NPP - 8 Technology speed breakers for real time payments

The New Payments platform offers the potential of plenty of business advantages to the retail and corporate customer segments, however it presents significant technology challenges in its adoption and implementation. In this last installment of the three part series, I discuss the technology impact of the move to NPP.

1. 24*7 nature of Real time payments will mean greater operations / technology costs to maintain fail over tracking teams and enabling manual intervention to process the transactions. While majority of the transactions are expected to be STP, but given the legacy nature of back office processing systems, banks will need to maintain business operations and technology teams to manage exceptions or failed transactions to ensure they maintain the SLAs under the new payments regime. Over the period of time, banks will have to re-engineer their technology processing and process flow logic needs to be more products and channel agnostic. This generic flow concept will help reduce the time to market for new products as well as reduce implementation costs for any changes to existing product schemes.  This re-engineering should also improve overall payments system resilience and efficiency in general.
2. Integration between online banking and the real-time payments platform will need to occur at multiple levels. Mobile payment processing platforms (e.g. Zapp or ApplePay or proprietary bank apps like Barclays PingIt) with online banking platforms for account balance and processing requirements.  There are others like Sofort in Germany which integrates online banking with the e-shopping experience to provide convenient, faster and secure transfers. Additionally, payments processing will also have to be integrated with real-time cash & exposure management and ledger systems to seamlessly manage the real time, online and batch platforms for unified experience.
3. 'Scagile' Sight Applications – To fully harness the benefits of NPP, enterprises will need to build Scalable, agile and insightful applications not only to handle the load of real time payments data required, but also to harness the value through process / customer insights.  
   
   

   
4. Implementation issues especially involving batch and non RT back end systems for greater efficiency and reduced costs will be important to address. Real-time settlement and reconciliation will present its own challenges. Banks currently manage non-availability / upgrades to systems through batch and maintenance windows at the end of the day, which will no longer be available. Enterprises and businesses will retain Batch / bulk processing of payment transactions especially for schedule payments and payroll processing as they are more cost effective. However, real-time clearing and settlement will put more pressure on system resilience and availability of payment platforms as processing will need to be done outside business hours with availability stretched to 24*7. Platform upgrades and changes will need to be made with little to no down times to ensure customer convenience is maintained which will be a challenge for systems not designed for minimal planned downtime and it is a considerable challenge to retrofit these capabilities into existing heritage systems.
5. ‘Agile’ Business Activity monitoring (BAM) will be a critical component of a real time payments implementation. This has some significant implications -  
   1. Investigating incidents raised by online merchants and enterprises, especially those involving manual interventions and transaction research by technology or business operations teams
   2. Proactive alerts to help limit and manage critical events or transactions which have a significant impact on customer satisfaction
   3. Identifying and measuring performance bottlenecks for continuous cycle time improvement and historical comparative analysis.
6. Elastic Payments Store – Richer data due to the NPP enhanced messaging capability will necessitate maintenance of payments data within a dedicated payments data store to ensure traceability, acknowledgment and reporting of transactions and detailed analysis within real-time performance requirements. Also, this will drive the creation of differentiated overlay services bringing additional revenue opportunities for ADIs. The data architecture around the data store will be critical in search and retrieval activities and should be designed to utilize modern “big data” technology.  
7. Increased pressure on completing the AML/CTF checks within seconds to enable real-time payment clearing and settlement. This will be particularly important given the non-reputable nature of NPP transactions. Banks will have to prioritize the essential business rules required before the payment is processed within the real time settlement window. Also, they will need to manage a mechanism for after the fact checks and processes. 
8. Reconciliation utility – As complexities increase with real time processing, reconciliation will be a key focus area and abstracting all aspects of reconciliation from channel / products systems will be critical to the overall success of the NPP.

Designing and implementing resilient and flexible payments platforms to extract the benefits of NPP will be critical to the success of the program at each participating financial institution.  This will separate the winners from the losers.