EBAday brings together financial services professionals from around Europe. While AI was, inevitably, discussed it took a supporting role to conversations around the future of payments in Europe.
The event opened with thought-provoking sessions on the state of the industry, and the roles of tokenisation and digital identity in the next phase of banking and payments evolution. An audience poll during the first session set the tone for the event: when asked which trends they see as most impactful for the payments industry, 44% responded with ‘open and instant payments’, with ‘generative AI’ a distant second at 19%.
The ongoing development of real-time payments
Sulabh Agarwal, global head of payments at Accenture, hosting a panel about navigating transformation for banks asked the audience what programmes their institutions have planned for the next 12 months. 75% said the SEPA instant payments regulation was their number one priority, followed by ISO 20022 migration at 58%.
The panel focussed on SEPA and the need to create safe, real-time digital journeys. So, how do banks prioritise investments?
Bruno Mellado, global head of payments and receivables at BNP Paribas pointed out that for pan-European banks there are multiple regulatory initiatives occurring at once that will require banks. That, he cautioned, could mean delivering new services to customers takes a lower priority.
When the audience was asked how investments are prioritised within their institutions, compliance and the cost of maintaining the licence emerged as the clear priority for 73% of respondents, followed by only 27% of respondents justifying investments with long-term revenue goals.
Simon McConnell, Director, EMEA Head of Clearing and FI Payments at Citi, explained that while the industry is facing many challenges, it must also balance delivering for the short and medium term.
“They have to invest in the core infrastructure, but it needs balance. It’s making sure you have a solid investment to build out your core, solid investment to build out your user experience, and then triangle your compliance spend,”
BNP Paribas’ Mellado outlined the extent of the investments required: “I have looked at the number of entities across Europe that don’t have instant payments today. Those will have to move to the new regulation. So, we’re looking at $10 billion, at least, in investments for the banking sector in Europe just to respond to the instant payments regulation. And I think that’s conservative.”
Citi’s McConnell agreed. “From what we’re seeing, it’s about asking the right questions and speaking with your providers and partners. Figure out what you have to do yourself and what someone else can do for you. Can you leverage someone else’s investment?”
Collaboration at the core of innovation
Our very own John Salter participated in a panel titled ‘Rising Stars’, examining how the industry has evolved and the catalyst for changes. Alongside, Luca Kotton, platform owner at Investec Bank; Jenny Winther, Head of Payment Schemes at Handelsbanken; and Phoebe Zhou, Head of Emerging Payments, GPS Europe at HSBC, they discussed everything from AI to open banking.
The panel noted that the industry narrative had moved on from ‘us vs them’ into something more collaborative. Handelsbanken’s Winther gave a Nordic perspective, explaining that traditional banks and fintechs can balance each other out, with banks offering the security and trust that they have in customer relationships, and fintechs filling in gaps of technology and innovation.
She added: “We want to really collaborate. We want to have a real relationship. We want to know what you're doing and how we do things better together. That's what I see going forward.”
Investec’s Kotton highlighted that having modular architecture is important to building technology stacks, and that continuous integration, constant development, cloud-based solutions, and automation are critical to be ready for new innovations:
“We don't often talk about the hygiene elements. We all look at hygiene and know we have to do it, but keeping the systems up to date allows you to adapt with the technology as it comes along. API-first design is also key. It's the only way that you can have seamless integration and adapt quickly. It's easy once you've got an API-first design,”
When asked about whether fintech and banks are moving away from competition and towards collaboration, our CCO John Salter commented that there are more collaborative efforts at work, but it is not always a smooth journey.
“There needs to be a mutual benefit that generally is based on a commercial basis because it's important. If you have one person getting all the benefit and someone else getting very little - that is not sustainable.”
Unified approaches to tracking fraud
The need for greater collaboration was also raised in a later session titled ‘New approaches to fraud management’. Erwin Kulk, Head of Service Development and Management at EBA Clearing commented that joining forces with other industry players is the most efficient way for the industry to combat fraud.
Simone Löfgen, Global Head of Payment Platforms and Managing Director at Commerzbank, agreed: “It is absolutely crucial that we are connected, and that we've defined common ways of combating this industry challenge, so there shouldn't be any competition on fraud because it's a joint attack that we're all facing.”
Kannan Rasappan, founder and CEO of Banfico, reiterated the point: “The one thing banks haven't tried is working together. We have thrown money at the assets, technology, all of these advancements within the bank, but we couldn't solve this problem.”
On the topic of sharing data and the security concerns around that, EBA Clearing’s Kulk emphasised the solutions that centralised approaches could offer:
“It's technically not possible for everybody to share data with everybody. It's legally not possible. But if you have centralised data, you create views on where everybody can detect patterns and anomalies. Then the company can add value and this is a way to collaborate within the legal setup.”
Embedded needs to be open too
Open banking and embedded finance are a catalyst for the next wave of digital transformation for payments providers and facilitating easy and efficient payments for consumers. Research suggests that the embedded finance market is expected to be worth $22 billion by 2028 and grow 148% in the next five years.
The driving forces behind this change and what may come next were examined on the panel ‘Open Banking and embedded finance: how far have we come?’. Industry leaders Gijs Boudewijn, General Manager at the Dutch Payments Association and co-chair of SPAA Multistakeholder Group; Pietro Fragnito, Senior Innovation Strategy and Market Outlook Manager at Intesa Sanpaolo; and our own Paul Staples, Group Head of Embedded Banking at ClearBank, discussed new developments in the space.
Boudewijn opened the session discussing how the sector is working towards harmonisation. He highlighted how fintechs had reduced friction for consumers and delivered services that were geared towards solving specific problems.
The notion of solving for problems was then reinforced by Paul Staples. He stated that it is impossible to implement open banking and embedded finance without understanding the business case behind adoption. He explained:
“You have to go back to the ground level problem of what job are you solving for the consumer? Is it a big enough problem? Are they going to use an alternative way of banking? You may provide a non-bank to solve for it, and there's a lot of work that needs to go into that, so it's not just simply return on investment financing. The revenue source is a scalable process. There's a lot of research needs to be done on the use of customer-centricity design solution.”
The Dutch Payments Association’s Boudewijn also raised the issue of a fragmented payments landscape. He explained how the industry needs continue its collaborative efforts to achieve harmonised pan-European payments, including the role of the SEPA Payment Account Access (SPAA). Intesa Sanpaolo’s Fragnito agreed that SPAA was vital because the legacy system of many banks need modernisation to deliver a consistent, scalable and reliable payments experience for their customers.
Building for the present
While looking to the future is important, we also need to build in the present. And there’s plenty to still be done. As the conference highlighted many times, we’re still waiting for the complete implementation of SEPA Instant across the eurozone. The future is unwritten, and this event offered a more pragmatic approach to discussing what that means. EBAday’s primary message was the need to prioritise collaboration, between regulators, banks and fintechs, to deliver the best outcomes for customers and support ongoing innovation.
Our first EBAday was full of great conversations with clients, prospects and partners. We look forward to returning next year to assess how real-time, instant payments have developed, its impact on banking in the eurozone and where the industry is going next.
