Even in challenging times, changing payments is the only constant
During the most difficult of times, there is arguably nothing more critical to the economy than to keep money moving securely: to families whose finances have been put under immense strain; to businesses whose doors are shut and whose orders have dried up; and between financial institutions who are rushing to offer credit and liquidity lifelines. During the COVID-19 pandemic, Payments providers have seen their business continuity plans put to the ultimate test. As we take tentative steps beyond the initial response, adapting to the new normal brings another set of challenges. What does the revised payments change roadmap look like? Should activities resume where they left off? How do we overcome the backlog with even less time and even fewer resources? Read on as we share some of our industry insights on changing payments.
Payments do not stop in a crisis, they become more important
While challenges come in all shapes and sizes; thankfully the UK Payments ecosystem has consistently weathered these turbulent times without failing its users. Time and again, UK Payments has demonstrated its stability and resiliency: during the Credit Crunch of 2008 payments systems did not fail, and during the recent pandemic, interbank payment systems continued operating in business-as-usual fashion. In fact, not only have our systems proved their mettle, but in many cases, they have been a significant enabler in facilitating behavioural change. This is evidenced by immediate shifts in volumes in areas such as e-commerce and contactless payments and drops in the usage of cash, cheques and ATM withdrawals; and in the rapid implementation of emergency payments such as the Coronavirus Job Retention Scheme payments and Coronavirus Business Interruption Loans that are supporting the economy. The ability to depend on our payments infrastructure at such critical times should not be taken for granted.
Payments change functions should re-double their efforts
The recent pandemic has reminded us how critical payments are to society. The contactless transaction value limit increase (from £30 to £45 in the UK, and along similar lines globally) is an example of this; Payments must always adapt to the needs of our daily lives. These changes have allowed our economy to function more smoothly in an otherwise turbulent time and have provided an insight into large-scale behavioural changes. Pay.UK has announced that a joint payments task force was established [i] to take necessary steps and monitor developments in the payments industry, allowing the government and financial institutions to use this intelligence and shape their response accordingly.
Given the indispensable nature of payments, financial firms will need to take stock and consider their payments strategy accordingly. The paradox between increased time-critical demand for payments change in an environment of squeezed investment appetite and constraints is not easy to navigate. There is a need to do more, but the crisis may have forced businesses to deliver less, in order to reduce business disruption. We think this challenge is not insurmountable: a laser focus on customer needs will be the differentiating factor for many firms. Responding to these needs and organisational priorities will be paramount to driving customer and business confidence in the coming months.
This does not mean that longer-term structural change, such as ISO20022 programmes, should be de-prioritised, as this could prove damaging in the future. The benefits and opportunities of programmes such as ISO20022 are clear, albeit in a multi-year timeframe. From improved compliance, to increased automation and enhanced data; if anything, the recent pandemic has proven the value of investing in robust payment infrastructure and the value of payments as a source of data.
Post-crisis priorities for payments change
As Payments providers contend with what life will look like in the coming period, a revised perspective could see them get ahead. Seeing this as an opportunity to re-assess, re-baseline and create a springboard for growth and innovation could reap many benefits. We believe four key activities will facilitate this outcome:
- Revisit and reaffirm your payments change priorities. Continue to do this by regularly challenging, reviewing and re-prioritising your change list. This exercise could result in projects that were previously shelved bubbling to the surface: chatbot support, increased channel payments limits, strengthening controls (such as Confirmation of Payee), improving accessibility for vulnerable customers and bolstering fraud detection are some examples. A customer-centric and demand-led payments change strategy is imperative right now; institutions must focus on what users need across their entire customer base, be that retail or corporate and not shelve the innovation required to achieve this. Being relevant, available and adaptable will be a key success metric for Payments in coming months.
- Partner to solve your customer payment needs where it accelerates time to market and if this means strategic change, embrace it. Responding to widespread payments trends could result in a move away from traditional payments to newer alternatives. With a decrease in cheque processing by 14% in Q1 2020 [ii] and further decreases expected, investments in innovative real-time payment solutions (including card-based offerings such as Mastercard SEND and Visa DIRECT) could be impactful.
- Don’t ignore key strategic payments programmes. Large-scale payment change programmes, such as ISO20022, may seem like good candidates for de-prioritisation right now due to the cost and effort required however this should not be the case. Taking tactical approaches to such change will lead to workarounds which are often risky and costly to maintain and ultimately difficult to unravel. Such programmes have the potential to establish true digitisation in payments and homogenise the Payments ecosystem, thus the ultimate benefits are considerable and should be taken into account.
- Be agile and proactive internally. Ways of working may change dramatically for some and considering all options before returning to the default of the “old normal” will enable businesses to make conscious decisions which are right for their organisation. This will set their teams up for success – even if that success looks different to the original forecasts and plans. Be ready to be adaptable professionally, just as we have had to adapt our lives outside of work.
How BCS Consulting can help
BCS Consulting is an expertise-led management consultancy working solely with clients in banking and financial services, bringing effective change to world-leading businesses. Our portfolio includes a diverse range of multinational and UK banks, payment companies, insurance firms and other financial institutions. Using our insight into payment challenges, we help firms to identify and implement their most important change. Across change delivery, payments technology and operating model change, we work across the organisation to respond to payment challenges and opportunities.
Considering the current crisis, we have channelled our thinking to provide insight and advice to deal with COVID-19; dealing with topics that range from operational[iii] and cyber resilience[iv] and financial forecasting[v] to digital transformation[vi], operating model[vii] and customer experience. We are actively supporting our clients in delivering on their priorities and managing their portfolios during these challenging times. We think success depends on keeping the show on the road and maintaining a crisp focus on your customers – and we are here to help. Please get in contact to discuss how we can support you too.