The future of payments – a segment in constant flux

There is no doubt that payments as we know them today will change fundamentally. This change requires massive investments but also promises good returns.

The payments sector is undergoing irreversible further development. A clear sign of this is the advance of digital payment methods on the Italian market.

Several trends can be identified at the same time. These include automated payments, digitised commerce, PSD3, instant credit transfers (which should soon be standard), including for cross-border payments, RTP and the management of data flows using artificial intelligence, which will become possible with the move to the ISO 20022 payments standard.

In view of the constant development of the market, a change in strategy is likely in the coming years, which will result in a reorganisation of previous business plans.

Market players are often unprepared for a change of such magnitude, which requires investments as well as skills.

It is therefore not surprising that instead of a consolidation of platforms, an increasing fragmentation can be observed. This is probably due to the fact that the various domestic payment methods, other than the direct debit procedure RID (an Italian payment method based on a standing direct debit mandate, where the instructions given by a specific creditor are executed) which has now been replaced by SDD, such as ICI or MAV (a payment method by means of a payment notification containing the information required to reconcile the payment) and RiBA (a payment method where the creditor's claim to receive a payment is acknowledged) are outside the SEPA system.

While SCT procedures have undergone technological modernisation, many platforms in the commercial portfolio of the largest financial institutions are still in mainframes because they were developed according to the traditional Cobol/CICS/DB2 paradigms.

High-value payments are also in many cases located on the existing, and to that extent not yet abolished, credit transfer platforms; similar to more recent projects such as the TARGET2 consolidation and the evolution of cross-border payments from FIN messages to the MX standard, which take advantage of the converters. This further increases the fragmentation at the application and architecture level.

In such an environment, consolidating platforms within a payment hub can only have a positive impact on system operating costs, the amount of investments required for the development and, last but not least, the lead times for system releases subject to regulatory compliance.

The desired consolidation could also be promoted by the introduction of the new payments procedure Request to Pay within the SEPA scheme, which could be a natural evolution of national payment services such as RiBA and MAV. But we are not yet at that point. It remains to be seen how the Comitato Pagamenti Italia will position itself on this.

Authors: Federico Sajeva, Marinella Pistone, Alessia Giani


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