Instant payments and generative AI will be the most impactful for the industry

Moderating the first digitisation panel, Olivier Denecker, expert partner at McKinsey & Company spoke about immersive trends in payments technology with Erik Alstromer, head of product Europe and new markets at Form3; Martin Bentele, managing director and payments lead Europe at Accenture; and Krister Billing, market infrastructures & regulatory affairs, SEB.

Starting off the discussion by diving into the current landscape, Alstromer outlined the current developments in the payments landscape and explained the push and pull PSPs are facing between managing existing infrastructure and adopting new technologies.

“It’s a mix. Clients are mostly excited about the new things that are coming in, but also the old boring infrastructure stuff. There is a lot of pressure at the moment on clients. There is pressure to innovate, you have to be better at preventing data breaches, you have to be better at preventing fraud, you need to have a 24/7 solution that’s built on the cloud so you can scale it properly – and there’s not enough time. A lot of clients spend 80% of their time and budget just to keep the lights on,” Alstromer said.

An audience poll then asked the delegates which trends they see as most impactful for the payments industry, to which the overwhelming majority (44%) responded with ‘open and instant payments’, followed by generative AI (19%).

“Regulation is clearly driving the agenda,” commented Billing, both on the results of the poll and the motivators he himself observes in the industry. “And in order to comply with regulation we need to deploy both existing and new technologies.”

Bentele agreed: “The reality is that many banks struggle to keep their systems up to date. Look at instant payments, if you want to handle peak volume at scale, this is change that puts many banks at the edge of their budget. Banks invest the majority of their change budget to comply with regulatory requirements. But on the other hand, we see a huge potential in investing into technology and services, particularly on the corporate side, that offer good business cases. The problem I see is getting the budget right and disconnecting it from the regulatory side.”

A second audience poll asked which use case is driving technology change the most, to which more than half of respondents (57%) responded with regulatory changes – confirming the sentiment expressed by the panel. Efficiency and operational improvement ranked second with only 17%.

A key to addressing these challenges lies in partnerships. The panel expressed the need for collaboration in the industry, because banks cannot do everything by themselves. Finding partnerships is more efficient than building in-house.

Is embedded finance the key to digitisation?



Moderating the ‘keys to successful digitisation’ panel, Adam Davis, partner – financial services at Bain & Company spoke with Carlo Panella, director at Be Shaping The Future; Simone Satan, global head of digital market management and treasury services at BNY; and Paul Thomalla, non-executive director at Unifits.

Before diving into the panel discussion, Davis shared some explanatory slides on how open banking enables new business services by integrating banks and third-party players’ data and services, as well as how embedded finance unbundles the traditional banking value chain, providing a new way to distribute financial products.

To set the scene, Satan mentioned the adage that digitisation is no longer a nice to have – it’s a must for banks. “There are several factors to consider for a successful business – but also operational – transformation. One key aspect is offering digital customer journeys, making the interaction with the client as seamless as possible. But the other aspect is to manage talent and skill. You need the right talent with the right skillset. We also see more and more organisations looking into a more agile approach, transitioning from siloed models towards more platform driven ones.”

Touching on the untapped potential of open banking when it comes to modernisation, the panel discussed that it allows organisations to de-couple core banking systems from modernisation. Yet, echoing the prior panel, one challenge is the regulatory environment. While many banks still struggle with legacy systems, another hurdle is the fact that there is heavy investment into regulatory compliance, leaving less budget for innovation. Another fundamental problem pointed out by the panel is standardisation and harmonisation.

An audience poll then asked, in the long term, whether open banking or embedded finance would have a bigger impact on the digitalisation efforts of the audience’s organisations. 46% of respondents answered ‘both’, followed by embedded finance (31%) and then open banking (17%).

Discussing the order of priority of digitisation, Thomalla referenced Maslow’s hierarchy of needs. “If you don’t have open payments, you can’t have open banking. If you don’t have open banking, you can’t have open finance. We have to realise that some of these old systems aren’t going to make it, because we’re talking about the end product without talking about the journey. If I don’t have a digital payments system, I’m never going to get to the next level.”

The panel moved on to discuss the importance of partnerships in the space, yet as collaboration and digitisation increases, privacy becomes a bigger topic of discussion as well.

Touching on the key hurdles in creating successful open banking and embedded finance models, Panella commented:

“You’re now responsible for other parties. You have to orchestrate the relationship with your partners, otherwise the system does not work. On top of that, there are three main hurdles: regulation, propensity to adoption of these services (referencing that customers need to be supported to make these decisions), and supporting financial institutions in thinking outside the box. Digital adoption means changing mindsets.”

A second audience poll gaged the current mindset towards industry partnerships, asking how successful the bank/fintech partnerships of the audience’s organisations have been. The sad truth: 57% of respondents rated their partnerships as falling below expectations.

The role of cloud in the ongoing digital transformation of banking and payments

Moderating the ‘cloud-based managed services’ panel, Nils Jung, senior director at Capgemini Invent spoke to Daragh Kirby, head of sales & marketing at Intercope; Nadish Lad, global head of product at Volante Technologies; and Michèle Zaquine, director, head of propositions and commercialisation Europe & treasury solutions group, global payments solutions at HSBC.

The panel started by outlining how much has changed in how little time. Especially considering delivery models, the last four to five years have seen a significant step towards flexible cloud models, such as subscription based or pay-as-you-use services.

And while standardisation, scalability, flexibility and resilience are some of the key benefits enabled through cloud, the panel pointed out time to market as the first value proposition cloud offers to clients – with any new technology, it’s crucial to show time to market. “People are keen that you take the maintenance headache away from them,” Kirby stated.

Zaquine added: “From a technology point of view, it’s about having a clear strategy in the cloud. It’s not an IT topic – it’s a bank topic. It’s a stringent process that goes through a number of evaluations.”

Lad observed that it’s interesting to see how different tiers of banks have adapted the varying types of cloud. “We’re seeing Tier 1 banks saying yes to the cloud, but it’s more private cloud. Tier 2 and 3 onwards, it’s more public cloud services.”

Kirby agreed and added: “We find that some of the fintechs and the Tier 2+ banks are generally interested in the settlement mechanisms in the cloud and less concerned about the technology. Whereas Tier 1 banks and central banks are much more concerned about the security aspects of cloud.”

As the conversation shifted towards use cases of cloud, Lad pointed out that he observed a pattern where commodities are generally outsourced to cloud, whereas USPs and differentiators are what banks are focusing on and prefer to keep in-house.

Zaquine concurred, stating: “There are some things we do really well as a bank, and if we do it well we don’t want to change it. But we might use cloud for data analysis. It’s a case by cases basis: What do we need to address? Where are the friction areas?”

Jung wrapped up the session by asking the panellists where will we go with cloud in the next three years. Kirby mentioned commoditisation, Lad leaned towards cross-border payment rails, and Zaquine pointed out cloud discipline.