The Future of
Competitive Advantage
in Banking & Payments

Bottomline’s Second Annual Global Survey

Introduction

In the banking and payments industry, the past year has been loaded with questions that still need to be answered. What will the economic fallout be from COVID when it’s all tallied? Will geopolitical instability continue to roil markets? And maybe the most crucial question: will a global recession present obstacles to growth at this critical time?

However, for executives looking for answers, there’s only one issue: competition. You will need to compete for customers. You will need to compete against fintechs. And you will need to continue on a journey toward digital technology and iron out new wrinkles like open banking to strengthen your competitive set.

The report you’re about to read will illustrate and benchmark the critical issues for competition in 2023 and beyond. You will see that real-time payments have taken the highest priority. Also, note that regulations are still a substantial issue across the globe. And we will put this in the context of arguably the most dynamic and impactful year since the financial crisis.

About this report

The results are ‘in’ from more than 320 banking & FI players across Treasury, Fraud, Operations, Innovation, Product, and Technical Implementation at C-Level in 34 countries globally. The breakdown: 32% Europe, 22% APAC, 16% North America, 14% UK, 11% Middle East & Africa, and 5% LATAM.

This report is based on a peer-based, real-time comparison benchmarking survey to see how executives and their companies met customer expectations and progressed toward achieving their digital payments transformation strategy. Topics covered included real-time/instant/faster payments, cross-border, ISO 20022 messaging, transitioning to SaaS,  fraud & financial crime management, cash & treasury management, and Open Banking.

Why this report is worth reading

As we said in the introduction, the simple answer is competition. Banks & FIs need to take advantage of the opportunity to compare their strategic priorities, product roadmaps, and plans for future innovation with their peers. In the process, they can discover the technology trends the industry is prioritising and align with themes. For instance, adopting new payment rails, such as real-time payments, has risen from 40% in 2021 to 55% in 2022 as the top priority for banks and FIs over the next 12 months, followed by mitigating fraud risk from 38% in 2021 to a massive jump to 53% in 2022.

Let’s put this report into context. We have just started recovering from the Covid-19 pandemic and managing the extra traffic resulting from the enthusiasm and increasing customer reliance on digital banking. Then add the drama around the shift in hitting SWIFT CBPR+ and domestic scheme deadlines for ISO 20022. Mix in new initiatives from the European Commission to make Instant Payments in Euros available to all EU & EAA citizens. Consider the strong drive from the industry toward improving cross-border payments while incorporating potential disruption in the correspondent banking model raised by the Russian sanctions from the Ukrainian conflict. And then lastly, best fraud prevention practices are being introduced and mandated, such as Confirmation of Payee, and it is clear that we have a true melting pot where a great deal needs to be considered, agreed and planned for in 2023 and the long-term future. As Winston Churchill said, “To improve is to change; to be perfect is to change often.”

Make sure your financial institution is on track to maximise the changes impacting the payments ecosystem and accelerate your digital payments transformation strategy today – that is where true competitive advantage can be leveraged.

Insight 1: How confident are you with your company’s digital payments transformation strategy? 


Any competitive edge that banks & FIs can achieve in the next 12 months will be driven by their commitment to accelerating their digital payments transformation strategy. The results here in insight one have roughly stayed the same as last year, which would suggest that either banks & FIs feel that they are keeping pace with all the new regulations, mandates, and industry best practices or, at least, consider their strategy to be along the same lines as their competition. However, the 20% who are sceptical or highly sceptical need to double down on innovation. They need to ensure that they get better support internally from the top down to accelerate change and address legacy infrastructure. The 8% that are unsure should be concerned about where they sit against their competitors – apathy isn’t an option.

So much has changed in payments with the development of add-ons and layers upon layers of new functionality that adds enormous complexity to our operational systems. At a time when a multitude of ‘change requests’ are hitting desks, decision-makers need to take a step back and ask critical questions before they build, partner, or buy anything:

• How old are my legacy systems, and how are they impacting operational efficiency?
• Are they able to inter-operate between themselves and with new payment rails?
• What is the potential for scalability? What are the big picture and optimum long-term digital payment transformation strategies?
• What are the new regulatory priorities, and how are they driving domestic and international payments?
• How can fraud losses and issues with friction be mitigated?
• How can we protect our institutions and customers while driving innovation and operational efficiency to exceed customer expectations?


Supporting resource

Whitepaper: How Banking Heads of Operations & COOs can Leverage Centralised SaaS Platforms & Hybrid Integration Models to Win Competitive Advantage


Gilles Ubaghs – Strategic Advisor Commercial Banking & Payments at Aite-Novarica Group


"The sheer momentum of change now happening in the payments space, driven by both regulatory and commercial considerations means that the majority of financial institutions are now well underway with significant payments transformation. While an ongoing process, the pace of investment and subsequently change is creating a self fuelling cycle where financial institutions firstly face no choice but to invest in payments for regulatory compliance, and from there need to invest even further in their capabilities to gain any sort of competitive differentiator. Financial Institutions essentially need to run faster just to stay in place, and faster still to get ahead. The strategic importance of payments transformations should not be underestimated by Financial Institutions of any stripe as they risk getting left behind."

Insight 2: What is your financial institution’s appetite to transition to a single SaaS platform for your payments and messaging ecosystem in 5 years? 


60% are strong or extremely strong in 2022 Vs. 75% in 2021. Does this suggest that the buzz has dissipated? Or is it based on the perceived reality of potential costs, hassle, lack of IT resources, or project roadmaps that miss the point? The onus is on the industry consultants and service providers to discuss how to scale and educate on the benefits of outsourcing for hybrid integration models. The 7% who have no appetite to transition need to be realistic about whether they can keep business continuity (let alone competitive advantage) with a legacy on-premise solution and address whether working on disparate systems is likely to damage their operational efficiency.

Supporting resource

Webinar with SWIFT & Zanders: How COOs Can Address Legacy by Accessing Multi-Lateral Platforms to Improve Operational Efficiency via SaaS Platforms


Charles de Rougé – Head of SaaS Proposition, Bottomline Technologies


“Using a hosted, standard, secure, SaaS-based platform to connect, control, compete, and comply brings enormous long-term strategic possibilities. First, it inspires confidence that your capabilities evolve according to market expectations and the demands of your internal strategy regarding appropriate investment, product development, and the generation of new revenue streams. Secondly, you reap the rewards of a constantly evolving platform optimised by best practices and driven by the collaboration and innovation of vendors and market players – in other words, a best-in-class platform.

Soon, we will see more innovation emerging from new payment rails, instant payment schemes, regulations, and deadlines to new agency bank/partnership models. The responsibility for operations will need to grow to support interoperability, the unmistakable shift towards real-time, and ensure the safest, most secure processes. To succeed, you must embrace digital transformation, improve operational efficiency, and exceed customer expectations. Jerome Powell, Chair of the Board of Governors, Federal Reserve System, stated, “One of the keys for cross-border moving forward will be both improving the existing system where we can, while also evaluating the potential of and the best uses for emerging technologies.” Additionally, in the recent G20 Report, they confirmed that the goal for the FSB running this program is that cross-border payment costs will drop to 1% by 2027, that 75% of payments arrive in less than one hour, and that 100% are processed the same day.

Additionally, a single, hosted platform can counter error and fraud more effectively by using a standardised approach based on proven best practices. A good example is using multi-factor authentication to log in and approve payments or setting limits per account, user, or group of accounts. This opens up the possibility of segregating data access and duties for unique de-limited roles, and provides complete end-to-end visibility and control while using shared service centres and/or branch access. The tangible impact is the ability to validate beneficiaries and support multiple current approval workflows, from straight-through-processing (STP) to multiple approvers based on the amount/payment/or type of debit accounts.

Lingering doubt exists in the heads of every banking and financial institution executive about whether change comes at a risk of potential failure through what seems like never-ending project updates, rising costs, and the disruption of existing operational functionality. There is no standard playbook, as one size doesn’t fit all. Nor should it, as institutions have different strategic objectives. However, time is running out, and new regulations that impact your network and technical obligations now come with more aggressive deadlines. There is an urgency to deliver innovation, gain a competitive advantage, or stay in the game and avoid disintermediation. Everything is real-time now, and everybody expects everything to work with ‘one press of a button. The truth is, of course, more complex. Still, with the right partner making the right choices for you, you can start or continue your digital transformation in a smooth and controlled way to ensure the growth of your business and satisfaction in your customer experience.

There’s a difference between driving innovation and feeling forced to do it. And there’s also a difference between improving the customer experience and being mandated to do it. It will be the FIs that harness innovation and strategic partnerships that will compete to win in 2023 and beyond.”

Insight 3: What is the key issue you face with your current payment infrastructure?


It isn’t surprising that Legacy and Internal Interoperability have been listed as key issues. However, this is contrary to the 7% in insight 2 who have no appetite for solving these issues by transitioning to SaaS. The catch-all for most of the problems above is Operational Efficiency. It’s also surprising that scalability is so low, considering busy roadmaps and the need for top-down buy-in. Many banks & FIs have chosen the Minimal Viable Propositions (MVPs) route, which is all about scaling at pace with budgets, time resources, and business cases. Also, with increasing numbers of industry mandates and regulations, it is a mistake not to have the scalability to meet these within tight deadlines. In a competitive world, there is a danger that being unable to scale to meet customer demands and achieve best practices will cause issues with customer switching and overall retention. Finally, we all saw the massive acceleration of the adoption of digital payments as a result of the COVID pandemic, as well as the situation in Ukraine, which has meant that in a “changing world,” it is vital to respond quickly to any crisis.  

Supporting resource

Article: Is the COO now the cloud operating officer?


Andy Turner – Director of Product Management for Financial Messaging, Bottomline


“Lack of IT Resource & Legacy infrastructure is impacting modernisation plans. Globally, banks are currently experiencing a talent shortage. This is reportedly most prominent in Asia and was highlighted at this year’s Digital Transformation in Banking Summit in Singapore - it made the short list of the top four pain points. In the region’s biggest hubs, workers look to the many fintech and big tech firms for higher salaries and better career prospects. These issues were exacerbated in cities such as Hong Kong due to strict Covid-19 policies and associated travel restrictions. Rapid digital advancements have also caused a shortage in skilled areas such as software engineers, data science, and architecture, and banks are competing against other industries for tech talent.

Direct solutions to these shortages discussed on the Summit’s panel included hiring for attributes of the role rather than specific skills, investing in training to meet the skill requirements and hiring graduates, and guaranteeing salary increases for the next three years. However, the truth is that it is rarely the best option to hire additional staff to do this all in-house. The better choice is to look at a hybrid integration model and outsource complex projects to trusted third-party providers. The results support this in Insight 7 of this report, where 44% said that one of their top priorities over the next 12 months was replacing legacy infrastructure with increasing operational efficiency, and 25% said freeing up in-house IT resources to enhance customer propositions.

Additionally, it is often too expensive for most institutions to maintain heavy infrastructures on-site. These disadvantages impact the ability to scale on-demand and future-proof systems. Instead, the solution is to partner with the right supplier to leverage their expertise and bandwidth – whether that is via SaaS, Service Bureau, or a trusted Fintech partner. These options keep your development to a minimum by utilising the right partner, already audited and compliant.

Your objective should be to look for the most straightforward possible integration through standard connectors that will offer quick time to test and speed-to-market combined with a genuine capacity for custom integration. This way, your provider is doing the heavy lifting on your behalf to provide seamless integration across all your systems within a centralised hosted platform.

Inevitably, many new players in the market claim they understand the challenges you face and can take away the pain. The harsh reality is that this is not always true. Robustness and efficiency, disaster recovery, and high availability are mandatory first factors in choosing a partner, including sufficiently robust Service Level Agreements. But more than just the technical knowledge and the promise to meet expectations, you need a partner who truly knows and understands your business, has a proven track record in delivering successful projects and has solid relationships with regulators and auditors. In other words, the expertise to transcend a simple supplier status and be viewed more as a valuable and trusted partner in your day-to-day operations.”

Insight 4: Which topics are the most significant focus for you and your business at the moment? 


This is the most critical finding in this year’s survey. Real-Time payments top the scale with 63%. Payment fraud detection and prevention, with 54%, will always be a big focus in a world where digital banking is increasing and new payment methods are being launched. It will always be a battle to keep in front of wily fraudsters. However, improved regulation and best practice solutions such as Confirmation of Payee and Bank Account Verification will help. Additionally, leveraging the benefits of being ISO 20022 Native will help to mitigate this risk going forward.

Again, only 45% chose Digital Transformation via SaaS, against 64% in 2021. This reinforces that there may still be a need for more education on what this would mean in terms of addressing most of the priorities listed above. Real-Time cross-border payments will always be a high priority because of the link to the ISO SWIFT CBPR+ and other domestic deadlines for ISO 20022. We should also consider real-time schemes for systems like Target2 and the movement towards intelligent routing via multi-lateral platforms recommended by the Bank of International Settlement & the G20. On the upside, trade and commerce are global, and opportunities lie in new tiger economies where businesses need to be present to meet revenue targets.

Supporting resource

Podcast: Sibos TV: How banks can build for the future


Riccardo Colnaghi – Head Of Business Development at Solarisbank AG


"Real-time payments are the immediate transfer of funds that is fueling an exciting opportunity across the payments and financial industry as a whole. Not only are real-time payments a means to move money faster, but also, they are increasingly becoming a must-have infrastructure and catalyst for innovation.

For example, think of all the overlay services that today are based on instant payments and offer increased flexibility, such as the well known Peer-to-Peer payment platforms, Bizum and Swish, in Spain and Sweden respectively. Open-banking instant payment methods are also evolving and gradually establishing themselves as competitive and engaging payment options within the e-commerce space. One can also can consider the added value that instant QR code payments could have in-store both in Europe and globally, where “Cash is Still King”.

Additionally, the powerful potential that real-time payment systems could have across the entire B2B industry as well as throughout supply chains, as a means of increasing efficiencies, is a compelling case. In particular, given the maximum transaction values have been increased to 100,000 EUR in 2020.

Not adopting real-time payments would mean ruling out the upfront opportunity to join a wider set of longer-term payment trends, that are likely to be key for future competitiveness."

Insight 5: How important do you think compliance & regulation will be in the next 12 months? 

74%

think that RegTech will become more critical in the next 12 months


Banks are under heavier and tighter scrutiny and regulatory oversight than ever before. This is shown in the results in Insight 4, where only 45% said compliance and regulation were a key focus for them. So far this year, we have seen new mandates from the European Commission for all citizens from the EU & EAA to receive instant payments in Euros, new groups being included in the PSR’s Confirmation of Payee programme, and the imminent arrival of PSD3.

Regulation drives best practices such as the adoption of Confirmation of Payee, Bank Account Validation, and SWIFT CSP. It also helps to avoid transacting with nefarious parties through sanction screening. Additionally, you have mandates such as ISO 20022, which are vital in ensuring that elusive interoperability that the industry is always talking about. Finally, we have PSD2, which is designed to provide competition between traditional players and challengers in the market to ensure the customer is constantly receiving the best experience. These new access models, such as New Payments Architecture & systems like TIPS, will do much to level the playing field.

Supporting resource

Podcast with Payments System Regulator – Payments Infrastructure

Insight 6: How challenging do you think it will be to remain compliant? 


More regulation equals more pressure on product roadmaps and resources. Part of the answer again centres around SaaS, where a joint industry solution across multiple banks & FIs benefits from speed-to-market and automatic adherence to new mandates. However, regulation is rarely seen as a friend but rather as a foe. The mandatory adoption of initiatives such as ISO 20022 will help in many ways. For instance, the structured data will help with compliance for sanction screening and AML by providing efficient alerts, automation, and better results. Better flows and adequate controls will result in cost reduction through better orchestration and enabling customers to self-serve.

The G20 reprioritisation plan provides overarching guidelines to help with improved harmonisation within cross-border payments. This unified voice will help reduce friction and offer more versatility and choice through the recommendations for multi-lateral platforms and intelligent routing.

“Harmonisation is what success looks like” Becky Clements, Head of Industry Engagement, PAY.UK. “You can’t have harmonisation without standardisation. So, regulation and compliance will continue to drive change." The tools are out there, so banks and FIs need to collaborate better. An excellent example of this is the New Payments Architecture Group. It is also worth mentioning that SWIFT, European Central Bank & Payments Canada have already pushed back deadlines for banks & FIs from November 2022 to March 2023 to support banks who were not ready to migrate and were concerned about truncation of data. We suspect other reprieves will also follow in due course across the payments ecosystem.

Supporting resource

Article with Payments System Regulator

Insight 7: Which of the following are your top priorities regarding payments over the next 12 months? 


Again, it is very dramatic to see that adopting new payment rails, such as real-time payments, has increased by 15% since 2021. Incidentally, it was 19.5% before the news broke from the European Commission in October 2022, tabling the proposal to ensure all EU & EAA citizens can receive Instant Payments in euros. The results before October 2022 can be credited to increased customer demand, schemes providing more accessible access models for banks & FIs (NPAs, Target2, etc.), as well as the link to creating new revenue streams using digital overlays such as Request to Pay and Variable Recurring Payments, etc. Therefore, the business case for real-time is no longer in doubt, whereas previously, banks were concerned about having enough volume and value to justify the spend on implementation.

The 15% jump in mitigating fraud risk between 2022 and 2021 is also notable. With real-time payments becoming the new norm, fraudsters will look to take advantage, especially when a new real-time payment scheme appears. Criminal organisations that use well-developed mule networks are all too ready to take advantage of the speed of real-time payments by moving the money frequently to avoid tracking.

“Instant payments rails are not less secure or more dangerous than other payment rails; they are just more attractive to fraudsters because the money can be retrieved from the account or transferred on within minutes or even seconds after the payment was initiated,” Petra Plompen, Lead New Initiatives - Service Development and Management – EBA CLEARING. 

Indeed, it isn’t the real-time or instant payment rail itself that is the issue, as it is as safe as the regular credit transfer. As Petra Plompen points out, it is simply that the money is gone faster and so there is less time to react. Together with its users, EBA CLEARING is currently evaluating options that can be offered from a market infrastructure perspective to support banks in addressing payer concerns about the security of instant payments. 

Overall, what is exciting is if you were to examine how the responses would vary if you asked corporates the same question. Improving cash forecasting & liquidity management would always be at the very top of their list of priorities. Bottomline’s annual Payments Barometer survey for corporates found that cash-flow reigns supreme as a critical focus for companies of all sizes, with 69% of businesses in GB and 73% in the US saying that the way they receive money has never been more critical. However, corporates are aligned with the banks on the priority they place on Mitigating Payments Fraud, with 55% of corporates in the UK & 68% in the US concerned about Authorised Push Payment Fraud. The point is that if the key to competitive advantage is exceeding their customer’s expectations, then banks & FIs should place more focus on cash flow and continue to develop their fraud protection and prevention tools for their corporates.

Supporting resource

Sibos 2022 with: Deutsche Bank, SWIFT & EBA CLEARING:- Which of the following are your top priorities regarding payments over the next 12 months?


Ron van Wezel – Strategic Advisor, Retail Banking & Payments, Aite-Novarica Group


"Real-time payments will be the top priority for financial institutions in the coming year. In Europe for instance, all banks will be required by regulation to support real-time payments which is not only crucial for mass uptake, but also provides certainty to providers looking to invest in new payment solutions. Banks in Europe and around the world can look at India and Brazil as examples how real-time payments can disrupt the market for both online and in store payments. Real-time payments also come with challenges e.g., the increasing focus of organized crime rings to defraud unsuspecting consumers. In countries such as the U.K. and the U.S., banks are working with the regulator to better protect consumers against scams. These factors require financial institutions to invest in payments modernization to create customer value with innovative, secure real-time payment solutions."

ISO 20022

The sooner you achieve ISO Native status, the sooner you can reap the rewards that the extra data, interoperability, etc., can provide across your payments ecosystem.

Insight 8: Which areas of your company’s cash positioning & fraud monitoring could benefit from the improved data that ISO 20022 provides? 

56%

say ISO 20022 can help them improve their fraud monitoring & management


The best answer here is ‘all of the above'. The sooner you achieve ISO Native status, the sooner you can reap the rewards that the extra data, interoperability, etc., can provide across your payments ecosystem. It is also true that there are lots of other exciting new use cases that have yet to be discovered – i.e., you won’t know how useful it is until you have it and can explore it.

However, let’s look more closely at why 56% said ISO would help improve fraud monitoring and management first. Take sanction screening as an example. If you’re trying to identify financial crimes and prevent them, it makes it so much harder when you have inconsistent, unformatted data attached to a transaction. Let’s say you have a suspicious payment from a questionable source, and all you have is the name and country of residence. That’s hard to work with. But with the global adoption of ISO 20022, you have more rich data coming through the expanded data fields. You’ve got a name, address, city, and country, and you know what the transaction is used for. So, to screen the name or entity behind that purchase, you could undoubtedly go to various security databases like the US Office of Foreign Asset Control (OFAC). But that is not always practical in a world of real-time and ‘always on.’

We also agree with the 53% who said it would help with data analytics to improve compliance with payment standards. But, there will be other data challenges that will take time and good partnerships to fix. The structure of ISO 20022 on the international payment message side will evolve during the following year. Therefore, how you maintain your data, update it, and manage it is becoming a big part of what makes your payment processing and screening much more efficient and accurate. Not all banks have the tools to manage the additional data that comes with ISO 20022. Initially, this data will be mainly on their central platform because many banks will have a hybrid legacy digital infrastructure. Without the correct data, we have a lot of empty boxes within the ISO format. By partnering with FinTechs, banks can send, receive, and screen the new enriched messages. But on the core system, until that migration has taken place, we’ll still have the good old empty box, which is, unfortunately, light on information and will continue to pose challenges to better STP rates and effective sanction screening.

In conclusion, connecting the benefits of ISO 20022 with business outcomes is essential. We are certain that some compliance experts think anything happening with ISO 20022 is the hottest payment issue of the moment. However, they probably haven’t grasped the effect it will have on their entire internal ecosystem. Operations & Treasury will be delighted as it will reduce their workload because if they have the data right and the compliance filter is set correctly, risk scoring will be lower. This means fewer false-positive hits and lowers the chance of missing a cut-off time for a payment mechanism. The other side of the coin is that it’s also less work for the compliance people as having better quality data means they will have more efficient and accurate sanction screening. Accurate screening implies that when a match needs reviewing, it’s obviously a higher risk and needs analysis to make a decision. Ultimately, it will improve efficiency from an operation and compliance perspective.

Supporting resource

Sibos 2022 with Deutsche Bank, SWIFT & EBA CLEARING: Which areas of your company’s cash positioning & fraud monitoring could benefit from the improved data that ISO 20022 provides?


Mark Sutton – Senior Manager, Zanders


“We are witnessing the digital transformation of the payment’s ecosystem, which is supporting the rapid growth in e-commerce through the introduction of new and alternative payment methods including the use of tokenisation. With competition increasing from multiple sides, banks must stay relevant to survive. Looking at competitive advantage through a corporate lens, three key areas need to be considered. Data will become a table stake as Artificial Intelligence and Machine Learning capabilities mature and start to deliver on the promise of predictive and prescriptive analytics as well as enabling an acceleration of the core reconciliation processes. Banks that can provide timely and structured data, leveraging the much talked about benefits of ISO 20022 messaging will gain a competitive edge. Collaboration will also be key to delivering value added capabilities that leverage the agility and leading-edge technologies from the fintech community. A good example is Standard Chartered’s partnership with Finlync to accelerate API adoption and provide the opportunity to redefine best in class through a combination of enhanced visibility, alerting and real time notifications. The final area relates to consistency and sadly for some global players, it is simply a case of being consistently inconsistent with their global service proposition. Banks that can deliver a truly consistent global service proposition will also enjoy a competitive edge as global corporates look to move beyond the simple network concept.”

ISO 20022

Only 30% of SWIFT members impacted by ISO 20022 were testing by the end of October 2022. This means they need to hustle to meet the March 2023 deadline.

Insight 9: Do you think you will require transformation, or will your back-office systems be IS0 20022 ready? 

39%

say they will require transformation 


The majority of banks & FIs that responded to this survey did so before the shift in deadlines from November. Therefore, it will be interesting to see how the data changes as we approach March 2023.

SWIFT has stated that 70% of institutions representing 98% of received payments traffic have already tested for CBPR+. However, a significant portion of institutions are delaying ISO Native adoption. This delay is a risky strategy as timelines for introducing ISO messages by counterparties on the network may be very short. For instance, some may start sending assuming those not ready will rely on in-flow translation.

This led to the European Central Bank sharing a decision on October 20th, 2022, to delay the ISO 20022 migration of the Eurosystem by four months (Payments Canada has also delayed Lynx until March 2023). In light of this announcement and in line with SWIFT’s earlier scenario planning, Swift committed to further analyse and validate impacts on the timeline for CBPR+ with a view to maintaining operational and business continuity across the global financial system.

An overwhelming majority of the SWIFT global community has requested that Swift align the start of the global ISO 20022 migration for CBPR+ with the ECB’s updated timetable to ease implementation. In response, they have taken a decision to accommodate this request, and Swift will begin the ISO 20022/MT coexistence period for all users on 20 March 2023. 

Either way, the delay is eminently sensible. The beauty of ISO 20022 lies in the global standard providing interoperability. This won’t be a positive factor if some banks have it and some don’t. It doesn’t make sense for banks to move at different speeds. It is essential to be clear that these deadlines only represent the start of the journey for ISO 20022, which is to have basic connectivity – to be able to receive messages for SWIFT in the ISO messaging format.

However, the view at Sibos, also held by Bottomline, is that the sooner you can fully leverage the advantages of ISO, the better. That means looking to be ISO Native as soon as possible and not waiting until 2025. There is the compromise of ‘Market Ready’ where banks can send and receive, but with the need for translation. At the same time, ISO Native is when ISO 20022 is integrated across your whole payments ecosystem with no need for translation.

We aren’t fully aware of all the use cases for ISO, and we won’t find out until we have integrated ISO fully. The sooner you start exploring these new use cases, the sooner you can gain a competitive advantage over other banks. However, the broader benefits that we know include high levels of transparency, better customer service, and improved operational efficiency.

After all, ISO 20022 provides the standardisation needed for interoperability between traditional and new cross-border channels. The abundant availability of rich data and related (artificial) intelligence allows us to route payments intelligently and choose the right channel for each transaction, whether to drive new coverage in markets or currencies or to optimise the execution in existing markets. The richer data’s impact on fraud monitoring & compliance, cash-flow management, and of course, data and analytics provides justification enough for the immediate transition to being ISO Native and having ISO front and centre of any bank’s roadmap.

CBPR+ ISO 20022 Status Update – December 2022:


INTRODUCTION

As all impacted institutions will be aware, there is a mandatory requirement to be ready to receive ISO 20022 messages by March. We then enter a co-existence period until November 2025, during which time institutions will move over to ISO 20022 and start to adopt enhanced data and format. For our clients, we have offered three strategies: Native (full adoption of ISO 20022, replacing FIN), Market Ready (outwardly ISO 20022 but with internal translation), and Connectivity Only (being ready to receive but continuing FIN and using in-flow translation). Projects have been engaged against these strategies.

MARKET SENTIMENT

It has always been clear that the market would only all move at one pace. Some currency clearing and settlement banks would follow Market Infrastructure’s ISO 20022 adoption, while other institutions would be guided by cash bank and counterparty readiness.

However, a common denominator is that the adoption of enhanced data should be scheduled from November 2023 rather than before to avoid complexity in data handling through payment chains. This has been supported by Market Infrastructures, SWIFT's Payments Market Practice Group, and Cash Banks alike.

Market Data in December 2022 from SWIFT shows that 70% of institutions are testing ISO 20022 messages. This percentage will increase before March, but we can be confident that a sizable proportion of institutions will go into the Co-existence period ready to receive ISO 20022 as mandated but still sending and receiving MT. The strategy is to move to ISO 20022 later next year when strategic roadmaps are less busy.

GUIDANCE

In line with our earlier advice to clients, it is critical that you engage with your correspondents and cash banks to understand their adoption of ISO 20022. The following information is guidance aligned to critical influencers:

SWIFT

SWIFT messaging is clear. Technical readiness for March. Start sending and natively processing ISO 20022 when you can. SWIFT'S Payments Market Practice Group also recommends that banks & FIs should avoid enhanced data until November 2023.

SPECIFICALLY ON ISO 20022 REPORTING MESSAGES

Unless you proactively opted in, your ‘bootstrap’ enablement on SWIFT for FINplus will not have included the RMA (Relationship Management Authorization) to receive ISO 20022 statements. This will require a manual RMA exchange. SWIFT have suggested that you should keep in mind that in-flow translation will result in a basic MT statement only. Ideally, you agree with your correspondents on starting to exchange camt reporting messages when ready to process those natively. We support this approach from SWIFT unless you want to leverage the specific truncation management options Bottomline can support via the Transformation and Enrichment Service (speak to your account manager for more details).

MARKET INFRASTRUCTURES

Direct participants, have been given clear guidance, and migration timelines are known; in most cases, this is a hard cutover to ISO 20022. For indirect participants and those offering accounts in impacted currencies, you will need to send and receive in ISO 20022 from when the market infrastructure moves to ISO. Cash banks are unlikely going to want to translate ISO to MT.

CASH MANAGEMENT BANKS

Guidance is coming out from banks on their preferred adoption timelines. While most are ready to support ISO 20222 from March, there is some advice against using ISO 20022 until November 2023. It is critical that you speak to your bank to understand and clarify their individual position fully.

MANAGING YOUR PROJECT

While you may need to move at the pace of our correspondents and banks, the preference is to move at your own pace. Where possible, use ISO 20022 as soon as possible to close out your market-facing migration. This means managing any translation requirements internally.

Next Steps:

• Initial projects continue to complete in the lead-up to the March deadline. However, planning for 2023 is needed now to boost your competitive advantage. Be assured that many institutions will not be ‘Native’ in March.
• There will be increasing requirements for ISO 20022 and enhanced data in 2023 and beyond.
• Bottomline is running a series of webinars in early January 2023 to investigate these areas in more detail:
17th January, 3 PM Singapore Time – ASEAN, 18th January, 3 PM UK Time – UK, 19th January, 3 PM CET - Europe.
• Stay close to your cash management banks and correspondents to understand their position and any planned change to their adoption strategy.

Beyond ISO 20022 Connectivity – The Road to ISO Native
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Here are the three clear steps needed to ensure a successful migration that delivers scalability, minimum hassle, and speed to market:

Why should you prioritise this as urgent?

With 17M SWIFT payments messages exchanged every day and set to increase, it would be a risky decision to delay implementation & testing. The good news is that Bottomline is here to help make integration hassle-free, speedy, and cost-effective. www.bottomline.com/CBPR+

Supporting resources:

ISO 20022 Case Study

Instant/Real-Time/Faster Payments

The sooner you achieve ISO Native status, the sooner you can reap the rewards that the extra data, interoperability, etc., can provide across your payments ecosystem.

Insight 10: How advanced are you in your Instant Payments strategy?  

54%

say they have either completed their plans and are looking to start implementation or are already ‘live.’


54% are on track, and the other banks & FIs who have just started planning or haven’t even started yet need to move quickly, or they will lose competitive advantage. Undoubtedly we will see much more rapid adoption, not only because 63% of banks & FIs listed it as their most significant focus in Insight 4, but because central banks and market infrastructures are instigating huge new industry initiatives. A good example has been the willingness of the central bank to extend operating hours to improve liquidity management and to clear and settle interbank transfers on a real-time, 24/7 basis (CMPI, 2022).

Firstly, the new targeted legislative initiative from the EU Commission is expected to accelerate the roll-out of instant payments in Europe, which should ensure that instant payments and their benefits will become table stakes. You don’t want to be in a situation where you’re playing catch-up in other regions of the world. The business case for Real-Time Payments is proven. Where previously banks & FIs were concerned about the volume and value potential for their business, now the numbers speak for themselves:

• In the US, the Clearing House is celebrating five years since they sent their first real-time payments, with more than 285 financial institutions carrying out forty-five million transactions worth $19.7 billion in Q3 2022. That is an increase in volumes of 10%+ per quarter since 2018. 
• The statistics are looking equally high in the UK for Q3 2022, which saw 1007 million payments processed by Faster Payments, an increase on Q3 2021 of 14% worth £840 billion, an increase of 26%. 
• Finally, RT1 also launched in 2017, and as of today, the service reaches 85% of bank customers in SEPA and processes over 2 million transactions worth EUR 1.5 billion per day on average. 
• Globally, the real-time payments market is expected to grow from $15.91 billion in 2021 to $21.41 billion in 2022 at a compound annual growth rate (CAGR) of 34.5%. The market is expected to grow to $66.76 billion in 2026 at a CAGR of 32.9%, according to ReportLinker. That alone should move instant payments up the priority ladder. 

Secondly, instant payments represent a revenue opportunity that will only grow as banks find new ways to leverage it. 

Thirdly, instant payments are a springboard for digital payments transformation. If you don’t offer it to end customers and corporates, then they are more than likely going to rethink their relationships with your financial institution and switch.

Supporting resource

Sibos 2022 with Deutsche Bank, SWIFT & EBA CLEARING: How advanced are you in your Instant Payments strategy & what is your company’s greatest barriers to adoption?

Barriers to the adoption of Real-Time Payments 

Insight 11: What are your company’s most significant barriers to the adoption of real-time payments?

33%

rank lack of IT resources & prioritisation within an already busy roadmap as the most significant barrier to the adoption of real-time payments


For responses A, B & C, the solution to these pain points have already been covered extensively above under migrating to a single SaaS integrated platforms and having a hybrid integration model if you are a smaller Tier 3 or 4 bank. It’s important to say that legacy infrastructure is not limited to payment systems because if you want to enable instant payments as a bank, you need to also take into account real-time limit checks, real-time sanctions, real-time booking, and so on. In a world of 24/7/365, you can’t just focus on the payment system; you need to think about your end-to-end secondary infrastructure process too.

For the 17% still looking for the business case, look no further than the real-time volume & value numbers in insight ten and also the new European Commission proposal for mandating that all citizens in the EU & EAA need to be able to receive Instant Payments in Euros. It would be naïve to believe that other regional market infrastructures will likely not follow suit in the foreseeable future. However, the most compelling business case is that not offering instant payments to customers is a reason for customers to switch banks. 

Instant/Real-Time/Faster Payments are ‘Table-stakes’

It’s apparent that real-time payments have gone from a “nice to have” investment to a “must have” in a concise period of time, and those that don’t provide this functionality risk attrition and gaining a reputation as a laggard.


Instant Payments are becoming mainstream and are considered table stakes.

Following two years of unprecedented acceleration towards digitalisation that has been driven by the pandemic and new customer expectations, the benefits of instant payments for efficient economies are becoming apparent: frictionless payments, real-time access to counterparties, immediate feedback, better visibility on payments flows, enhanced customer experience and improved liquidity management. However, these are just some of the key advantages provided by Instant Payments in Europe. Instant Payments are also a critical component to reaching an end-to-end real-time experience driven by customer needs and regulations, bringing Real-Time payment implementation projects to the financial industry’s top agenda.

For those financial institutions that don’t have payments front and centre as part of their core business, the decision to wait too long before implementation has the real potential to drive marginalisation and poor customer perception. Many banks have been sceptical in the past about the advantages of modernising their payments systems. They felt that the customer demand for instant payments wasn’t strong enough to warrant the expense; in other words, the business case lacked the volume and value of transactions to justify the spend. They also considered the commitment excessive because it would involve transforming their entire legacy system to meet the new standards. As a result, some regions have seen banks take a wait-and-see approach to real-time payments to assess whether the rollout by others proves its worth.

The landscape has evolved, and customers and regulators expect payments systems to be modernised. Global Data published that 118.3B real-time payments were made in 2021 with a year-on-year growth of 64/5% and that they predict that instant payments will be 26% or a quarter of all electronic payments by 2026. However, Europe & the UK are lagging behind the top five global markets- “combined real-time payments volume across the top 5 global markets – India, China, Thailand, Brazil, and South Korea – helped to facilitate US$54.5 billion of additional economic output in 2021 – forecast to grow to US$131.1 billion in 2026. In contrast – across the leading developed markets US, Canada, UK, France, and Germany – the additional economic output supported by real-time stood at US$7.3 billion in 2021 – expected to rise to US$14 billion in 2026.”

Therefore, the banks that move first in their region in the UK & Europe will have the greatest chance to unlock new revenue pools, attract the best talent and generate a wealth of data that can be used to enhance customer experiences and build brand loyalty. Early movers will also be first to lower costs and improve fraud detection while remaining ahead of inevitable new regulations that will transform instant payments from a choice today into a requirement tomorrow.

Turning a challenge into an opportunity

While the power and potential of real-time payments are evident, making the switch to instant transactions at speed and scale takes work. Modernising legacy IT systems takes time and costs money. Revenue per transaction will decline in the short term, and non-bank technology companies are beginning to enter the fray, increasing the competition for customers and talent. Banks need to modernise their systems, including updating infrastructure and technology to support real-time payments through instant validation and confirmations; meeting international standards like ISO 20022; providing 24/7 processing and support; and ensuring that their systems can scale sustainably.

However, the benefits of the transformation now make it worth facing those challenges. The opportunities created by Instant Payments include: 

• Create New Revenue Streams: Increased revenues through transaction fees, cross-selling, and data monetisation 
• Leverage Data: Data Systems modernisation that facilitates the effective use of data and increases efficiency 
• Reduce Friction & Overheads: Cost savings through the reduction of cash and check transactions and in-branch activity, as well as the automation of exception handling 
• Boost Customer Excellence: Ancillary benefits such as better responsiveness to customer needs (which will increase loyalty) and the ability to build propositions around transactions.

How do I decide which payment system to use between UKFPS, RT1, TIPS, or SIC 5?

Although IP initiatives are domestic by nature, with almost every country having its own implementation nuances, most of the recent IP schemes share commonalities between themselves e. g., end-to-end in less than 10 seconds, 24x7 availability, and ISO 20022 format. These standard features make instant payment processing steps reusable across regions, although the last mile connectivity and scheme specifics, such as currency limits, remain proprietary for each scheme. However, to maximise the benefits of the reusability of features, be quick to market and best serve your customers, the technology underlying Instant Payments must be carefully scoped and based on modern micro-services. This is essential to meet the stringent scheme’s requirements, with a focus on fast processing steps (format & semantic control, fraud & sanction check, scheme specifics, bank specifics, balance check on a 24x7 basis) and end-to-end orchestration. Accurate workflow management and message life-cycle control will also be critical features required in the new world of IP, as manual intervention is no longer possible – it is all about automation.

Integration: a critical starting point for API

Innovative financial initiatives in general, and Instant Payments in particular, are moving to new integration models based on Rest API to speed up processes, improve security, and to ensure real-time and synchronicity in the interactions with market infrastructures. Although other integration methods can still be envisaged, IP represents a unique opportunity to start adapting interfaces to a future-proofed API layer that will be essential for leveraging other payments methods (e.g., cross-border payments, RTGS, and ACH) and building new services to generate additional revenue streams.

Our solution

Built on Bottomline’s Universal Aggregator IQ single SaaS platform with ultra-modern SaaS micro-services and leveraging multiple gateways, our solution for Instant Payment is agnostic by design and is interoperable with any Instant Payments scheme. This is complimented by our comprehensive set of Message Services (i.e., the payment is received in native format delivered by the backend system) and Payment Services (i.e., the payment is received in a canonical format and transformed into the target scheme format). Using our Message Services will enable your banks or FI to receive super-fast access to a scheme, with orchestration and payments services (e.g., fraud, sanction, scheme semantic) provided by the bank’s core systems. In contrast, our Payment Services will leverage Bottomline’s orchestration and payments services to meet all the scheme’s requirements, whether they are Instant or classical.


The full range of services that form our SaaS proposition are listed in further detail below. Their ubiquity/interoperability makes these services reusable across schemes for speedy delivery and cost-effective access to Instant Payments schemes as well as classical RTGS, ACH, and bank-to-bank rails.

Use case - SEPA Inst

The SEPA Inst standard (SCT Inst) has been ‘live’ since 2017 and is already used by several schemes, banks, and service providers. However, the European landscape remains fragmented, with various local schemes having different rules and a very domestic approach, preventing a harmonised and wide reach of Instant payment across the borders within Europe. More recently, both TIPS and EBA RT1 have built a pan-European approach with a great reach where it is now possible to achieve a single instant payment area in the Eurozone. Recent declarations from the EU commission that all EU & EAA residents need to be able to receive instant payments in Euros will dramatically speed up adoption in order to reach the required critical mass for true success. This is the reason why Bottomline is focusing on delivering access for Message Services, Payments Services, and Connectivity via SWIFTNet Inst – a proven and reliable network well known by the banks - for both RT1 and TIPS. Other connectivity options are also on our future road-map including P27, so watch this space.

Use case - SIC 5 Instant

In Switzerland, the need for a modern and state-of-the art platform for Instant Payments has already been widely recognised and understood. So much so that a renewal plan for the domestic payment platform has been issued by SIX in conjunction with the Swiss National Bank. This initiative called SIC 5 aims to renew the current RTGS platform used by 246 banks in the country, whilst also introducing a brand-new Instant Payment rail in parallel. Unlike the EU landscape at this stage, SNB & SIX are making the usage of Instant Payments compulsory - they announced that all banks with 500’000+ SIC messages in 2020 must be ready to process incoming SIC IP by August 2024. It will then become mandatory for all SIC participants by 2026. The planning for SIC IP service corresponds to a ‘technical go live’ in November 2023 and a ‘market go live’ in August 2024. Testing should start no later than mid-2023 for early adopters and so that is yet another date for your strategic diaries.

Supporting resource

Whitepaper: European Payment Infrastructures Under Renovation


David Renault, Head of SEPA Payments & Country Manager for France at EBA CLEARING


“Full reach of instant payments, paired with the introduction of request to pay, is seen by many of our users as the key to innovative and successful end-user solutions. Together, they provide the foundation for solutions enabling full automation, 24/7/365 availability, real-time execution, security, and, most importantly, the smooth user experience and ubiquity that customers expect. While 85% of bank customers in SEPA are already reachable via our RT1 infrastructure today, the full reach to be established by the future EU Regulation is crucial to creating ubiquity for end-user solutions based on instant payments. This is particularly important for payments at the point of interaction and in e-commerce. 

Our users are heavily focused on creating solutions in these areas and we will continue to develop our RT1 and R2P Services to help them monetise their investments in instant payments. RT1 also provides the easiest adoption path for instant payments to new joiners, thanks to its maximum alignment with STEP2, which all PSPs in Europe are already using today, and the fact that RT1 comes with built-in connectivity to TIPS. We look forward to supporting PSPs from all over Europe in bringing their payment processing up to speed and expanding their business opportunities going forward.” 

Cross-border pain points

The tools to help solve pain points in cross-border payments are out there, Banks & FIs just need to accelerate adoption of SWIFT gpi & multi-lateral platforms such as Visa B2B Connect. 

Insight 12: What is the greatest pain point when sending cross-border business payments? 

35%

said that the greatest pain point when sending cross border payments is the lack of visibility on payment status


A lot of the issues around Lack of Visibility, Unknown Arrival, Poor quality of Data can be solved by ISO 20022 or is in-built into SWIFT gpi – roll on March 2023 and the end of the Co-existence period in 2025. As for costs of nostro accounts and trapped liquidity these can be solved via using multi-lateral platforms such as Visa B2B Connect.

The best recipe for cross-border payments success is co-operation, collaboration & co-existence. As global business continues to expand, so too does the volume of cross-border payments. The value of worldwide cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027, equating to a rise of over $100 trillion in just 10 years according to The Bank of England. The combined research of Aite Noverica Group and McKinsey & Company predicts that revenue for cross border based on transaction & FX fees will rise to an estimated $261B by 2025. Finally, McKinsey have also said that Asia’s cross-border revenues, in particular, have been a key contributor to the region’s ongoing payments growth, increasing by an average of 6 percent annually from 2011 to 2019, and are predicted to make a steady recovery after the initial Covid-19 decline.

The main banking channels used to make international payment are still leveraging legacy methods that can be both ‘clunky’ and expensive.

“Evident by Visa research which suggests up to 70% of businesses surveyed have cross-border payment pain points-- including payment predictability, value clarity, and visibility-- it’s still clear many companies and individuals continue to face money movement challenges that can ultimately hurt businesses’ bottom lines and the global economy. Through offerings like Visa B2B Connect, Visa is committed to helping our clients serve corporations and businesses to efficiently move money around the world at scale. – Ben Ellis, Global Head, Visa B2B Connect”

For instance, the latest Banking Circle FX & Cross Border report says that 25% of companies surveyed reported experiencing poor value in the FX rates offered by their banking partner, while 42% said their bank’s fees for cross-border transactions were too expensive, with more than one in three complaining that sending money between countries also took too long. In the worst cases (the Nordic markets and the Netherlands) this complaint about slow transaction times rose to almost two in five of those surveyed. This in turn led to (49.7%) of those surveyed beginning to use FinTechs and other NBFIs to fulfill their international currency and payments needs, rising to almost three in five in Nordic markets. Therefore, it is of paramount importance that innovative banking players start exploring new strategies to improve efficiency and maximise on revenue potential.

The potential new revenue streams via developing a new & growing fee-based pricing structure, cross-sell other products in your armoury, and access to coveted deposits can’t be ignored. It is a brave bank decision-maker that says to its board of directors and shareholders that they don’t want to take advantage of this.

The key solution comes in the form of multi-lateral platforms that enable global payments through a single connection. For transactions between participating banks, it offers an enhanced customer experience at a reduced cost and with security and efficiency through tokenisation, governance, and rich data. Optional foreign exchange and same or next-day settlement in multiple currencies allow for true innovation and more choice.

The business case for updating your cross-border strategy is clear – after all, no bank is so busy or so asset rich that they don’t need to be more cost-effective and turn down the opportunity to create new revenue streams via transaction fees, FX rates, and cross-sell.

Here are some key next-steps:

Step 1. Identify your internal business case & strategy

• Form a project team & allocate budget for 2022
• Where does it sit in your busy road-map and can it be integrated into your existing ISO 20022 or real-time payments strategy?

Step 2. How will cross-border innovation be integrated into your existing processes?

• If you have legacy infrastructure, are you going to do a rip-and-replace or focus on scaling the project – Minimal viable requirements
• What pricing structure should you use?
• Should you place a limit on the transaction value?
• Do you need to invest in extra fraud prevention tools, bring in data scientists as well as leverage AI & ML?
• How do you manage and monitor transactions out of working hours?
• How many processes should be automated vs manual?

Step 3. Talk to your peers, service providers, partners/vendors and key customers

Peers
• How can you as a community of financial institutions and corporates collaborate on best practice?

Service Providers
• What support can you get from your service provider to ensure speed or adoption, whilst maintaining operational efficiency?

Partners/Vendors
• Will they be able to accept it and will this result in more competitive terms?

Customers
• Do they know how they can use new cross-border rails to improve their business?
• What are your customer’s needs e.g. what volume & value do they need?

Supporting resource

Sibos 2022 with Deutsche Bank, SWIFT & EBA CLEARING: What is the greatest pain point when sending cross-border business payments?

Insight 13: What are the biggest challenges with your existing Payment Fraud Detection & Prevention Strategy 


Many businesses have prioritised security over customer experience. As soon as something stands out from a customer’s normal behaviour, payments are blocked straightaway. However, a fundamental tension exists between controlling payment fraud and optimising customer experience.

ISO 20022 makes a significant difference in the fight against financial crime. Being able to enrich data, and the ability to better structure that data, contribute to better quality of data compared to legacy formats. From a payment fraud point of view, structured data, and standardised messages make it easier to ‘mine’ that data, and then provide better fraud detection and prevention analytics with less false positives. The quality of data and how banks leverage the insights of that data makes the difference between improving the customer experience and stopping payment fraud on the other hand.

The jump in monitoring insider/employee fraud is also of note. The biggest danger for banks (and corporates actually), is that most insider frauds go undetected and, as such, are wrongly considered less of a risk. However, the pandemic and the Working From Home Culture has changed the insider risk threat landscape. In addition, the 2022 Fraud-Scape report from CIFAS explicitly flags an increasing concern about “the rise in insider threat as a service”, i.e., where employees are actively being recruited through social media by fraud rings, to carry out internal fraud (data leakage, financial theft). For many banks, insider fraud risk management is the next step in the fight against fraud. Today’s economic challenges and the rise in the cost of living puts pressure on people. There is a heightened risk of dishonest staff perpetrating fraud against their employer and customers. It is a matter of catching insider fraud early, and shutting it down immediately.

Supporting resource

Report: THE RACE IS ON - Payment Fraud Protection and Case Management Gains Velocity

Insight 14: How developed is your use of Open Banking in enhancing your customer proposition over the next 12 months? 

15%

have stated that they are fully operational with Open Banking, which is 5% less than in 2021


There is an 8% increase in the early stages of delivery compared to last year which highlights that the “belief” in the relevance of open banking remains. This should come as no surprise in the face of an increasing number of highly published discussions around open finance and new use cases.

The reduction in fully operational banks and FIs may be indicative of the early adopters already having come to market, with the newly interested parties not anticipating delivery in the next 12 months due to busy roadmaps or lack of resource or even regulatory timelines being seen as unrealistic.

Supporting resource

Article: Open banking shows promise in addressing UK direct debit failure crisis

Insight 15: Which of the following would you like to offer in the next 12 months? 


As market penetration grows, respondents recognise the immediate benefit of single domestic payments via opening banking. No surprise given the well-publicised success of the HMRC deployment. But on equal footing, is the recognition that refunds via opening bank promises similar benefits, including faster payment. Furthermore, a merchant collecting payment via PIS also needs a refund mechanism which, although included in the OBIE standards, is not yet supported by all banks. For merchants, this can result in a fragmented approach that needs to be resolved.

As expected, the hot topic of VRP is also identified as an important offering with 54% of respondents. Also, it is unsurprising that using this for payments is seen as more important than the sweeping use case currently mandated by the CMA order. This gap between open banking and the market has yet to be resolved. NatWest has come to market with a non-sweeping solution that is helping to drive the conversation, but until wider bank support hits critical mass, there can’t be a viable commercial solution.

The use of COP as a new initiative to reduce fraud is well recognised. However, many who filled out this survey did so before the Payments System Regulator announced the new batch of banks & FIs that are mandated to integrate the solution. Therefore, we should see numbers rise for this as we progress closer to the new deadlines. Additionally, whilst CoP is available in other parts of the world it is primarily a UK initiative at the moment, and so a percentage will have been impacted by only 14% of people taking the survey being UK based.

Supporting resource

Webinar with Cambridge Building Society: Confirmation of Payee – It is Time to Act 

Insight 16: How developed is your approach to enabling your clients a Request to Pay solution Leveraging Open Banking APIs? 


We think our question may have needed some clarification as there is currently no open-loop ‘request to pay’ (RtP) solution as defined by Pay.UK. Perhaps the respondents may be including ‘pay by link’ type services in their responses to the question. 

What is recognised by respondents is the need to be able to communicate with payers with respect to payments, perhaps increasingly so as the cost of living crisis grows and the number of failed and cancelled direct debits increase. A good solution is the ability to send an email, SMS or letter to the debtor with a link or QR code to a payment service. 

Supporting resource

Article: Access all Areas


Ellie Duncan – Head of Editorial and Broadcast, Open Banking Expo


“Banks and financial institutions continue to embrace open banking, as these findings demonstrate. Increasingly, open banking is at the heart of organisations’ customer propositions and it is encouraging to see it shift from being on the ‘wish list’ to being ‘in early delivery’. Next year, maybe those FIs at the exploratory stage now will be in ‘early delivery’ or, indeed, ‘fully operational’. It’s fair to say 2022 has seen huge strides taken when it comes to open banking payments. Without a doubt, the Competition and Markets Authority’s July deadline to mandate VRPs for sweeping drove this shift. However, the findings suggest it is VRP payments, ahead of VRP for sweeping, that banks would like to offer in the coming year. Open banking single payments, open banking-enabled refunds and Confirmation of Payee should not just be seen as a nice-to-have, though. As the UK’s Open Banking Roadmap comes to an end, banks and FIs must continue with progress made so far in payments."

About Bottomline Financial Messaging

Bottomline makes business payments simple, smart and secure for businesses and financial institutions, of all sizes, all over the world. Our Banking & Financial Institution solutions are recognised and trusted by 600+ customers in 92 countries, across 6 continents for SaaS-enabled payments, securities, connectivity and messaging. Our connectivity solutions leverage multiple domestic and cross-border payment networks and schemes with a track record of success. This connectivity includes SWIFT, UK Faster Payments, SEPA-INST for RT1 or TIPS, SIC 5 Instant Payments, Bacs, Six, EBICS, Visa and others to enable our clients to deliver added value to their customers.

As one of the top SWIFT service bureaus globally, we manage 15% of all international cross-border traffic. Our global experience and expertise in financial messaging and ISO 20022 implementation includes message translation, validation, transformation, intelligent routing, orchestration and integration.
In total 10M payments and transactions are processed daily by our Secure Managed Services. Overall, our solutions enable financial institutions and corporations to achieve lower costs, speed to market, greater security, and improved risk management while avoiding the costly internal infrastructure and software updates for legacy on-premise solutions.

Connect, Comply, Compete

Universal Aggregator IQ - Bottomline delivers a single API-enabled SaaS platform for payments, securities and messaging that helps financial institutions to achieve lower costs, wider reach, speed-to-market, industry compliance, greater security and improved risk & treasury management.
Payments & Cash Aggregator • Messaging & Connectivity Aggregator • Securities Aggregator • Fraud & Financial Crime Management • Data & Analytics

Find out more and book a meeting to discuss your payments strategy

About the author

Zhenya Winter, Global Head of Financial Messaging Marketing, Bottomline

More than 22 years of experience in the Financial Services sector, specialising in payments over the last 10+ years. Key areas of focus within payments messaging and connectivity include Real-Time domestic & cross-border payments & ISO 20022.