Banks must innovate to simply to keep up with fintechs and competitor Banks also need to overcome infrastructure constraints quickly to deliver the real-time payments that customers demand Leveraging data effectively is key to seamless transactions and growing profits As banks work on their digital transformation, said SmartStream global CEO Haytham Kaddoura, they need the skill sets and infrastructure to make it happen. They also need to figure out how to collect and enrich data so that it provides perspective and intelligence. “Each one of these - infrastructure, skills sets, technology - is a minefield.” Over the last couple years, Kaddoura said, a key focus for SmartStream’s work with financial institutions (FIs) has been on areas including payments and payments controls. The range of clients goes beyond just typical FIs, he noted. “It’s not limited to banks. We’re working with a telco, a major car manufacturer, insurance providers. Digital payments is picking up momentum.” SmartStream is upgrading its solution sets, expanding them to include virtual payments, and enhancing control across the value chain. These initiatives are building transparency, speeding up transaction processing and providing a lower cost per transaction. “Banks are now developing more complete profiles of clients so that they have a “single version of the truth, for a consolidated perspective of the client. That impacts payments digitisation and the services that the bank provides to its clients” said Kaddoura. Digital Payments The biggest innovations in recent years have happened in payments”, with advances in digital payments and crypto-payments at the fore. The three key factors for success in digital payments, said SmartStream digital payments practice lead Santosh Tripathy, are scale, security and speed. Consumers and merchants as well as banks increasingly want to go real-time. “At banks in the US and in Europe, this is being promoted.” While the infrastructure that is in place is a hindrance in some places, faster payments are picking up in markets such as Hungary and Greece as well as the UK. Even Mercedes Pay wants to use to SEPA instant payments, Kaddoura observed. “Everyone is trying to enhance their infrastructure.” A key enabler for faster payments, Tripathy noted, will be distributed ledger technology (DLT). DLT can lead to a quantum shift in the way the industry interacts, Kaddoura said. Already, some banks are starting to roll out blockchain for internal payments, from one unit to another. “That will spill over to the outside.” Data drives Profits Another key need for banks is effective data analytics and machine learning. SmartStream is enabling new players to jump into the space, Kaddoura said. What banks also need to do, Tripathy said, is to find out whether they’re making money on each of their products. Banks are launching multiple products, he explained, from wallets and platinum cards to virtual cards. “We have access to the data, to run our algorithms, and help customers optimise their products.” SmartStream also works with banks to resolve data issues, Kaddoura said, and to enable them to properly address them. Bank in the US and Europe cannot just send data to another institution, for example, let alone to third-party provider. “For us it is how to actually get visibility of client data and allow banks to build a holistic view of the client base without infringing on regulatory constraints.” The Future of Banks “If banks are unwilling to innovate,” Kaddoura said, “they will lose their shirts to incumbent banks. Banks don’t have an option. Look at European digital banks. They have picked up millions of customers. The young customer does not attach much value to the individual relationship, the teller, the branch manager. Today’s generation is about efficiency. They don’t want to bother stepping into a branch. Going further into the future, the bank is going to go to the customer. The industry is moving so dynamically that demands are coming for secure consumer financial solutions. It is hard to come out up with a framework. It’s going to be challenging. It’s also exciting.”
