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Over the past few years, one area of banking that has undergone a massive shift is payments. Rapid urbanisation, advances in technology, and the proliferation of smartphones and digital wallets have spurred a surge in online and digital transactions sparking a move to a cashless society. The advances in payment technology have helped in connecting consumers, banks, and payment processors in a seamless manner.

Millennials expect on-demand banking as well as fast, seamless, contactless, and one-click effortless payment options. Regulatory institutions and payments industry leaders too are driving this change by putting in place measures to streamline payments standards and rein in risk.

The Covid-19 pandemic has led to an acceleration of these trends, shrinking the cycle of change from years to months. While these shifts were driven by the unprecedented situation brought about by the pandemic, a lot of these changes are here to stay even post the pandemic. As real-time payment solutions become the norm, we’re likely to witness increasing demand for retail and peer-to-peer payments, even across borders.

Banks must rise to the challenge

The quantum of change is putting pressure on incumbent banks to evolve their payments technology strategy and be future-ready. Already, fintech firms, low-cost digital payments platforms, technology giants, as well as upcoming challenger banks are riding on digital prowess and differentiated business models to deliver cheaper and better payment services.

Already, fintech firms, low-cost digital payments platforms, technology giants, as well as upcoming challenger banks are riding on digital prowess and differentiated business models to deliver cheaper and better payment services.

- Sriranga N. Sampathkumar, Vice President and General Manager - MEA, Infosys

Therefore, the time is ripe for traditional banks to look at new ways to deliver value to their various stakeholders. The changing landscape will revolve around:

• Early mover strategy by tier 1 banks

A great example of this is Qatar National Bank (QNB), which operates across more than 31 countries in Africa, Asia and Europe. In 2018, the bank consolidated its multiple payment engines and replaced them with the unified, multi-currency and multi-entity-enabled enterprise payments hub from Finacle. This was aimed not only at boosting business efficiency a boost but making QNB fit for a truly digital future.

• Innovative banking

Emirates NBD partnered with ICICI Bank in India to pilot the first blockchain-based network for international remittances and trade finance. By replicating the paper-intensive international trade finance process as an electronic decentralised ledger, the new framework enables all the parties within the framework to access a single source of information in real time. This facilitates quicker, transparent and secure transactions as well as instantaneous remittance transactions.

• Digital banks

Liv. Bank, the digital-only lifestyle bank operated and managed by Emirates NBD Group is a great example of a digital native bank, which is targeted at millennials. It was built on the principles of simplicity, intuitiveness, smart analytics, and API connected ecosystems. The bank attracted more than 370,000 customers at 20 per cent of the acquisition costs of a traditional institution, emerging as the fastest-growing bank in the UAE by customer acquisition. With more than 80 per cent of new customers coming by way of referral, Liv. enjoys a high customer satisfaction rate. In addition, Liv. is bringing a whole new market place of various service providers to attract millennials to buy and spend through Liv.

• Disruptors

Non-traditional alliances such as the partnership between telecom player Bharti Airtel and Axis Bank to launch Airtel Money is a great example of disruptions in the payments space. This alliance leverages the companies’ respective strengths in telecom and banking sectors to bring banking products and services that can empower financially excluded citizens of India.

Paytm, which transformed itself from being just a digital wallet player to launch a mobile-first digital-only bank in India, is another great example. Paytm saw the addition of 42 million accounts in 18 months in addition to 500 plus corporate clients within just a few months of launch. Paytm drives 30 per cent of open banking transactions in India and witnessed a 400 per cent increase in average daily transactions, clocking five billion transactions annually.

The past few years have seen immense growth in using emerging technologies to support non-card-based payment transactions. Blockchain as a technology with its inherent capabilities has helped address requirements of traceability of funds from source to destination, providing the support for AML/fraud checks while payments are instantaneous.

For Instance, VISA B2B Connect, a non-card payments rail, helps corporates send money to over 97 countries in real time, with the sender and receiver having the necessary transparency regarding the payment. Its partnership with technology players like Infosys has helped to bring this capability to banks across the globe.

Furthermore, with more and more countries becoming crypto-friendly, we have also seen the rise of the crypto-exchange platform. The platforms enable customers to use their cryptos for money transfer where the receiver gets paid in fiat/crypto currency. They can use it as an asset pledged for a loan. Crypto-linked payment cards where customers make payments using their crypto wallets is picking up pace. For instance, VISA has recently announced that it facilitated more than $1 billion in transactions via crypto-linked VISA cards.

With so many disruptive technologies and innovative banks entering the fray, the writing on the wall is clear. Modernising the infrastructure becomes paramount and embracing seamless digitisation, real-time payments and open banking lays the foundation to embrace any new payment technology advancements in the near future.

The writer is Vice President and General Manager - MEA, Infosys