Immediate payments and technology convergence: Opportunity or challenge?

The global move to immediate payments is well under way, with Europe, the U.S., Australia, and the UK developing immediate payment offerings based on the ISO 20022 standard.

The European Commission has accelerated the adoption of instant payments among its member states with the recent Single Euro Payments Area (SEPA) instant mandate. To comply with this sweeping regulation, all banks and payment service providers in the European Union must be capable of receiving instant payments by January 9, 2025, as well as offer services for sending instant payments by October 9, 2025. At a scheme level, SWIFT, SEPA, FedNow, New Payments Platform (NPP) in Australia, and the proposed New Payments Architecture (NPA) in the UK are all in various stages of migrating to ISO 20022.

While this progress is exciting, does the convergence of immediate payments and technology represent a challenge, an opportunity, or both? CGI’s Voice of Our Clients research supports the view that product and service innovation, such as the move to immediate payments, along with business optimization through new technology, are among the top five business and IT priorities for corporate and transaction banks. Are they competing priorities, or can they be achieved simultaneously to drive the effective execution of immediate payments?

Convergence as a catalyst for modernization

For many banks, this global move to immediate payments and common messaging standards has forced the migration from legacy systems to newer payment technologies. ISO 20022-based immediate payments replace not only the previous ISO 8583-based payments rails, but also a range of proprietary formats used in domestic schemes.

The good news for banks is that major solution providers (like CGI) can more easily provide payment solutions based on a standardized ISO 20022 format. These solutions can be adopted more quickly and economically. With the bulk of the “heavy lifting” already done by these third-party solutions, there is an opportunity for banks to move away from proprietary, expensive-to-maintain technology.

The challenge, on the other hand, is how to identify the right technology solutions to support a bank’s payment strategy when there are so many options. Software evaluations are ongoing by many banks, but is technology selection really the starting point?

Finding the right technology to support your payments strategy

A successful technology purchase first requires a thorough evaluation of expected business outcomes. If a bank views payments as simply a utility, for example, it should find a technology solution to process payments as cheaply, securely, and compliantly as possible. In this scenario, a platform as a service (PaaS) or cloud operation model may be the answer, and the bank might consider outsourcing all or part of the operation.

However, the best solution may not be the same for all payment types. For example, a bank may view bulk payments as a utility but instant payments as an area for differentiation, perhaps as a part of wider innovation in customer offerings. This approach would require a solution that is flexible enough to support future development and can be delivered in modules with different hosting models.

Investing time to rethink the role that payments play in your organization will be instrumental in finding the best technology for your payments strategy.

Once your payment objectives and strategy are clear, the choices of technology and operational models are reduced to a few options. Software as a service (SaaS) and cloud-based implementation of scalable, containerized payments processing drive down operational cost, risk, and operational complexity. Application programming interfaces (APIs) and microservice technology offer opportunities to rapidly develop and deploy new workflows and deliver differentiating services to better serve customers.

Partnering to drive business outcomes from payments

Immediate payments present short-term challenges for smaller banks (for whom the SEPA deadline is approaching in Europe), while offering exciting and critical long-term opportunities for all players.

In reevaluating their payment processing, banks may benefit from the support of a trusted technology partner to help guide them and share valuable insights gathered from a broad range of payment transformation projects. As an organization with decades of payments, compliance, and security experience, CGI can support your broader payments strategy, ensuring it’s driven by measurable business outcomes.

If you are interested in simplifying your payments journey and refining your strategy, please get in touch.