BANKING
Kevin Pettet , COO at Bottomline , provides four key recommendations to financial institutions on what they should be investing in throughout 2024 to mitigate payments frictions :
1 . Rationalising international payments : This is an area where the industry has become more confusing . A number of new fintechs are focusing on this today , although there are no clear leaders . In the short term , this situation has made the situation more complicated rather than simpler as banks try to sort out what the best forward strategy should be .
Bottomline sees rationalising international payments as a key opportunity . We believe that this situation will change in 2024 , as some payments technology vendors take leadership roles , enabling the endgame of making things simpler , faster , more reliable and less expensive .
2 . Confirmation of beneficiary details : To further complicate the market , there have been domestic initiatives to reduce fraud by making sure the beneficiary name is lining up with the account number on the payment instruction . In the UK , this has become a regulatory mandate with a new service called “ CoP ” or “ confirmation of payee ”, but banks outside the UK are not able to access the new validation services because of privacy concerns .
A side effect of this situation is that every payment instruction coming from other countries has a reasonably good chance of failing when the instruction reaches the UK correspondent bank tasked with executing the payment .
This phenomenon will likely start to become an obvious problem . Expensive downstream payment failure has haunted the banking industry since SWIFT was introduced to “ replace the telex ”. SWIFT recently announced a new service that banks can use to perform this beneficiary name / account pair validation check called “ beneficiary account validation ” or “ BAV ”. This service combines third-party services from around the world that do this locally with historical payment data going through SWIFT – the idea being that , if an account / beneficiary combination has been used successfully many times , chances are the pair is good .
The BAV service returns a level of confidence about the pair . The most effective place to put this service is at the point of payment capture , and I foresee this service getting integrated into client-facing digital channels in the coming year – especially as more and more central banks and markets start to mandate this validation the way the UK has .
3 . Adoption of real-time payments in the US : The Clearing House ( TCH ) Real- Time Payments ( RTP ) have been in the B2B payment space for a few years , but the uptake has been slow . With the
54 January 2024