With the Coronavirus lockdown dramatically increasing the amount of transactions carried out by contactless payment or e-commerce and accelerating the decline in cash usage, there is a school of thought that fresh impetus would be provided to the launch of real-time payment platforms.
Mountstephens, Equinix’s head of banking and payments ecosystems in EMEA, however tells Finextra Research that with every business affected by the lockdown, they are scrambling to redeploy resources into areas of most need.
“A lot of UK banks have just stopped lending to a new mortgage deals,” he observes. “Not because they can’t, but because they need to focus resources onto dealing with day-to-day queries from their customers.
“They can’t have hundreds of people trying to process mortgage applications at a time like this.”
He believes that Q2 will be a continuation of this, with companies focusing on ensuring they remain functional and that they are keeping their people safe and well, but thereafter it will be business as usual.
The current situation could however accelerate the digital transformation of small businesses due to a needs-driven survival instinct. They realise the necessity to innovate and digitise in order to continue to exist.
“You take the example of my local butcher, who’s trying to build a website so that he can sell his meat online, which he never had to do before,” Mountstephens says.
“Normally, these businesses wouldn’t look at something like that, and even if they did, it would take months to build. But now you’ve got my butcher, in a tiny village in the middle of nowhere, going from a footfall industry to an e-commerce platform in about two weeks!”
The show must go on
The Coronavirus pandemic places us in a world where the use of cash drops off even further than it has in recent years, point-of-sale transactions sees a steep decline and there is a surge in payments through e-commerce.
While the next few months will see this adjustment accounting for the majority of companies’ time, attention and resources, Mountstephens does not believe that activity in the real-time payments ecosystem is entirely in stasis.
“Once we get through these next few months and everyone settles down, are big projects going to be cancelled? No. Are planned real-time platform deployments still going to happen? Yes.”
He explains how there are still various projects ongoing, with multiple countries expected to announce the refreshes of their payment technology to make it conducive to real-time. This involves refreshing the old technology and replacing it with instant payment platforms with the capabilities to support Open Banking more effectively.
“It’s a difficult time, but the big decisions will not see serious delay or cancellations, but in this three-month period, everyone is working out how we’re going to work in this situation, which isn’t going to go anywhere any time soon,” Mountstephens sums up.
Real-time payments platforms and cloud
There are many conversations taking place around what technologies will facilitate and drive innovation based on real-time payments. Cloud-based technology, for example, looks to be a huge enabler, particularly for the Fintech community, and those organisations working in Open Banking.
The attraction of the cloud is that it can enable things to be done in a faster fashion and in combination with modern APIs allows partnerships in the financial services arena to develop quickly and grow. As traditional banks and their challengers are finding, their fintech partners are already heavily reliant on the cloud to develop their solutions.
However, the relationship between real-time payments platforms and the cloud is a little bit more complicated.
While not always regarded as critical infrastructure by national governments, as would be defence or intelligence systems, payments platforms are of course integral to keeping a country’s economy ticking over. There’s a tangible sensitivity to keeping these real time payments platforms grounded in data centers on national soil, and the operators and regulators are particularly sensitive to who has access and manages the platform.
“So, national switchers don’t go in the cloud because they are so critical to a nation. Platforms like P27 and Faster Payments want to keep all that data and infrastructure on home soil, where it can be managed.”
Therefore, there is a lot of thoughtfulness about deploying national payments infrastructure in a cloud provider. While this could change going forward, for the time being the management of these systems makes it difficult. Mountstephens explains that they tend to be managed in quite a hands-on fashion by teams physically at data centres.
“This is not a criticism of any of the major cloud providers, but rather an understanding that the sensitivity of keeping it on national soil in a building where the government can ensure both safe keeping of the operations and data,” he sums up.
“I’m sure in time that will change, but at the moment, these platforms are very traditionally built on the ground in data centres using geographically-separated resilience as a core part of what they’re doing.”