change how banks and organizations are required to operate. Main changes include:

    • ISO-20022: Over the next three years, the global finance infrastructure will transition into utilizing ISO-20022 payments. Nearly all major central banks will be implementing this change and it’s important to ensure that your organization is ready for the shift. These payment messages are in a flexible XML file format that allows for high-volume transactional data to be passed without the shortcomings of the legacy format. One Sheet: ISO 20022
  • NACHA: Beginning in 2021, NACHA is requiring specific changes regarding ACH data security that directly impact the storage of sensitive bank account information for organizations who process a high volume of ACH transactions annually. To learn more about the upcoming NACHA changes, check out our blog post: 2020 NACHA ACH Data Security Rule Changes – Extension!


Keeping up on payment trends is necessary, but doesn’t need to be difficult. Elire continues to produce treasury and payments resources for treasury professionals. Register for the upcoming Elire Treasury Experience where we’re hosting educational sessions over the course of two days. In the meantime, view our webinar recording of “Success Always Sits Above The Clouds: Moving towards a SaaS Treasury Management Solution.”