Transforming Payments: Meeting Evolving Customer Demands - Davies

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Transforming Payments: Meeting Evolving Customer Demands

Exponential technological advancement and evolving customer habits are shaping the future of payments. Clients are seeking new capabilities and asking for faster, safer, and cheaper payment services

Meeting customer demands for fast and efficient payments

Customers’ demands are broad. They span the need for simple domestic to more complex cross-border, cross-currency payments. Real time payments are becoming more prevalent as customers expect instant access to funds in a fast-paced environment and a cost-efficient manner.

Customer transactional requirements must be considered alongside the complexity of the client structure. Their needs must be satisfied by adequate investment in digital technologies that enable faster and more transparent cross-border payments. To enable this, firms must ensure that internal flows of data are streamlined to enable efficient processing of transactions.

It is crucial to avoid assuming customer habits and understand them through effective customer experience metrics and insightful data analysis. This will allow firms to tailor customer offerings and services to meet their needs and expectations, enhancing customer satisfaction and loyalty. It’s true that firms don’t necessarily win clients for their advanced payments infrastructure, but they certainly lose them by not meeting baseline expectations.

Adapting to Regulatory Demands and Competing with FinTechs: Challenges and Opportunities for Banks and Non-Banking Financial

Banks and non-banking financial institutions need to continuously upgrade their payment capabilities to compete with agile and customer-centric fintech companies. They also need to navigate complex regulations and technical enhancements such as PSD2/3 (EU Payment Services Directive), Wire Transfer Regulation, and include new standards such as Instant Payments, and ISO 20022.

Additionally, non-direct payment regulations like the NIS Directives, DORA and GDPR should be considered. Regulatory improvements are necessary to protect customers, ensure payment transparency, combat criminal activity, and safeguard the interests of banks and the wider community. While these improvements present implementation and delivery challenges, they also present potential opportunities.

Switzerland, as a non-EU member, has not fully adopted PSD2. However, Swiss banks and payment service providers have implemented similar open banking initiatives in alignment with Swiss Financial Market Supervisory Authority (FINMA) regulations. While there may be slight differences in regulations, Switzerland aims to harmonize its payment system principles with EU standards such as PSD2/3 and ISO 20022.

This can be achieved by implementing efficient fraud monitoring engines, strengthening authentication factors, embracing open banking, and enhancing data utilisation and digital adoption with an effective level of Straight through Process to focus on what matters.

Navigating the Changing Landscape: A Holistic and Agile Approach to Payment Solutions

To address these challenges and opportunities, it is crucial to adopt a holistic and agile approach. This involves understanding customer needs and likely adoption, designing effective features and capabilities, streamlining the payment process, and implementing robust screening and AML transaction monitoring. It is essential to keep in mind the increased competition from non-bank fintech companies, as they disrupt the traditional banking industry with innovative payment solutions.

To remain competitive, and be on track in this disruptive technological environment, banks need a robust delivery cycle, perpetual enhancements, and efficient MVP delivery. This requires not only robust methodology but usually a cultural shift as well.

Building a Solid Business Case for Innovative Payment Solutions: Factors to Consider for Successful Implementation and Adoption

It is important not to underestimate the need for a strong business case. Don’t simply assume that implementing certain features will automatically lead to success. Take the time to articulate why these features are necessary, considering customer expectations, organisational goals, and the broader community’s expectations. Many projects fail to deliver the anticipated benefits because they assume a high level of adoption without thoroughly considering the business model, IT and data structure, and customer habits based on culture, generation, and personal needs. Gathering accurate data – particularly transaction types and volumes – will help shape your business case and determine if you can reach a break-even point. Firms must not assume cost reduction is an end but consider the future benefits of such investments.

How we can help

At Davies, a Davies Company, we offer comprehensive support ranging from subject matter expertise to digital implementation. Leveraging our extensive expertise and delivery experience, we employ a proven methodology to provide efficient solutions tailored to your unique needs. Feel free to reach out to us for any assistance or to discuss how we can contribute to your success.

Do not hesitate to contact us if you have any inquiries or require further clarification regarding the content shared in this paper.

About the author

Simon Lovett


Asset & Wealth Management

I advise a range of hedge funds, asset and wealth managers, service providers and DeFi firms, blockchain and crypto firms

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