Vaughan Williams’ choral work ‘Towards the Unknown Region’ is a dramatic setting of a Walt Whitman poem, describing the uncertainty of life, the soul being led to an unknown place with no maps or guides or paths.  As the recent report ‘The Changing Face of Payments’ shows, the infrastructure of payments is heading towards an unknown region.  There are many payment infrastructures and everyone agrees there will be fewer in the future.  The report indicates 21% of respondents use over nine payments infrastructures today but that ‘all domestic infrastructure will disappear over time with schemes … closing, merging and consolidating.’  Obviously the SEPA project is driving change in Europe and other regions echoed the need for a similar response to the pressure of removing barriers for international payments. 

But which payment infrastructures will be there in future?  How can payment organizations survive in the journey to the unknown payments region?  Vaughan Williams’ musical setting of the journey involves abrupt changes of key and swift climaxes.  The payments environment does not involve sudden change.  As the report makes clear new payment infrastructures will only gradually replace existing infrastructures as we have seen in SEPA gradually absorbing domestic payments (but too slowly in some people’s view) and Faster Payments in the UK gradually taking payments away from BACS.  Recognition that the journey is one of transition from the current mix of payment channels to a different mix of payments is the key to being able to plan for the journey.

So what attributes should banks and other payments organizations ensure are embedded in their payment systems to allow them to survive the journey?  Two key aspects stand out.  Firstly payment systems of today need agility and flexibility to survive the journey to the unknown payments region.  Payments systems need to be able to absorb change.  With many organizations the challenge is the proliferation of payment systems, all using a multitude of payment infrastructures.  Just as consolidation in the infrastructures will lead to more efficiency in effecting a payment, so the consolidation of systems within a bank is vital.  The start point is the consolidation by payment type or by geography leading to consolidation across customer types or regions.

Secondly payment systems also need to be able to handle the ‘real time’ world expected by consumers and corporates.  As the report makes clear increasing numbers of transactions will move from the bulk payment mechanisms into real time mechanisms; it references the expectation that payments are like emails with almost immediate delivery.  That requires banks and other payment organizations to ensure their entire processing is also in real time.  For instance, it is pointless being able to submit the payments in real time if the fraud detection systems are still working on a post authorization basis; fraud detection needs to be real time, in the transaction path as well.

While payment infrastructures are moving towards that ‘unknown region’, banks and other payment organizations can prepare for that future.  Perhaps a challenge for one of today’s composers is to illuminate the path of payment systems towards that unknown payments region!