How to approach the payment architecture in the matter of instant payments?
The anticipated obligation to engage in instant SEPA payments offers banks a unique opportunity to standardize and simplify payment system architectures and key payment processes. In the past, banks implemented and developed their payment infrastructure in waves, depending on individual requirements. The result was often inconsistent architecture, duplicate and overlapping functionality, and multi-track payment processes.
ISO 20022 and SEPA instant payments define new standards for modern payment processes. Therefore, banks can use the architectural transformation budget to make a fundamental change that will take their payment infrastructure and operations to a modern level, ensuring their competitiveness and significantly reducing operating costs.
Instant SEPA payments newly introduce the obligation of daily AML screening of the entire client portfolio. This process can also be used for transfers within the same bank and instant domestic payments. Transactional AML will thus only be used for a minimal number of cross-border payments.
A new obligation will also be to verify the IBAN and the beneficiary's account owner. The entire set of validation procedures will then be used for other payments, allowing banks to achieve a high STP (Straight-Through Processing), i.e., implementing processes without human intervention – i.e., fully automated or at least robotized processes. A high level of STP can significantly reduce the operating costs of manual processing of outgoing payments.
An interesting option will be implementing modern applications for payment orchestration (Transaction Orchestration, Payment HUB). It will use rule-based engines that allow consolidation of payment transaction processing, straighten and harmonize data flows and thus achieve increased operational efficiency. This can significantly facilitate core banking systems, which will be able to simplify their agenda to simple billing of transactions to client accounts.
A separate chapter will be about generating client statements, which are now sent to clients in various formats – from PDF and paper statements through electronic invoices in the old SWIFT format to modern electronic statements in ISO 20022 form. Managing such a large amount of formats and data will require a specialized application combining accounting sentences from core banking systems with additional information provided by the ISO 20022 format. All this is formatted into the desired output at the end of the report generation process and then sent to the client through the preferred channel.
It will be up to the banks themselves how effectively they can use the budget for this transformation and prepare their payment infrastructure for modern and efficient payment processing. If you are unsure about your options and need advice, at Trask we offer consultations on the reference payment architecture with senior experts with many years of experience in banking payment departments. We will help you define a transformation road map, find a Proof of concept for crucial components of modern payment infrastructure or complement your development and testing capacity.
František Kovařík, Architect, Payments
František has been working in the financial sector for over 18 years, and his main domain is electronic banking systems. As an IT architect, he helps banks implement payment middleware components that address various shortcomings of legacy core-banking systems. He joined Trask last year as the chief architect of the Payment gateway team.
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