Against a backdrop of intensified competition—particularly from innovative fintech companies—geopolitical instability (the war in Ukraine, tensions in the Middle East, and the new U.S. administration), coupled with increasingly complex and restrictive regulations (Basel IV), banks must urgently strengthen their cash management offerings to optimize their liquidity management.
In this context, the following issues are critical for banks:
- Optimizing liquidity management for themselves and their clients.
- Improving profitability by optimizing customer liquidity through the offering of other products—particularly financial products—with higher value added.
- Build customer loyalty with a comprehensive and efficient payment and reporting solution.
- Risk management, whether financial (interest rates, foreign exchange, or credit) or reputational—related to incidents involving payment systems that, in extreme cases, could lead to the loss of a license.
- Technological innovations, adapting and expanding their cash management offerings by investing in innovative payment and customer reporting tools.
Building on innovations in payment methods such as GPI, Instant Payment, and CBPR+, the emergence of new schemes that combine services and payments is transforming the world of payments.
The two new payment schemes below are examples of upcoming developments in the world of payments:
SPAA SEPA Payment Account Access
This scheme is not a payment method but a service offering associated with SEPA, SEPA Instant, IP, and card payment methods. The purpose of this scheme is to allow the payer, when making a purchase online or in-store, to choose the payment method they wish to use, and to process the payment once that choice has been confirmed.
This plan's premium service guarantees payment, including at a future date or in installments (standing order).
When using SEPA, SEPA Inst, and IP payment methods, this service will affect client reporting for corporate clients with a retail distribution network.
EPC OCT Inst, One-Euro Instant Credit Transfer
This payment scheme applies to payments in euros made to countries in the SEPA area whose currency is not the euro and where at least one leg of the transaction is in euros, as well as cross-border payments in euros made to countries outside the SEPA area.
The goal of this scheme is to reduce both the cost and the processing time of these payments by leveraging SWIFT’s SEPA Inst and IP+(1) payment methods.
(1) SWIFT Instant Payment Plus: real-time international payments via FOREX
Similarly, the rapid evolution of new technologies such as AI and blockchain will redefine the processes and organizational structures of certain cash management functions, such as reporting, anti-money laundering, payment processing and settlement, as well as related functions.
To illustrate the evolution of these new technologies, here are two concrete examples of their applications:
Artificial Intelligence
Banks are legally required to archive payment messages and other interbank messages for a period ranging from 10 to 15 years, depending on the jurisdiction. This process is currently complex (duplicate databases), costly (licenses, infrastructure), and inconvenient for users.
Tomorrow, archiving payment messages in a data lake and analyzing those archives using AI will be much simpler:
- Search for messages for investigation
- Search for a message at the customer's request
- Generation of regulatory reports
- Use of this data for statistical purposes
Blockchain
Blockchain, the technology currently used for cryptocurrencies, is now being studied and tested in the areas of securities clearing and payments.
The U.S. financial market infrastructure (FMI), the Depository Trust and Clearing Corporation (DTCC), and the Japan Securities Clearing Corporation (JSCC) have explored the use of blockchain and distributed ledger technology (DLT) for collateral management.
At the same time, a pilot project involving SWIFT, numerous banks, and the IMF—including DTCC—was conducted with the aim of exploring interoperability between existing systems and potentially an unlimited number of blockchains through SWIFT’s secure environment. SWIFT has also experimented with the interconnection of Central Bank Digital Currencies (CBDCs) and other digital assets with existing or new payment systems.
The emergence of CBDCs and ongoing experiments with blockchain technology herald a profound transformation in the field of payments—both domestic and international—as well as in a number of related sectors, including asset management.
In conclusion…
In summary, given the uncertainty of the current environment and the rapid rise of new technologies, banks will face a major challenge in developing, adapting, and strengthening their cash management offerings. In light of this, QUANTEAM has decided to launch a dedicated cash management offering within its Ops & Finance practice to better support its clients through current and future strategic changes, both functional and technical.
an article written by…
Denis CERVONI
Expert Consultant
