The paper defines open banking as an initiative that enables third party developers to build applications and services around financial institutions by giving access to previously walled-off data.
“Our research shows that the possibilities for value realisation in the open and real-time banking ecosystem abound,” said Craig Ramsey, head of real-time payments at ACI Worldwide. “New services such as Request to Pay are already proving popular in many parts of the world. Once merchants and banks recognise the benefits adoption will take off.
“Real-time payments and open banking add value for businesses in a variety of ways and they have a huge potential to help banks grow revenue and attract new customers when combined.”
“Consumers have been quick to adopt real-time payments in many countries, because they offer additional convenience and functionality,” added Leo Lipis, Chief Executive of Lipis Advisors.
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| Source: ACI Worldwide/Lipis Advisors white paper. Banking models against degree of digitalisation. |
“Many people are just now beginning to realise that the combination of real-time payments and open banking can improve efficiency, compliance, and create new services for corporate customers, too, and lead to increased revenue for banks.”
The paper outlines new use cases, spanning retail and wholesale payments, that can benefit the entire value chain including:
The creation of new types of digital overlay services, such as Request to Pay (RtP)
With RtP, a biller can send an electronic request for payment and customers can respond via their mobile phone to make the payment. India is an example for how digital overlay services can create an explosion in cashless payments.
The paper predicts that RtP is set to revolutionise billing in sectors such as utilities, local government or mortgage payments. Other services could combine real-time payments with related financial services; for example, banks could offer faster decision on short-term loans by combining real-time payment systems and data on credit worthiness.
Addressing inefficiencies in accounts receivable and payable
Where the reconciliation process of incoming payments to outstanding invoices remains highly manual, API-enabled systems and more functionally-rich data standards can provide invoices and payments that map to the needs of the corporate customer.
Improving regulatory compliance
For many banks compliance with know-your-customer (KYC), anti-money laundering (AML), and counter-terrorism financing (CTF) sanctions often involve manual steps that prevent straight-through (seamless) processing. This drives up the cost and reduces the speed of payments. APIs could allow for two-way communication with centrally held and up-to-date sanctions lists, allowing for always up-to-date automated screening. Furthermore, anti-fraud measures can also be shared among consortium banks, allowing mule accounts to be identified more efficiently.
In Asia-Pacific, the paper observes that some governments are studying emerging technologies ahead of setting regulations. The Australian and Singaporean governments have created fintech sandboxes to facilitate innovation in the hope that new services will be developed, for example. Malaysia and Thailand have increased efforts to reach those previously underserved by banks, and so are trying to drive financial inclusion.
In Japan, the government expects more than 80 Japanese banks to begin releasing APIs by 2020 in order to facilitate partnerships with innovative fintechs, despite the lack of any governmental decree. In China, mobile applications like WeChatPay and AliPay have turned into platforms allowing users to send real-time payments, order food with integrated payment functionality, and split bills all from the same application.
Explore:
Download the Get More From Real-Time Payments white paper from Lipis Advisors and ACI Worldwide (PDF).
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