Consumer demand for faster, lower cost and flexible payment methods is driving the digital transformation of financial institutions. But it’s not easy. The move to real-time payments and same-day ACH payments means balancing 24/7/365 uptime and liquidity – turning away from the traditional 9-5, Monday through Friday operating model.
Beyond meeting consumer needs through faster payments, digital transformation is also about the rich data and information that moves with the payments. This data can improve decision-making, drive operational efficiencies, expose new revenue opportunities and enhance relationship management capabilities. Financial institutions that are cautious will miss a compelling and differentiating advantage.
Managing Liquidity to Mitigate Risk
There are broad implications to 24/7/365 payments processing, including the need to have immediate and ready access to available funds. Traditional tools and strategies for managing liquidity fall short in this environment.
Parking excess funds in the central bank to cover availability can be a costly and unsustainable solution. Likewise, underfunding a financial institution’s central bank account could result in customer payments being stopped or delayed, not only harming your customers but also posing a huge reputational risk to your financial institution.
But here’s where data comes in. With the right data analytics tools, financial institutions can transform payments data into payments data insights. By marrying payments data with the right data modeling, machine learning, artificial intelligence and visualization tools, financial institutions can monitor payment flows, track operational effectiveness, and ultimately predict future liquidity needs with a high degree of confidence. Put another way, advanced analytics can take the guesswork out of liquidity management so financial institutions can land on the sweet spot between overfunding and underfunding their central bank accounts.
Deepening Retail and Corporate Relationships
The coronavirus pandemic highlighted the need for financial institutions to have a line of sight into their financial stability, the financial stability of their customers, liquidity management and the economic and social trends that drive their business. But there’s more to be gained from payments data.
Forward-thinking institutions can leverage this information to also:
- Prospect for new customers
- Customize and tailor products to existing customers
- Provide better service
- Enhance existing products and processes
- Offer products to customers that they otherwise may have found to be too risky when considering only traditional creditworthiness measurements
What does this look like in action? Financial institutions can use data to determine which solutions and products would add meaningful value to their customers, such as better tooling and monitoring techniques. Automated monitoring capabilities can also alert organizations to processing issues that might otherwise go unnoticed – or, worse, get flagged by their customers. By getting a jump on the problem, financial institutions can deliver a better, seamless experience.
Advanced data analytics capabilities, when integrated with an enterprise-wide payments platform, can also open up new avenues to revenue generation and sustainable growth. An enterprise view of payments data can give financial institutions insights to build deeper, more comprehensive profiles on their consumers’ credit capacity and risk profile. By looking at overall liquidity and funding levels that are not necessarily reflected “on paper,” institutions can determine if additional credit-related offerings are justified. As a result, they can promote services they might not otherwise offer – and thus deepen relationships with their consumers.
Insights at the Enterprise Level
So, where to go from here? The question isn’t where to get the data; it’s already available, traveling alongside the payments. Before they can put that data to work, financial institutions need to evaluate their payments infrastructure. To get the most from their data, organizations need a payment strategy that applies across payment types.
Adding another silo or manual work-around simply won’t cut it in this on-demand environment. Disparate systems, single-function applications and manual processes are inefficient and prone to error under the best of circumstances. Legacy systems and incompatible platforms hinder visibility and cancel out the advantages of automated monitoring and modeling.
An integrated enterprise payments platform, or payments hub, is the key to intelligent payments processing. With an integrated platform, financial institutions can process payments and collect data across channels, payment types and clearing schemes.
An integrated platform increases straight-through processing and overall payment processing speeds while reducing the need for inefficient, manual intervention. The result: Faster, more accurate and more complete data, providing a real-time look at operations and processing performance. From there, institutions can begin to layer on dashboards, exceptions handling, artificial intelligence and machine learning toolsets to gain a true, 360-degree view of payment activity.
Some comprehensive enterprise payments platforms offer out-of-the-box tools that can be put to quick use for processing payments and gathering data. But for those smaller institutions that are seeking parity with the big players, it’s not enough to rev up processing capabilities. Enhanced monitoring capabilities and other integrated offerings, such as fraud support, are foundational to building market differentiation. Institutions that do not have the resources and expertise needed to build these tools and dashboards on their own can partner with a Fintech or technology vendor.
Digital payments are here to stay, providing an unprecedented amount of data-rich information and competitive capabilities. Financial institutions that don’t jump on board now will risk falling behind, and fast. Those that have the right infrastructure, strategies and tools will have an unprecedented opportunity to leverage their payments data to improve products, processes and profitability while gaining new customers.