Modernizing payment rails: the fast track to frictionless global payments
Technology is fueling a proliferation of new payment methods, but with legacy infrastructure and consumer inertia posing barriers to global adoption, just what does the future of money movement look like?
In this week’s Payments Innovation podcast, host Cara Hayward spoke to Dan Roseberry, VP, Global Fintech Partnerships at Visa, and Emily Man, Investor at Redpoint Ventures, about the promise of new payments technologies, why progress varies so much from country to country, and what Europe and the US could learn from India and Brazil.
Here are some of the episode’s key takeaways:
Innovations come quickly, institutions move slowly
While Fintech is benefiting from an explosive rise in the number of ways to make payments, Man pointed out that these rapid advances are being held back by the creaking technological infrastructure that underpins much of the world’s banks.
“43% of our banking systems are still built on COBOL, which is a programming language from the 60s,” Man explained. “So technology is one area where there’s a lot of opportunity to modernize, to enable these new ways to pay to proliferate.”
Roseberry suggested that with the vast costs for a bank to modernize its entire infrastructure, many institutions will continue to merely patch up their architecture for as long as they can, rather than making wholesale changes.
With a surprising number of B2B payments still being conducted by cash and checks, there is still a long way to go towards realizing the promise of some of the most exciting innovations in the sector.
Real-time payments mean real-world benefits
Among the most exciting of those innovations is real-time payments (RTP). As more and more businesses and consumers make payments across borders, Roseberry argued their needs are not being fully met by today’s financial services.
“And that’s where I get really excited about real-time payment rails,” Roseberry enthused. “A small business can receive funds safely from their clients or customers in close to real-time, or maybe their vendors are able to provide working capital to them that would allow them to pay their workers early. And it may also allow them to pass on some of those cost savings to their customers.”
RTP payments in the US still make up a small fraction of all transactions. Man and Roseberry agreed that for their potential to be achieved, there would need to be more collaboration across the financial system on fraud detection and reporting to ensure that the future of global money flows is even more secure than the present.
What the US and Europe can learn from emerging markets
Man and Roseberry agreed that the US and Europe could learn a lot from Brazil and India, which have both enjoyed explosive growth in instant transactions – not only in terms of what has worked and what hasn’t, but what kind of incentives are necessary to overcome the barriers towards widespread adoption.
With Central Bank Digital Currencies also having a role to play in creating smoother payments, Man suggested that it will be developing nations, with no existing payments ecosystems in place, that are likely to be at the vanguard of innovation.
While every country is currently moving at its own pace, according to its own unique market conditions, Man suggested that the time will eventually come when we can start thinking about a global standard of money movement.
With the existing barriers to widespread adoption still firmly in place, that time remains some way off on the horizon.
Until next time!