Why it’s time for payments companies to super-charge the back-office

As the world becomes more digital, and consumer payments become faster and easier than ever, the expectation on B2B payments is building too. Where it was once just traditional banks playing catch up, now payments businesses also need to pivot to respond to the challenge, with many Payment Service Providers (PSPs) striving to offer their merchant customers more payment options.

However, there is one major obstacle in the way for both banks and payments companies: speed.

Cross border payments are slow and expensive

Traditionally, a cross border transaction costs €50 and takes at least five days.

The main issue with cross border transactions is that the existing correspondent banking network is the slowest and most expensive way to move money for merchant customers.

This isn’t good enough. Banks and payments businesses need an alternative. Imagine what could happen if a cross border payment cost 50 cents and took less than five minutes?

Cloud-based infrastructure offers an advantage

Banks and payment businesses that already have a cloud-based approach have an advantage.

Cloud-based architecture is highly scalable, providing capacity and functionality precisely where it’s needed. It’s flexible and future-proof, but more than this, it also allows the organisations using it to concentrate primarily on their technology and offering.

Collaboration can allow payments businesses and traditional banks to take advantage of this, working with a partner who already has the technology, payments network, and banking licence to handle all back-office processes securely and compliantly, all of which plays a part in allowing them to keep pace in a fast-moving environment.

A ‘super correspondent’ network

Whilst thinking about how they deliver the best service to their clients, financial institutions (FIs) also have to consider how they stand out against their own competition, which is constantly increasing. Customers’ appetite for real time payments is growing, as is the expectation for a broad range of services, from lending, to accounts, to foreign exchange.

Not only do payments need to be processed quickly, they must also be monitored effectively, and organisations without the right infrastructure, or who have legacy systems, will struggle to meet these demands.

Reducing the number of stages in transactions is key; what these organisations need is a ‘super correspondent’ network – one that integrates local clearing and payments schemes. Again, collaborating with a partner is key here, and can also help to boost regulatory compliance.

Built-in fraud prevention

When it comes to selecting a business to partner with, considering AI is important. Payment specialists that are at the forefront of the AI revolution can be an incredible asset to financial institutions and payments businesses, because AI has the capability to reduce the level of human intervention needed for transaction monitoring. In turn this leads to fewer false positive alerts.

The traditional approach to transaction monitoring and AML is not efficient enough. It’s based on outdated technology and the static behavioural rules it uses only capture one element of the transaction, which results in the industry seeing false positive rates of an astonishing 97-99%.

When AI is introduced, however, it is possible to enhance the precision of these rules, cutting the number of false positives, and therefore reducing operational workload and freeing up resources to be used in other areas.

As society becomes less reliant on cash, and as online transactions increasingly become the norm, the demands on anti-fraud and regulatory teams will rise too, and AI will become increasingly commonplace, which is why it’s so important to be working with a specialist already developing these technologies.

When partnering another business, sophisticated technology and a banking licence are a must, but there is another fundamental element to consider. By taking advantage of the capabilities of a specialist whose solutions are API and cloud-first, financial institutions can access the best options for managing cross border payments, FX and regulation, helping them remain competitive in an ever-changing market.