EXCLUSIVE: ‘Richly Deserved’ – Suzan van Eeten, Rabobank; Tino Kam, Nordea and André Casterman, Intix in ‘The Fintech Magazine’
New payment messaging systems are adding to the data goldmine that banks have been sitting on for years. Rabobank’s and Tino Kam from Nordea discuss how they’re now digging deep with André Casterman from Intix, which provides the digital shovels
The growing pace of open banking in Europe and beyond, customer expectations of instant everything, improved visibility of data that’s been siloed for years, and an explosion in digitisation forced by remote working, have pushed the world of payment processing dramatically forward.
At the same time, richer messaging formats and better tracking of transaction information, including cross-border developments like SWIFT gpi, the Nordics’ P27 payments system and the global adoption of ISO 20022, have put the pressure on providers new and old to get a grip on the information they hold.
Incumbents have the richest data stores of all which, coupled with their traditional, trusted provider role, means they could take the greatest potential prize when it comes to using data to reduce cost, improve their services, deepen customer relationships and, ultimately, build their bottom lines. That is, IF they can overcome significant legacy challenges in order to turn it to their advantage. Among the end user beneficiaries of all these are corporate customers and, specifically treasury departments.
We asked Suzan van Eeten, area lead for payments at Rabobank, Tino Cam, Nordea’s head of product management transaction banking, and André Casterman, chief marketing officer at technology company Intix, which helps banks to make the all-important connections between the undeniably rich but disparate data they hold, what they see as being the greatest opportunities and challenges.
The Fintech Magazine: What are your views on the current state of payments innovation?
Suzan van Eeten: I’m responsible for all SEPA payment methods within Rabobank, which is doing around 12 million transactions a day. I’ve been in payments for six or seven years and, in that time, I’ve seen major innovations, such as our instant payments transformation, including cross-border, in the Dutch market, where there is also more transparency than ever.
We are digitising our processes. The pandemic accelerated the move to digital and more than 80 per cent of all our payments are now contactless.
André Casterman: This year, I celebrate 30 years in fintech. I spent 24 years at SWIFT, working for all the banks on the planet, on various innovations, mainly in transaction banking, and for the last six years I’ve worked with Intix, helping banks make their transaction data accessible and actionable. While I was at SWIFT, not much happened in cross-border payments, besides SWIFT delivering new standards and the market getting interested in processing more and more low-value payments.
But, over the last five years, there have been remarkable, really major innovations both from incumbents, including SWIFT, around transparency, and by major card providers like Visa and Mastercard, which are getting into account-to-account and cross-border payments. Then, of course, ISO 20022, is a convergence to a common data dictionary, supporting an industry-wide move towards more transparency, lower pricing to process lower-value transactions, and real-time processing.
And that’s all because customers want faster processing, lower cost, more convenience and more information. So, it’s a really exciting space and I think the next five years will be even more so, as we see the results of these innovations materialise. The central banks are getting into the picture as well now. Although more on the retail side, this will also impact wholesale, with central bank digital currencies making the cross-border payments space even more fascinating.
Tino Kam: I head up the product team in transaction banking at Nordea, which includes cash management and payments, consumer and corporate cards and trade finance. We want to be a better digital bank for our customers; to be fully self-service, 24/7, 365 days a year, with real-time connectivity and notifications. From a cross-border perspective, tracking and tracing the status of each payment is very much a part of that, and we are enabling our customers to do that themselves through our own portals, and also with premium API solutions. This is in line with our omnichannel strategy: customers can go to a branch, pick up the phone, access our online portal or make use of our APIs to retrieve the same information.
TFM: What role does data play in the innovation you’ve all spoken of?
SvE: We believe the more data we have, the better we can help our clients and the safer we can make their payments, because it increases our real-time transaction monitoring and the information we can give back to them.
With more transaction data and faster processing, we can run checks between an IBAN and the name, and feed back anything that doesn’t match to our client in real time, so that they can consider if it could be an instance of fraud. We can also give our clients more insights into their spending and payments, and so make banking safer.
Our mission is to give our clients financially healthy lives and we use all the enriched data to provide them with insights into things like their spending and subscriptions, through the Rabobank app. A lot of the fixed costs people have, like subscriptions, they don’t even know they have, so we help them reduce the amount of money coming out of their pockets.
AC: Just after the financial crisis, regulators increased the burden on banks to fight financial crime, and, between 2010 and 2015, banks started to use their data much more to screen payments, mainly because of regulatory obligations. But, more and more, it is there to automate processes within operations and compliance, as well as potentially increasing client satisfaction and decreasing the burden on the helpdesk.
For years, cross-border payments were mainly around DMTF [data management] standards, which contained limited data – really just what was needed. Now, with ISO 20022, there is rich data being processed and exchanged between banks, and that could be made accessible now for various types of processes, like reconciling payments with invoices, for instance.
All this data is being swallowed by banks and stored in different systems. Getting access to it is the technical challenge and this is where Intix is focussed on linking the datasets, and making them meaningful for a particular internal process – for example, enabling customer service and compliance teams to access transactions to get their status or generating reports, in order to respond to ad-hoc or recurring regulatory requirements. So, once the accessibility has been sorted, many different use cases can be implemented.
TK: Banks are exploring a number of those use cases, not least using the data to make sure we are even more secure and compliant from a payment perspective. Firstly, it can be used to make sure the infrastructure is secure and trusted. The second is related to what are we going to build on top of that infrastructure.
There are many areas where we, as an industry, have been struggling for years: with reconciliations, from a treasury and cash management perspective, making sure that we understand our accounts payables and accounts receivables, our cash position and the risk function. All those will benefit from much richer data. Those are traditional pain points but, on top of that, we are looking to use the data to offer our customers insights – not only about where their payment is, where it’s stuck, rejected, or accepted – but also embedding the payment information into business functions.
TFM: What part will automation play in the future of payments?
SvE: With 12 million transactions a day, Rabobank needs robotics and automation to gather data and analyse it for our clients. Everything is automated for reporting and compliance; we have no manual work. We split our system into microsystems, connecting and decoupling, using APIs, because we’re working with lots of people on data transparency and need different components to work in parallel.
On our acquiring side, for retailers, we have always offered one financial income and payments overview, the same day or T+1. That is automated but withour customers, real people, making the decisions, based on its insights.
AC: When it comes to insights – basically, helping clients make the right decisions – the key word here is automation. We want to automate as many processes as possible, like transaction and business activity tracking, so corporate customers know immediately when a transaction is blocked because of a glitch or some other reason, and when to intervene.
In the future, banks will be completely automated, when it comes to both checking that everything goes well within banking operations and providing more value added services to their clients, like reconciling trade flows and using add-ons like artificial intelligence for credit management, compliance and liquidity forecasting – all enabled by increasingly efficient use of rich data.
Automation sounds operational, but the link between automation and strategic priorities is related to decision-making at the right time. Today, many decisions are still taken by human beings, but more and more of those decisions will be based on internal and external data points, and very specialised algorithms, so that only machines will be able to make them, potentially with supervision by human beings. And automation will increase margins by decreasing costs, ensuring better decisions and higher margins, and contributing to strategic priorities.
TFM: As a vendor, what are the main challenges that Intix sees for banks?
AC: Getting access to their data internally, because it’s spread across so many systems, to associate different pieces of information and gain an understanding of a whole transaction. Banks have a lot of legacy systems and they need to change in line with new ways of working, like APIs, ISO 20022 and richer data, that are coming into the picture. New technologies are combining with older ones and, at Intix, we’re helping the banks get smooth, end-to-end access to that data, so that they can offer more value to their internal users and external clients.
We have also had to look at ways of helping organisations adapt to the new drive towards digitisation. With more staff working from home, we provide a data layer, giving remote users access to the right information, without actually allowing them access to internal transaction processing systems, which is deemed to risky.
Through SWIFT gpi, we’re getting towards a far more transparent correspondent banking market, but this can only happen if banks provide a central engine with all the information required to track transactions from one bank to another, which puts a lot of pressure on them because providing this data on a continuous basis, at transaction level, is a huge operational task. We make sure they know where the payments are within their own infrastructure, so that payments operations teams meet their responsibility, on a continuous basis, during the day, to clear those payments according to the imposed gpi service level agreements.Banks can also offer much value, in terms of internal transparency, by providing full tracking and visibility of individual payments to their corporate clients through their web portals, as Nordea is doing.
The introduction of Visa B2B, real-time, account-to-account payments will also place additional pressure on banks to improve their internal infrastructures.
TFM: What can we learn from the Nordics and the introduction of P27, when it comes to payments processing?
TK: Our mission is to create the first, truly instant, cross-border, multi-currency, multi-country instant payment rails, from an account-to-account perspective, with initially Denmark, Finland and Sweden, using three currencies, including the euro.
We want to create an infrastructure that is efficient, scalable, effective and compliant. A lot of innovative solutions have been triggered by fintech companies that have filled niches in the market. With P27, we want to make sure that we’ve established a scalable, modern, regional solution, from an instant payment perspective, which is secure, trusted and resilient for consumers, corporates and financial institutions alike.
That’s why we, and five other banks in the region, have been supporting the initiative from day one. In the past, I think banks like Nordea have done things too slowly, and always at too much cost, from an internal development perspective. The key issue is how we simplify our infrastructure and that’s what we are trying to do in the four Nordic countries – making sure that we have a more agile setup, which is more scalable and future-proofed from a payment perspective. The benefit of P27 is that the bank is not only more agile, compliant and resilient, but it can also build on top of the infrastructure more easily, more cheaply and faster. We’re trying to reduce the spaghetti, reduce the legacy, and create more Nordic infrastructures. For me, it’s also very important that we are enabling the simplification, too, for our customers.
AC: We see so many new options in cross-border payments, so many new entrants. SWIFT itself, of course, reacted to those new entrants with gpi, but banks are also getting organised around regional initiatives, such as with P27. And we can expect more in the future as central bank digital currencies introduce even more advanced ways to handle money, possibly more so on the regional side.
It’s all about handling payments faster and more cheaply, and there are different ways to get there to improve the current models, or to introduce completely new models into the market.
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