Secure, reliable, resilient. These characteristics have long been associated with the world’s most successful payments environments.
However, to maintain these benefits, change in payments has historically been slow. But being static is no longer an option, writes Ramon Villarreal, global architect and payments lead: financial services at Red Hat.
Constant transformation is now the norm due to the proliferation of enabling technologies like APIs, newer kinds of commerce like cryptocurrencies, and regulatory and infrastructural shifts like PSD2 and Open Banking. Further disruption comes from tech giants, challenger banks and payments innovators.
This now very competitive industry is juggling customer demand for fast, constantly evolving payments options with an ongoing onus from regulators that systems are reliable and secure.
In this article, I’ll explore how a platform-based approach is fast becoming the payments paradigm. With the flexibility afforded by hybrid cloud infrastructure, it will be platforms (rather than legacy products) that empower financial services to constantly evolve and innovate, while prioritising security, compliance and resilience.
Payments platforms leave legacy products behind
Financial services organisations have long relied on suites of products that ensure different elements of the payments process run smoothly. However, while these legacy tools may be built around reliability and security, they also slow time to market and reduce ROI because they weren’t built for today’s more complex and cloud-based landscape.
Customers expect financial services providers to safely facilitate any kind of transaction they need to achieve their goals. This can range from fast international payments with competitive rates, to enabling the data-secure use of Central Bank Digital Currencies, which is currently a priority of 130 national governments.
Organisations need to embrace the use of one secure payments platform. Platforms are mission critical systems that facilitate transactions, with stringent business continuity requirements.
They’re central to moving money in whichever way the financial institution and customer requires so its successful operations are at the core of every transaction, payment, transfer, ATM money extraction, utility payment and so on. Platforms also have constantly evolving and growing components, reflecting the needs of the organisation and its customers.
Hybrid cloud’s happy medium: secure flexibility and reduced complexity
Payments is an inherently risky space because it involves moving money around and storing and managing extremely sensitive financial and personal data, attracting the attention of criminals.
For this reason, private infrastructure and on-premise servers have often been preferred to host data and payments software. But this approach comes with its limits, including a lack of flexibility, portability and space, all of which are critical for organisations expanding into new markets and adopting cutting-edge new technologies.
The cloud market has evolved in response to this with a ‘best of both worlds’ offering: hybrid cloud. Hybrid cloud typically involves an abstraction layer.
This enables organisations to continue using private or on-premise storage for sensitive data, while making use of the scalability benefits of public cloud, and crucially the ability to move between public cloud providers as dictated by the business, the market and regulators.
Platform-based payments’ present and future
To drive long-term business value and ROI, providers must consider customers’ present and future needs when adopting a payments platform.
- Composable, modular systems keep payments moving – Platforms must be modular, with composable features where relevant, so they can easily adapt to changing customer needs, the conditions of the market and regulations. New features or services should be able to be brought on at any time, while maintaining performance and upholding data security.
- Nimble, scalable systems for when it’s busy … and when it’s not – Payment capabilities should scale according to the market’s needs. For example, when catering to retail customers during peak times like Black Friday, a significantly higher volume of payments, and potentially bespoke features, will need to be enabled. This can then be dialled back down during quiet periods.
- Automation frees up brain power and space – Automation gives skilled teams space to retrain and refocus away from manual data entry and other routine, but essential, tasks, enabling the business to focus on its competitive edge. Platforms with added automation abilities also enable the faster adoption and deployment of new features.
- Enabling always-on innovation – Platforms as innovation-enablers has been a consistent theme in this article, but they must in particular be prepared to handle AI’s potential. AI’s immediate value lies in improving the customer experience, making payments faster, easier and safer. For example, it could significantly improve back office remediation: generative AI could be used to identify payment errors, analyse the problem and advise potential solutions. The sky’s the limit when considering future benefits (and risks), but platforms must have the ability to scale to manage what comes next.
- Augmenting payments’ heritage: resilience and security – While always-on innovation should now be a core part of every payment providers’ strategy, safe transactions and minimal downtime remain critical. However, unlike in payments’ static past, resilience and security themselves must also continuously evolve in the face of new challenges. Multi-cloud portability feeds into this by reducing outage impact, ensuring stability and cutting costs at the same time.
With a platform-based approach, the industry will be equipped to grow at pace with customers’ expectations, and our rapidly changing world.