By Tim Pemberton
Global transactions: the next frontier
How are transactions changing?
There’s a massive disruption challenging how payments are being made around the world. People are asking for things to be faster, simpler and more secure.
It is clear there have already been huge shifts. The number of channels that can be used for payment initiation and execution has expanded greatly, and settlement times have moved from several days to near-real time. Now many retail and business customers are comfortable making major payments on their mobile phones.
Another example is how people identify themselves to banks. They used to have to go into a branch and show photographic ID. This moved to a pin code system for online banking or using some kind of electronic device. Now we have voice, thumbprint and even facial recognition software. Customers and businesses are adapting to this new technology at light speed. And there is much more change to come.
How will payments be made in 2030?
I don’t have a crystal ball, but I think there’s a real-time payments revolution going on in the industry. HSBC Hong Kong has introduced the PayMe app, for instance, which lets users make payments instantly and securely using their mobile phone. I believe in five to 10 years it will be commonplace in every market in the world for payments to be settled more or less immediately. That includes cross-border transactions. Faster payments bring benefits to customers and the whole community in building trust and also giving them better control over their money.
Another change is that I think there are going to be three types of firms operating payment systems. Everyone is currently talking about the fintech companies. My feeling is they’re going to be involved in part of the payment, but will not cover the whole process like banks do. We also have digital giants who are deciding to expand into the payments field. At the same time as these new entrants appear, traditional banks will continue to expand and evolve with new technology.
Will new technology help customers?
Banks such as HSBC have an obligation not just to make sure the payments are safe and sound, but to ensure that we look at the next frontier.
I can see that with a customer’s permission, we could use their data and provide insights so they can be more effective. For example, a corporate treasurer may find they have more cash in their accounts and realise they can invest this in other areas. They might have also forgotten something simple, such as paying a regular supplier on a set date. Banks will be able to see the anomaly on these payments and point this out to the customer, potentially saving them embarrassment and money.
What role will banks play in the future?
It’s important for traditional firms such as banks to continue to invest every step of the way. I don’t think there’s a trade-off between innovation and financial stability though. It’s vital to have stability with an increasing volume of transactions. We want to be sure that we’re trusted, with our systems working at all times and containing the latest cybersecurity protection.