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Cross-border payments are an essential part of the global economy. Historically, the cost and potential delay of processing have added unnecessary friction to commerce. As payments wait to be settled, gaps in visibility can frustrate both sides of the transaction.
It has also made it difficult for small and medium-sized enterprises (SMEs) to tap into the potential of global commerce and has hampered their economic growth.
However, it isn’t all doom and gloom for the future of trade. Advancements in cloud platforms are giving rise to new architectures that are being used to deliver real-time payments, both domestically and internationally. It has significantly reduced the cost of operations and connectivity complexity while offering participants the ability to settle instantly. The immediacy of funds means less risk for exporters and importers, while accelerating economic growth.
A new approach is needed to step up the pace of change
The reality is that the future of payments will need a range of channels, methods, and routes to move funds. Those who transact will want to have choices based on factors such as convenience, exchange rates, settlement speed, and cost.
However, the payments infrastructure for many corporate banks is already strained by existing needs, let alone future ones. The ability to swap out or add new parts of a payments platform quickly has long been a goal, but was difficult to achieve with prior generations of technologies.
Banks can now develop, deploy, and scale updates to the components of their payment platforms independently, leveraging microservices to reduce cost and complexity. This proven approach has already been battle tested as safe, reliable, and scalable by some of the world’s most recognisable institutions
Creating high performing delivery teams and platforms
As banks strive to excel in the rapidly evolving domains of artificial intelligence (AI) and cloud technology, employee productivity and experience have rightfully regained focus. This renewed attention stems from the banks’ pursuit of top talent capable of propelling them forward in these areas. Increasingly, this means reducing the cognitive and delivery overhead so that high-quality services can be created quickly and efficiently.
The tooling landscape for both developers and data scientists continues to evolve, but the base need for making necessary information readily available is a constant. This means turning to development hubs so that teams can share information with others and be a catalyst for new value streams.
The rapid accession of generative AI only adds an additional productivity boost as it can read and summarise technical artifacts. However, collaborative technology is only half of the equation. Adopting operating models and practices that foster cross functional collaboration is the fuel that makes high performing teams stand apart from the rest.
Scaling artificial intelligence beyond the four walls of the bank
AI has long had a place in combating financial crime. Cloud based data platforms have shepherded in a new era of data science, powered by almost unlimited, on-demand infrastructure. However, the true power of machine learning is with large data sets.
SWIFT has shown how foundational models based on data-sharing agreements between banks will be the key in quickly identifying problematic transactions. As this becomes the new norm, banks will have to invest in tools to support governance so that AI is responsible, explainable, and transparent.
Reducing the cost and complexity of operations
The technologies to support microservices are inherent in modern cloud platforms, but can easily become unyielding to manage with prior generations of technologies. Attempting to apply this approach with the wrong underlying technology can increase complexity and introduce unnecessary operational overhead.
As banks look to modernise their payments infrastructure, it is important to look closely at the technology that sits underneath. Much of what makes up a modern cloud platform is fully automated and is optimised to work with these types of architectures. While the cost and risk are higher for re-platforming and migrating payments to the cloud, the payoff can be significant when it comes to outcomes.
Early cloud adopters have been able to reduce the cost of infrastructure by 50% and another 21% savings in operational overhead. Furthermore, they hold the belief that by advancing the technology supporting their cloud strategy, an additional 54% in efficiencies can be attained..
Making the transition from old to new
Ramon Villarreal, payments industry lead, Red Hat said, “For many banks it is not feasible to throw out 30 years of payments technology in one fell swoop. The best way is to progressively modernize their payments infrastructure as they adopt these cloud native architectures.”
Creating an intelligent roadmap with transitional states provides a sustainable path of evolution while derisking the transition. This period of time can’t be indefinite. Banks need to decommission the existing payments technology to get the migration benefits.
Otherwise the organisation is in limbo, with neither the efficiencies promised or achieved. As banks continue to evolve their cloud strategy, it is important to look at emerging options in the market where the platform can connect multiple environments together on the same operating platform so that they can gradually make the transition from one stage to another.
The technology future of cross border payments
China was the first to introduce a central bank digital currency (CBDC), followed by India, with other countries who are actively running pilots and evaluating its use. The rise of digital currencies in some markets will undoubtedly reduce settlement times and decrease the cost of moving funds.
In 2022 SWIFT and CapGemini announced that they successfully completed a transaction between two distributed ledger networks based on Quorum and Corda. It is not far-fetched to see the continued drumbeat of distributed ledger technology (DLT) as an alternative to traditional domestic networks.
The good news for corporate banks is that they can operate and scale connectivity on the same cloud platform. We already have a sense of what the future of cross border payments looks like by these early adopters.