Sibos 24: the modern (and future) payments experience

The modern payments experience goes beyond banking. The sector is evolving alongside shifting customer expectations, the rise of third-party providers, and increasing demands around security and safety.

In the lead up to the 2024 Sibos financial services conference in Beijing. ANZ sat down with Jackie Kallman, Head of Payments Industry and Engagement at ANZ, and Brian Bonar, Head of Payments, Industry & Risk at ANZ NZ, to discuss how the sector is changing and what that means for the future - on both side of the ditch.

Below is an edited version of the discussion. The two experts started by addressing the emergence of payments as a ‘third pillar’ of banking.

Brian: Banking is changing. In the past we've seen deposits and lending take the limelight. Over the past few years there's been an emergence of this third pillar, payments, which is now gaining more visibility than ever before.

The biggest driver of this shift is our customers’ demand for digital, and all the innovation, speed and convenience that it brings. Our payments ecosystem is changing, across regulators, fintech and customers. And that’s been driving a need for banks to respond.

From a NZ perspective, our market is embracing that change, although we're still the only country in the OECD that doesn't have a real-time payment (RTP) system. That in itself is worthy of discussion. We operate seven days a week with our direct entry domestic system, but RTP is a big-ticket item the NZ industry is going to have to consider - what's the value of such a system to our customers and the economy?

Jackie: That digital shift is significant. We used hear a lot about the ‘uberisation’ of payments, but we don't so much anymore - largely because any company that has an interface or digital presence has embedded their payments in their systems and processes.

That’s reflected in the way we deal with customers now as a bank. It used to be that banks dealt with treasurers and accounts-payable people. Now we are dealing with UX people and product people too. It’s been an interesting shift.

Our business customers are thinking about their end-to-end proposition, and the payments part of that, and how their customer pays. When we look at this space at ANZ, we have many competitors that are not just banks – they’re fintechs, other third parties, and even merchants providing payment experiences.

What's clear is the modern payments experience is all around us, and goes beyond banking. In this market, being easy to do business with is critical.

Brian: The sector is really opening up, I agree. These third parties are seen as being innovative and faster, more efficient and cheaper. Banks are sometimes seen as slow – probably unfairly. Yet we must balance the speed and innovative agendas with safety and security amid concerns about fraud and scams.

The rise of third parties will continue and banks will be disintermediated if they fail to take a proactive position. They can do that by looking to leverage partnership opportunities that will be beneficial to everyone, including consumers.

In NZ, action initiation – where consumers can authorise these third-party service providers to make payments on their behalf – is built into the proposition of the still relatively new open-banking ecosystem. That system, while complex, also presents unique partnership opportunities, use cases and services for customers across payments and data sharing.

Jackie: Absolutely. I’m glad you mentioned scams and fraud. Payments are embedded now; it’s all part of the experience and we’re trying to make these systems as easy as possible.

But the ‘old’ systems had well-established controls; there were boxes and guardrails. The same measures are less effective in a real-time, embedded-payments world. The question for the sector is: how do we ensure these new systems are safe?

From an ecosystem perspective, all the elements need to be aligned – telecommunications services, digital and social media platforms, and yes, also banks. The industry, regulators and government in Australia and globally are considering how we tackle that at a holistic level in a real-time, open-access world.

The Australian government consulted in September on a draft legislation framework, which takes a whole-of-ecosystem approach to reduce gaps criminals can exploit. Designated sectors under the framework need to have measures in place to prevent, detect, report, disrupt and respond to scams.

In addition to policy and regulation, the banking sector in Australia has taken a proactive approach to establishing and meeting obligations, with the release last year of a Scam-Safe Accord which outlines the steps banks will take to protect customers. One such step is the commitment to deliver an industry-wide ‘confirmation of payee’ solution to provide real-time matching of the payer’s intended beneficiary name with the name of the account held at the beneficiary bank. 

Banks and payments providers are also exploring opportunities for increased data sharing, use of behavioural biometrics, increased onboarding controls, and the use of artificial intelligence and behavioural analytics to introduce targeted controls to prevent misuse of the system.

Brian: Further education is required for all parties. In the payments sector, new tools like confirmation of payee help, but more is needed to solve issues like romance or invoice scams. To your point, Jackie, banks are not alone and we must leverage and collaborate with all sectors, including government.

In both Australia and NZ there is growing talk about digital identity and what that means. If done well that should enable our customers to engage in the digital economy in a more frictionless and safer manner.

When you think about the payments ecosystem in the future, many of these systems will be effectively invisible and we'll have modernised the end-to-end value chain to such an extent we will not only shift value, but also the associated data will be far richer. Much of that shift will be driven by data.

We’re already starting to see some really cool data initiatives emerge, through things like open banking, IS020022, and more broadly the advancement of digital assets. For ANZ and the financial-services groups we bank, the more data there is, the better we can serve our customers -- be it for things like payments reconciliation, or insights to spending trends.

There's a lot of opportunities that exist across a wide range of customer needs. For the sector, the challenge is to make the most of those opportunities, and give the best service to customers, all while still meeting regulatory requirements and addressing safety and security concerns.

We need to think long term and position these elements firmly into ANZ’s strategic direction. If we don’t our competitive edge will erode and customer demand for smart, convenient digital services will diminish.