Will the rise of new technology revolutionize payments and bank connectivity?
As technology advances rapidly, there is a lot of discussion about how robotics, artificial intelligence and distributed ledger technology will impact our lives. But what are the key trends in the area of payments and bank connectivity and what will their impact be?
Where in-house banks (IHBs) and payment factories have been around for a long time already, we see that their use has accelerated in recent years, due to the rise of bank connectivity solution providers, which was fueled by the introduction of SWIFT Alliance Lite 2. We expect corporates to benefit in this light also from the increased availability of virtual accounts further enabling Payments on behalf of (POBO) and Collections on behalf of (COBO). PSD2 is also expected to have an impact, allowing bank connectivity providers, but likely also ERP and TMS providers, to be able to connect to banks in the EU directly, using APIs, in a real-time fashion without requiring the use of SWIFT or other connectivity. Similar initiatives are underway in other countries as well, with the Open Banking initiative in the UK providing a very good example.
Trends and developments impacting treasury today, tomorrow and beyond
Impact of machine learning
In the longer term we expect that the impact of technology will be even greater. We already see some bank connectivity providers implementing algorithms for sanction screening and fraud prevention. These are now mostly rule-based and do not adapt to the actions of users. It is expected that machine learning will have a major impact in these areas with software being able to learn and at some point ‘understand’ which payments have a relatively high risk compared to others.
DLT is promising
Distributed ledger technology (DLT) is showing enormous disruptive potential in many areas, including payments. Ripple has already matured to the point that it has connected many banks to its network that are able to execute (cross-currency) payments in real-time thereby reducing transaction costs and settlement risk. Whether or not DLT, in the shape of Ripple or otherwise, will completely change the way we think about and execute payments is something that will still need to become clear.
Will these developments benefit treasurers? Yes, definitely. More and more options are becoming available to optimize bank connectivity and the payment process. And perhaps more importantly, these solutions are becoming more affordable, increasingly user friendly and are adding more value to the business.