The Keys To Modernizing B2B Payments: Standards And Starting Small

The holy grail of payments modernization can be boiled down into to one word: standardization.

As the financial services industry seeks to expand the use and value of instant payments linking cross-border transactions with always-on digital commerce, uniting far-flung stakeholders and fostering interoperability is key.

This concerted push toward standardization to reduce processing costs takes on a new urgency as the pandemic has exposed some glaring weaknesses among legacy back-end systems and organizational structures at financial institutions (FIs).

In an upcoming webinar with Karen Webster, Vincent Caldeira, chief technologist, FSI, APAC at Red Hat, and Mick Fennell, Business Line Director – Payments at Temenos, will delve into the way FIs will have to modernize and scale into a new “normal” for digital payments to address these issues.

In a conversation ahead of that discussion, Caldeira said a successful tech-focused transformation must come from within a company.

After identifying key pain points, according to Caldeira, it’s critical to find out how processes are running, where inefficiencies lie and how technology can help.

Time Is Of The Essence

“What COVID-19 has done is create a stronger business case for many of the changes that organizations were contemplating,” Fennell said.

It’s no longer feasible to take months to develop and rollout new products and services. New agile architectures and technologies must be adopted to support the latest open and global operating standards thus helping payments infrastructures to become more flexible and cost effective.

“New approaches to payments processing are creating attractive options, such as the advantage of payments-as-a-service is being able to consume as you go — and having that scalability that [firms] can call on in times of need and which comes down to cloud-based infrastructures,” Fennell told Webster.

Two Types Of Containers

Modernization and standardization tie into the idea of containerization, where payment processing functions can scale with speed and ease — and where parties across the financial industry and the globe can communicate payment transaction information without friction or boundaries.

That’s because containerization can be applied to two separate concepts within payments — the technical containerization of software components, and the placing of payment data into standard message format containers.

Think of the cargo ship that ferries containers in its cargo hold. The containers are uniform and standardized even though they hold a broad range of items.

In terms of transport, the ISO 20022 messaging standards can be likened to the cargo containers where different variations of payment data can be transported in each message.

“So, if you are doing domestic payments, or separate payments to Europe, or cross border via SWIFT, they will all be ISO 20022 based,” noted Fennell. “The container is the same, but actually the details inside are different.”

Then there’s the technical nature of containerization, which Fennell said, “allows you to run specific components within certain containers.”

He pointed to Kubernetes as an example, where open-source container systems can help deploy, and ultimately automate, the management of applications.

Added Fennell: Containerization “allows us to standardize both data and processing, increasing automation, creating greater efficiencies, and supporting greater agility. That lowers costs. It makes us more efficient, and that’s a key theme that we’ll talk about.”

Join PYMNTS, Temenos’ Fennell and Red Hat’s Caldeira at noon ET on June 18 to discuss the next critical steps in payments modernization.