• Nick Botha , Senior Sales and relationship manager- Banking and Payments at AutoRek


• 24.06.2021 04:45 pm
#payment

It is coming, and it will be unlike any boom in the past.

Although the dust has settled in the media on the €3.5 Billion Wirecard scandal that shocked not only the payments industry but the financial services sectors around the world, the operational nightmares are just beginning for those organisations directly affected.

The latest tendency has been to use partnerships as a key success driver to overcome challenges in the payments industry. Payments firms are making use of Payment Service Providers (PSPs) and other firms to ensure their customers’ expectations are met and exceeded. In turn, this has increased competition and the industry as a whole is beginning to experience the positive impacts. Although not all payments firms and banks were affected by the Wirecard incident, acknowledging that there may be other incidents in the future that could affect your organisation is key. 

The UK’s Financial Conduct Authority (FCA) defines operational resilience as the ability of firms, financial market infrastructures and the financial sector to prevent, adapt, respond, recover and learn from operational disruptions. The UK regulator expects firms to be operationally resilient by having a comprehensive understanding and mapping of their people, processes, technology, facilities and information necessary to deliver each of its key business services. 

If we compare what the European Banking Authority’s (EBA’s) guidelines outlined through the Payments Services Directive 2 (PSD2) or the Information And Communications Technology (ICT) and the Payments Services Regulations (PSRs 2017) framework aims to achieve, we can see that there is a clear drive from regulators to install the idea of operational resilience through regulation.

Let us look back at the FCA’s definition of operational resilience and ask which firms recovered and which firms are still feeling the pressure. When one of the world’s largest fintech organisations files for insolvency off the back of one of the biggest fraud cases of our time- one could say that it would be impossible to prevent, but organisations such as Revolut that were able to “adapt, respond to, recover and learn from the operational disruptions”.

WHERE ARE WE IN THE PAYMENTS INDUSTRY?

It's safe to say that most industries consider 2020 a year to forget. With a massive downturn in the economy, the amount of payments transactions have significantly reduced. 

Technology combined with low margins have come about due to customer expectations for transactions to be simple, easy, fast and cheap. Although the crisis has affected the purchasing power of consumers and businesses over the past 6 months this has allowed for a time of reflection, understanding and progression. Consumers and businesses have shifted away from traditional means of doing things. More organisations have adopted a work from home strategy, a migration from on-premise to cloud facilities, online retail purchases have grown…

… and it is no different for payments.

• People and organisations have had no choice but to learn and understand how to adopt digital payments.

• Digital wallets are becoming a more popular choice than bank accounts.

• New technology such as Open Banking APIs and real time payments are making transactions faster than ever before

• New regulations are streamlining the safety and efficiency of these payments.

• No payments article would be complete without the mention of blockchain and the potential to shift the sector to the next level.

With all these advancements, a better understanding of the capability of these new technologies and increased trust in payments firms combined with the return of purchasing power of consumers and business alike, the next few years could see a massive BOOM within the sector.

HOW WILL INSTALLING A SOLUTION FOR OPERATIONAL RESILIENCE BENEFIT THESE ORGANISATIONS MOVING FORWARD? 

While profits are generally the main focus for firms working with tight margins, the focus needs to be placed on systems and processes that will allow these firms to handle the challenges the sector will face in the volume of transactions and ever changing regulations in the next few years. 

Firms working with manual spreadsheets, outdated technologies, large requirements for full-time equivalent (FTE) employees and zero flexibility are bound to fall short when the economy is back up to full flow. With the adoption of new technologies and the right partners, firms will be able to ‘prevent, adapt, respond to, recover and learn from operational disruptions’ that are evidently upon us and will allow firms the flexibility and transparency to handle the pressures that the payments BOOM will have on the sector.

As the Senior sales representative for Banking and Payments firms at AutoRek, Nick is responsible for managing client relationships within these sectors and engaging with stakeholders to ensure AutoRek’s product offering is in line with the market demands. He previously worked in one of the largest private banks in South Africa and has worked with some of the biggest financial institutions in the UK and Europe since joining AutoRek in 2019.

This article was originally published on Financial IT Summer Issue 2021