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EBAday 2024: 75% view instant payments regulation as their number one priority

EBAday 2024: 75% view instant payments regulation as their number one priority

Hosting the second roundtable of the event, Sulabh Agarwal, global head of payments at Accenture spoke with Simon McConnell, European clearing head, treasury and trade solutions at Citi; and Bruno Mellado, global head of payments and receivables at BNP Paribas about navigating the testing waters of transformation for banks.

Starting out the session by mentioning that payments is a topic that’s close to everyone’s hearts at EBAday, Agarwal directed a first poll question at the audience, asking which are the main payment programmes their institutions have planned for the next year. The overwhelming majority (75%) polled instant payments regulation as their number one priority, followed by ISO 20022 migration at 58%.

The roundtable discussion began with McConnell outlining the major regulatory changes that are coming up or under way in the space, explaining that it is the main challenge for banks at the moment. Mellado added that it’s important to also keep in mind that in the banking sector, most institutions are present in multiple countries, and all of these changes are happening everywhere at once.

Yet the crux of the matter is this: it’s about creating safe digital journeys, real time and with rich data - no matter which payment method. So how do banks prioritise investments? Mellado pointed out that the industry will spend a lot of time on these changes, while bringing new services to clients will take a lower priority.

His statement was supported by the second audience poll, asking how major investments are justified in the audience’s institutions. Again, 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.

McConnell pointed out that it’s crucial for banks to leverage their spend. While the industry is facing all these changes, organisations need to remember to not just deliver for day zero or day one, but to consider what’s coming after. “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.”

Mellado added just how big the impact of these mandatory investments will be. “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.”

A third audience poll asked what is the biggest challenge for transformation in the respondent’s organisations. ‘Too many priorities/initiatives’ emerges as the main hurdle (69%) together with ‘legacy technology’ (66%). Here, both McConnell and Mellado stressed how important it is to have the right talent and the right knowledge in the organisation.

Modernisation is an end-to-end experience across the company, so having knowledgeable resources as well as competent project management is one of the biggest challenges in managing transformations of these sizes.

Following up with a related poll, Agarwal asked the audience what is making instant payments implementation challenging. The most common stressors for the audience were fraud prevention (63%) and real-time pre-processing, e.g., validation (52%). Mellado stressed that it’s not just domestic, and it’s not even just Europe. In his estimates, 50% of the world will have moved to instant by 2027. Instant is the main attention point for most banks, and McConnell pointed out the key challenges in this aspect are not just the short time frames in Europe, but also fitting the building blocks together. He emphasised that, even with short deadlines, banks need to look at the long term.

A last audience poll asked what some opportunities are for industry collaboration on use-case enablement. Request to Pay came in as the main opportunity with 53%, followed by one leg out credit transfer schemes with 45%. Here, both McConnell and Mellado highlighted the advantages of being able to build onto existing rails and systems in order to improve interoperability and make sure everyone uses the same standards.

Lastly, Agarwal asked both participants on their final thoughts on navigating the transformation journey.

Mellado: “The key message is think ahead. It’s not just one, there are tons of regulations coming in. If you don’t see where your investments today are going, you might have to undo them later.”

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?”

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