The market of payments and the different tools that, in addition to multi-millennial cash, enable people and businesses to exchange money with each other, is changing at an exponential rate.
I’m mentioning only some of the data published in the 19th edition of the Credit Cards and Digital Payments Observatory (Report in Italian) edited by Assofin, Ipsos and Nomisma, with the contribution of CRIF.
The impact of these changes on our professional and private lives is there for all to see and is now an everyday matter.
One just has to take a look at the many TV commercials — or the online advertisements that often “accompany” (or interrupt?) us when we’re browsing our favorite e-commerce platform — to see that we’re in the midst of a constantly accelerating change, a veritable commercial battle, in which the different players are committed to winning over as many streams of digital money as possible.
In this sector, digital means “beyond cash”: the European House – Ambrosetti think tank has for some years now been running a project dedicated to the cashless society, building a community around this theme made up of different actors — industrial, entrepreneurial and institutional — whose mission is:
“To promote dialog and relations between payments industry players, the business community, and government and institutions, as well as produce knowledge and workable proposals to promote the ‘Cashless Society’ and opportunities for the country’s growth and modernization.”
The community has recently published the sixth edition of its research work, “Cashless Italy: Changes in Progress and Future Perspectives”.
One of the key elements of the report concerns the Cash Intensity Index, which monitors over time the incidence of circulating cash on the GDP of 144 countries in the world: it is striking that the United States and Mexico both have an average cash intensity, while the best performers with low cash intensity are the countries of Northern Europe and Canada.
Decreasing the circulation of cash is important, but it’s not everything. I quote from Ambrosetti's report:
“In terms of the environmental benefits of using cashless payments over cash, the environmental impact of each cash transaction is 4.6 grams of CO2, compared to 3.8 grams of CO2 equivalent for a cashless transaction. In the case of cash payments, the impact is due, in particular, to the coin production phase (32%) and the ‘operational’ phase (64%), which includes ATM operation and coin and banknote transport. In the case of digital payments, 75% of the CO2 is linked to payment terminals."
So, one can easily understand that the transition to "pure plastic-free" digital payments to be read with a special terminal may make a significant contribution to further reducing this residual 75%.
The digital payments game is one of the catalysts of the concept of sustainable finance and can have a very major impact on the key indicators that measure the (collective) sustainability of an investment, or on the ESG (Environmental, Social and Governance) of companies. On the other hand, plastic can also become green and sustainable, supporting this change: in Mexico, for example, some companies are already issuing cards made with PLA, a bioplastic made from corn and, therefore, biodegradable.
Another factor for change is undoubtedly the pandemic that has given, and is still giving, a brutal and unequivocal push towards a profound change in the purchasing habits of consumers around the world. Streams of money have gone from being used via classic payment methods — such as cash or cheques — to more sophisticated ones, such as credit and debit cards: two instruments that, however, still retain a component of physicality. The next step? Fully dematerialized payment instruments, such as P2P payments or virtual cards.
How can Financial Institutions seize the opportunities arising from these changes? After all, today, the need to go to the branch in person to make a transaction is something that is conceptually already obsolete. It is another matter, however, if one addresses the issue of financial wellness, namely the advisory support and contribution that Financial Institutions can provide as an element of diversifying value. The white paper “CU Payments Outlook: How active member relationships drive long-term growth” of CO-OP Financial Services talks about this issue, in this case gathering the opinions of United States consumers: “96% of members and prospects find importance in accessing a branch in the future to obtain financial advice.”
The road ahead in the next few years hence appears to be quite well-defined with “banknote rustling” bound to give way to “plastic” (less and less) and the “fully digital” (more and more), with these two distinct money transfer methods in turn battling to conquer the market. On the other hand, the role of the relationship is becoming a key element of the future value that financial institutions can express towards the end user.
VISA, MasterCard, American Express: although these players are the global payments giants, they are currently playing a dual role. On the one hand, they attack, on the other they defend their positions, for example due to the rise of innovative payment systems unrelated to the presence of an underlying card. This evolution brings benefits, in general terms, but does not yet precisely meet the new needs of consumers: the systems that operate the transactions are still linked to the banking context of the individual country, thereby weakening the intangible element and its capacity to drive the spread of a truly global system.
These new forms of payment are already common both in Europe and overseas and are the result of the evolution of regulatory changes in recent years, which aim to liberalize financial markets and make them more competitive.
The latest one is dated last 11 October, and was announced by The Clearing House.
This player, one of the operators of the classic ACH (Automated Clearing House) payment network that had already brought a groundbreaking innovation in 2017 with the launch of the new standard for real-time payments called RTP® - Real Time Payments, has just announced that it is producing a prototype capable of connecting the US RTP® to its European twin RT1. In fact, subject to the need to continue to use the international SWIFT network, this evolution will allow a US citizen to issue instant payments to a citizen of the European Union. The two continents are thus even closer.
What has been described so far illustrates a competitive arena in the thick of the action, where roles and alliances are constantly changing and in which Financial Institutions must keep up, relentlessly: the great risk is to be frozen out of the game.
We feel we are an integral part of this world and we experience its nuances every day. As creators of banking IT solutions that started from Italy and developed worldwide, landing on the North American continent, we are also playing this game.
The roots of this present are anchored in the growth built through the completion of numerous projects based on our international banking IT system “BankUp”, initially in certain Eastern European countries, and then in Mexico and finally in the United States, an experience with which we have, from time to time, enriched our wealth of knowledge about products, processes and international markets.
The international expertise built over time and space, across two continents, is not only focused on the individual financial product or single application solution but also expresses all the aspects that accompany the life cycle of these solutions, inside and outside a Financial Institution.
This wide background is condensed in the new platform for card payments created between Italy, Mexico and the United States: a solution that encompasses the ability to natively integrate the banking IT system of the individual country and flexibility while offering great ease of dialog with the multiple actors outside the process, such as card processors, plastics manufacturers and printing and mailing service providers.
The platform allows all types of cards to be managed: the classic debit cards connected to a liquidity account active in the bank’s management system or the revolving credit cards for which, in addition to the authorizer node function, we manage the loan’s entire life cycle: from the calculation and charging of monthly interest, to the receipt of payments, generation of bank statements, to mention but the main ones.
At the same time, the platform also allows prepaid cards to operate effectively, helping Financial Institutions in the internal management of liquidity accounts and allowing them to be fed from the outside as well, regardless of the banking management system used. In fact, a B2B2C Web platform accompanies the management of this type of card, with which the Financial Institution’s client companies can independently manage the entire pool of corporate cards.
This new hub is currently used in both Mexico and the United States and we are working in this second half of 2021 to distribute it to the more than 70 US Financial Institutions served by VisiFI.
Thanks to the perfect and continuous synchronization with the core banking system, and with the multi-channel platforms made available to end customers, this solution allows both parties to get the most out of card management, offering high standards of security for sensitive data and with full PCI compliance.
The entire process of activating the new solution, which was created in Mexico and now also serves the US Financial Institutions, is the result of this cross-border collaboration and involves colleagues from the two countries and from different functional teams: a project on which we will be engaged until 2023.
Together with the technical part, we are also working to assist Financial Institutions in the process of change, helping them in the training of staff, the configuration of the different types of cards, the conversion and migration of data from the old to the new platform, as well as the management of the stand-in period, namely the time period during which the Financial Institution is isolated from the card payment network and will, therefore, need to recover and charge on the new system card uses occurring in the transition from one platform to another. This specific part through which we support the activation of the new system takes place during the first weeks of operation and includes the many professionals involved in this change.
In the United States, moreover, the Financial Institutions collaborating with VisiFI have already been able to benefit for some years from our real-time accounting solution, created specifically for the US market starting from our European-style accounting engine, Bank-Up. This incorporates the US market’s specific features, producing a groundbreaking product compared to the batch solutions normally widespread on the North American market.
These two focuses, on cards and payments and on real-time accounting, are for us two sides of the same coin and coexist in perfect synchrony, allowing Financial Institutions to address with maximum security and efficiency many of their business-critical processes, such as traffic monitoring or exception and reconciliation management.
Our Group has started its own globalization path by globally exporting the skills, software solutions and expertise on banking systems and processes developed in Italy.
Crossing the borders of our country, leveraging this great wealth, has allowed us to build a worldwide banking competence that ranges from core system’s management to digital payments.
In this way, we have built an across-the-board, international offer, which comprehends the breadth of experience gained in the world and our eclectic approach: translating our experience in banking management systems — with which we are still very diligently engaged — into digital payments and card management.
The plug — the core system — is and always will be required to turn on the lamp: what is important is not to forget to ensure that the lamp itself evolves to meet the needs that will emerge tomorrow.
And we are constantly working on this, with the innovative changes made to the VisiFI Digital Banking Platform: an expertise already awarded this year with the victory of the Callahan Innovation Series, which is once again in the spotlight as a finalist in the NACUSO Next Big Idea Competition.
