Banks need to make sure they're doing the best with digital.

Banks need to make sure they’re doing the best with digital. Source: Shutterstock

How are banks coping with the demand for real-time payments?

WITHOUT a doubt, real-time payments are redefining the banking landscape. In the next few years, there will be a multi-fold increase in volumes, with clients expecting 24×7 availability and scalability to handle peaks and troughs.

In this new payments landscape, the challenge for banks has evolved from managing liquidity to managing velocity, and it is all driven by digitization.

In Singapore, funds transfers between two local accounts can be done almost instantly. Hong Kong, which launched its near-instant payment scheme this month, may see bank-to-bank transfers completed just as quickly.

Such payments have not only created the need for 24×7 funds flows but also at higher frequencies. As a result, payments and treasury departments can no longer adhere to batch and daily processes, and the need to move to real-time systems is urgent.

With the current pace of implementation, cross-border instant payments will soon become a reality. Just earlier this year, SWIFT held exploratory talks with banks from the Asia Pacific region about the development of an Asia Pacific cross-border real-time payments system based on SWIFT global payment innovation.

The demand for instant liquidity, dynamic FX exposure management, and the ability to process real-time cash flow and transaction data means that banks have to deploy the combined strength of distributed ledger technologies, artificial intelligence (AI) and Application Programming Interfaces (APIs) to transform into a highly effective, high-performing, and value-added banking for clients.

The speed of real-time payments also makes it vital for banks to perform instant fraud and identity checks before the payment is sent.

“At Standard Chartered, these systems are supported by as many as 12,000 coders and technologists, and they now account for about 15 percent of the workforce,” said Standard Chartered Chief Information Officer (Corporate and Institutional Banking, Information Technology and Operations) Bhupendra Warathe.

DevOps and partnerships drive digitization

The numbers also underline the extent to which banking has become a digital business. As the industry moves forward, speed and agility are two critical factors that will drive success.

“In the past, software upgrades took place once in a few months, but with the rapid changes in today’s environment, the development of software, upgrades, and deployment need to happen at a much faster pace,” explained Warathe.

DevOps (Development Operations) is one way to deploy software into the production environment quicker. With this approach, testing and deployment processes are fully automated. New code is dropped into production while the system with the previous codes will still function, allowing the end-user to continue using the services.

A rapidly changing environment also means that banks have been forced to find partners who can accelerate the move to digital — and Open APIs have played a major role in fostering the necessary collaborations.

“In the next three to five years, we project a massive integration of service providers’ platforms with banks leading the charge,” said Warathe.

Open API-led transformations are expected to enable banks to accelerate collaborations with external organizations and third-party developers. Increased co-created systems will allow bankers to redraw the boundaries of the products and services they offer.

However, the rise of DevOps and Open API partnerships means that technology is now part of the new-era of banking. As banking becomes a seamless digital process, IT professionals are integrated with every banking department.

“At Standard Chartered, for example, besides having IT professionals across our 60 markets, four Centres of Excellence – two in India, one in Malaysia and one in China – support and provide expertise for our global operations. IT teams are now closely integrated with respective product/client solution teams for agile delivery,” revealed Warathe.

The truth is, for bankers to delight business and individual customers in the digital world, and compete with new-age tech companies trying to constantly disrupt payments and the industry as a whole, they must aspire to build digital into their DNA.