Friend or foe? Data interoperability key to trust in payments

At an exclusive roundtable sponsored by OpenText and hosted by Finextra, leaders from the world of finance and payments came together, in confidence, to discuss the…

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Monica Hovsepian

May 7, 20205 minute read

At an exclusive roundtable sponsored by OpenText and hosted by Finextra, leaders from the world of finance and payments came together, in confidence, to discuss the challenges and drivers facing the industry around digital and operational transformation. I can’t share with you everything that was covered, as we were under Chatham House Rule, but I’d like to give you a flavor of the conversation around the importance of data interoperability.

One thing that a delegate said really stuck with me. Their view was that there were only four things you needed to be good at to be a success in payments: pay, receive, transfer and report. I don’t think anyone would disagree with that but it begs the question: how did something so simple end up being so complicated?

Does digital transformation need to change direction?

The short answer to this question is that both the payments and wider financial services industries have developed as a maze of individual companies that have, over the years, created their own way of doing things. The result is unbelievably complex as unwieldy and inefficient processes and workflows struggle to gain value from siloes of information spread out across the organization and beyond.

But this business model of doing everything yourself is increasingly being replaced by collaboration and ecosystems of partners that must be able to share information and, most importantly, trust both the partner and data they are working with.

Sadly, many payments and financial organizations are some way off that today. Perhaps part of the answer lies in the way these organizations have chosen to implement digital transformation. The focus has been on efficiency and automation. We have seen already some great benefits from this but it seems that the industry has been slower to adopt solutions for data interoperability?

For example, Finextra notes that none of the 43 countries that have implemented faster payments have interoperable systems. In an environment where collaboration and information sharing are key, is there a danger we’re focusing on efficiency rather than effectiveness?

Data interoperability: Trust starts at the bottom

While the lack of interoperability in cross-border payments is extremely concerning, that’s at a macro level. My opinion is that meaningful change very rarely comes from the top. Yes, government regulation and customer requirements are demanding a more open environment across the entire financial services landscape, but there’s something a little more fundamental at play.

Delegates to the roundtable noted that many businesses simply don’t know where their money is at any given time. Something that should be relatively straightforward, such as knowing settlement status on a regular basis, is still fraught with difficulties. This is not sustainable. Complexity has to be replaced by collaboration and trust. This can only come when there is a great degree of visibility and control – and that requires data interoperability at every stage of the payments process.

According to Finextra, “If the full supply chain – from funding, through authorization, purchase order, shipping, receipt of goods and payment – is visible, the uptick in business and market confidence that this generates can be very exciting indeed.”

Faster payments. Where’s the value in that?

There’s a lot of work around faster payments – where the transmission of the payment message and the availability of final funds to the payee occur in real time or near-real time – that has seen excellent progress in the consumer space, but there is still room for improvement in the B2B arena.

However, this has to be about more than just the speed of payment. We’re relying on the quality and timeliness of data to facilitate the process but that’s an opportunity to assess if we’re getting the most value from the payment itself.

So, is there more value in the payment or the information that surrounds the payment?

For both the payments firm and their business customer, the real opportunities and benefits lie in the contextual layer of information around the payment. This is what gives rise to new and innovative services such as instant invoicing and dynamic discounting. Yet, one delegate pointed out that the payment and the payment information are currently held in separate environments.

Digital identities. Building a bedrock for trust

Data interoperability is one side to the trust coin. You have to trust the data but you also have to trust your partners. The delegates pointed to digital identities as a major element to creating trust across secure, collaborative platforms. In this way, everyone on the network knows exactly who they are dealing with and can connect and onboard with new partners quickly and efficiently.

A platform that enables collaboration and trust, and, Finextra concludes, “It is at this stage that value-add products and services, such as accounting, reconciliation and tax packages, for example, can be developed at a faster rate and the proposition for the end user becomes brighter and brighter.

To download a full version of the Finextra report: ‘The Information Advantage. Driving Opportunities and Mitigating Risks in a Hyper-Connected World’, visit our website.

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Monica Hovsepian

Monica Hovsepian is the Global Industry Strategist for Financial Services at OpenText. With more than two decades of financial industry experience, Monica has become a trusted subject matter expert in the Financial Services Industry, having worked with numerous large and international banks in North America, Europe and Asia.

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