Paul Henaghan, managing director of Asia Pacific & Japan for ACI Worldwide
The payments landscape has undergone various changes especially in the recent years. From accepting cash, cheques and credit and debit cards as forms of payments, banks now have to offer and accept electronic payments such as internet and mobile banking.
"As smartphones have become the tool of choice in our lives, we are so used to the flexibility it provides that we expect the same from payments," said Paul Henaghan, managing director of Asia Pacific & Japan for ACI Worldwide in an interview with bankITasia.com. Consumers today demand the ability to engage with banks at any time, anywhere and via channels convenient to them, he added. Besides that, they expect payments to be completed in real-time with little to no incurred costs to them.
Despite understanding the evolving customers' preferences, banks find it a challenge to meet those demands due to their legacy systems which makes up the core infrastructure that facilitates the payment process. Henaghan explained that the main problem with legacy systems is that they require rewriting of codes or processes whenever a new functionality, such as accepting mobile payments, is to be added to them. "Doing so does not only takes up time and resources but might also cause unintended consequences and risks to other parts of the legacy system."
To help banks be agile while retaining their current capabilities (or legacy systems), ACI launched its Universal Payments Platform in April last year, said Henaghan. "The platform integrates service-oriented architecture in the legacy environment to create a flexible front end so that the systems are able to accept payments from any channel, be it mobile, internet or prepaid cards, in real time," said Henaghan.
With Universal Payments Platform, banks will only need to change the required parts of the legacy systems to add a new functionality. This allows banks to cater to new technologies or meet changing regulatory demands without incurring the huge costs and risks that they will incur should they choose to rip and replace the core infrastructure, asserted Henaghan.
Besides other financial institutions, banks now have to compete with new competitors that are not from the finance industry but are entering the payments spaces such as Google and PayPal, said Henaghan.
These competitors can be disruptive to banks as they have the ability to target untapped consumer segments. For instance, M-Pesa - a mobile-phone based money transfer and microfinancing service - is so widely used in Kenya that the country led the world in terms of mobile money in 2013, according to The Economist. In 2013, over 17 million Kenyans were using the service and it contributed to around 25 percent of the country's gross national product. M-Pesa, however, is not offered by banks but by Safaricom and Vodacom, mobile network operators in Kenya and Tanzania.
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