EBAday 2024: Next steps in instant payments, regulation, and liquidity management

In the panel ‘The Instant Payments (r)evolution’, Simon Eacott, head of payments at NatWest; Ingo Faulhaber, division manager of account payments at Worldline; Wim Grosemans, global head of product management, payments and receivables at BNP Paribas; Hays Littlejohn, CEO of EBA Clearing; and Amelia Ruiz Heras, senior director of global solution consulting payments at Finastra, explored the potential of the instant payments landscape in Europe.

Eacott said he is not surprised that most of the audience voted for fraud, Know Your Customer (KYC) and Anti Money Laundering (AML) as the biggest challenge to instant payments adoption.

Faulhaber expected people to vote for infrastructure/technology as a greater challenge, arguing that “the adoption of instant payments is a journey and the start was a bit slow. We would love to see more transactions, but it is very important to keep user experience at the centre. Users are reluctant to use the transactions, so there is still a route of movement.”

From the point of the EBA, Littlejohn explained that banks are ready to provide instant payments infrastructure, adding: “I think we have issues on the part of the story; infrastructure is one part. We must pay attention to the whole ecosystem, end-to-end.”

Grosemans highlighted the importance of working with each other: “As a bank and as a community we need to continue to speak to each other, anticipate, and constantly, continually implement KYC, and provide a solid journey for customers.”

Eacott spoke on how the UK has struggled to implement fraud prevention protocols: “We've done a lot of things in the UK, both industry-level and in banking to try and combat it. We haven't yet built a regulatory regime which encompasses the entirety of the ecosystem. We've got one that protects the consumer in terms of when fraud is done, so we have a reimbursement scheme, but actually what is more important is stopping it before it occurs. In payments today, the use of data is going to be key for artificial intelligence, big data sharing, and polling data to identify trends. All of those things contribute to the instant payments infrastructure...We need to address it as an industry and we need to do it fast.”

Heras concluded by noting another challenge in the space around keeping the end user in mind: “Sometimes instant payments become too frictionless, and banks should sometimes put some friction back into the payments to raise the mental understanding that there is money being transferred.”

In a session titled ‘New regulations – new opportunities?’, panelists Antoine Cuypers, director of strategic alliances at Intix; Karthik Jagannathan, head of presales and payment solutions at valantic FSA; Katja Lehr, managing director of EMEA payments and commerce solutions at JP Morgan Payments; and Julie Timpson, head of high value and international payments at Barclays, discussed new developments in legislation, among European regulatory authorities.

When asked about the need and necessity for all of these payments regulations in Europe, Jagannathan said that some European regulation is purely industry driven, such as ISO20022, which is not necessarily pushed by a central bank but has the potential to go a long way in making payments more efficient - and this is needed to speed up payments.

“There are lots of reasons why we need regulations," he continued. "I also believe that the regulation simply catches up with reality; there are situations where we need laws that just catch up to what's happening in the market.”

Lehr believes that at the core of regulation should be protection of the consumer. Considering the European geopolitical situation, as well as the discussion around fintechs and big tech, she said the main question that financial organisations need to ask themselves is how they can ensure payments continue cross-border if there are sanctions, and how to maintain payments operations if that scenario arises.

“When we issue guidance, if we don't actually get adoption, the regulator is having to step in and say, 'it's time to make it mandatory so that we actually get some adoption' because it's a chain effect. You're not going to innovate if there is no opportunity that allows us to be creative,” argued Lehr.  

Timpson mentioned how global banks are trying to juggle the regulation being issued on all sides, from multiple governments. It is a struggle to keep pace.

“Get the data and insights that will help raise adoption," he suggested. "We've already seen the original roadmap is being challenged in terms of timescales. It's not just the FMI and the pace they are migrating. There is a need to really seize the opportunity and start making use of the data; using it, and allowing us to innovate on the back of it. We're trying to meet regulations and trying to just tick the box.”

Cuypers said that a variety of datasets is key to follow all these regulations: “Banks are often facing pressure from the large amount of regulations coming from all angles, but what can ease it is consulting asset holdings and data management and valorising that data to better understand it.”

Lehr commented that there are a lot of other regulations that are rolled out at the same time that will impact payments, such as AI Acts and data regulations which influence how banks operate and how effectively they can lay out their compliance strategies.

Cuypers stated that fintechs can provide additional value to banks in the compliance process by bringing different perspectives; alleviating the pressure to comply.

In the panel ‘Reassessing priorities in liquidity management’, experts Vivek Chikballapur, head of EMEA liquidity and account specialists at JP Morgan Payments; Jorge Filipe Nunes, head of liquidity and funding at Banco BPI; Justin Silsbury, lead product manager at Infosys Finacle; and director of product and global cash management at BNY, Varun Yadav, explored how the liquidity management ecosystem has been impacted by the geopolitical state of the world today.

Chikballapur started: “You can't be prepared for everything, but you can be strategic about decision making and assessing every assumption. You can be prepared for the ‘known-knowns’ and some of the ‘known-unknowns’. The way can you prepare for the ‘unknown-unknowns’ is discipline; have a stress test framework and consistently invest in your business."

Nunes said that you can never really be prepared for what is to come, but trust is always key in liquidity, and building that trust with clients through partnerships is simple, yet vitally important: “You really have to build trust with your clients. Build a partnership with them which will help them relax."

Silsbury mentioned how mass amounts of data can be processed through AI and machine learning, real-time analytics, reporting, transaction processing, and more: “As a software vendor, we manage a lot of issues in banks, a lot of what we do around the advances in AI technology can help with cash flow forecasting, optimising capital, and helping liquidity scenarios.”

Yadav spoke on the importance of customer segmentation and mediation: “A very important factor which I think in many cases most banks do forget about is how they are segmenting their data. Is it granular enough? Is it is examinable enough to create a customer segment at a high level?”

Salisbury commented on the volatility of the market as an effect of geopolitical risk. As a result of geopolitical events, lenders are becoming risk-averse and recessions have arisen that impact macro-policy and asset prices. He highlighted how liquidity managers need to be aware of how this triggers change in regulation. In order to prepare, banks and corporates need to intensify emergency liquidity, form solid relationships, rely on more than one channel for funding, and tap into these customisable tools to automate mundane tasks to avoid the loss of customers.

Yadav concluded that it is important to address both end to end and back-office aspects of innovation.