In digital payments, transparency should be king.
At 2018’s Swift Business Forum in New York, banking executives rallied around the message that ensuring transparency during the whole payment process is key to improving the experience.
“You solve for this, you solve for everything,” said Manish Kohli, managing director and global head of institutional payments and receivables, treasury and trade solutions at Citi.
Kohli discussed the challenges of re-engineering cross-border payments so they could be faster, simpler, and yet secure.
“In the B2B space, as payments move from one bank to another bank and move across borders, if all players in the chain can see where the money is at any point of time, which bank is taking how long to process it, and which bank is taking how many deductions to process it, it puts pressure on the whole industry to improve,” he said.
On the sidelines of the event, Kohli said banks can build in more intelligent routing, “which can move money through channels and pipes, which are either least-cost pipes or pipes that are the fastest in getting money to a destination.”
With transparency, Kohli added, data can be created and mined in order to improve existing applications and create products and solutions that can help leapfrog over unforeseen obstacles.
The levels of transparency are inconsistent in the digital payment space, especially in cross-border payments. Payments can be delayed because of a regulatory issue, a sanction query or a potential fraud alert.
Panelists debated which was more important: transparency, security, speed, cost or another attribute. The audience voted overwhelmingly for transparency.
“To me, it is security of payment,” said Kristen Michaud, managing director of treasury operations at GE, who was surprised at the results. “I would pay more to make sure my payments are secure than have them go faster. Faster payments scare me because of fraud.”
Security garnered zero votes.
“Trust and security are non-negotiable,” said Scott Galit, chief executive officer and director at Payoneer, who suggested security was dead last since it is an understood feature that is required across the board.
Another point raised at the Swift event is the evolution and ever growing use of gig apps—Lyft, Uber, TaskRabbit and AirBnb—and how they are affecting the experience around payments.
“They have changed the expectations,” said Russ Waterhouse, executive vice president of product development and strategy at The Clearing House. “How does an Uber driver get paid? In the gig economy, they are looking to increasingly check out and get paid instantly.”
Waterhouse used the example of his company's Real Time Payments application, or RTP, which launched in November, 2017 as a 24/7 network and infrastructure for payment, settlement and messaging. It was launched with six member banks: Citigroup, JPMorgan Chase, Bank of New York Mellon, SunTrust, U.S. Bancorp and PNC Financial Services Group.
“How do you facilitate that gig payment? RTP absolutely enables that because it’s real-time. It’s not, ‘I give you a check and you got to go to the bank and cash it.’ It absolutely lends itself to that experience,” Waterhouse said.
“A consumer doesn’t have to pull out a credential anymore. The challenge now is how we make sure that continues to be a very secure process,” he added. “How do we secure RTP in an environment like that? We are looking at tokenizing RTP such that it can be used in such a way that a credential is not shared.”
Another aspect of the application: Both sides of a transaction can see right away whether it goes through—a feature not available in ACH processes.
Waterhouse recalled a recent news story involving a car-sale scam. The buyer sent money via Venmo, then canceled the ACH funding transaction and got the money and the car.
“That,” Waterhouse said, “would be an example of not fit for prime time.”