The pandemic has prompted banks and payment intermediaries to scrutinise operations as many accelerate planned transitions to a Cloud environment. Here, Ciaran Chu, Head of Public Cloud at ACI Worldwide, talks through some of the key considerations.
Recent data from Link shows UK ATM withdrawals falling 60 per cent during the lockdown; PayPoint, which offers in-store bill payment services for consumers in the UK and elsewhere, saw card payments increase 75.3 per cent year-on-year in the first two weeks of April; while, according to the UK’s Office for National Statistics, the proportion spent online soared to the highest on record in April 2020 at 30.7 per cent. A similar picture is building across many countries.
The accelerated demand for online and digital payment services has encouraged fintechs, neo and legacy banks to quicken their pace, increase their processing capacity, design new products and, in many cases, prepone planned launches.
Industry experts believe the habit is here to stay. Retailers continue to work out ways around restrictions of physical distancing and lockdown during the pandemic. Consumers continue to look for reliable, cheap yet secure methods of real-time and digital payments and transfers. At ACI Worldwide, this meant the launch of new capabilities in its UP Immediate Payments solution aimed at extending application programming interface (API) connectivity to allow its clients a simple integration into any digital channel. Broadly, this means ACI Worldwide customers will now be able to benefit from real-time payments and transfers via internet banking, mobile banking, mobile wallets, e-commerce portals, bill pay apps and social media payments, with the added benefit of connectivity and fraud management now integrated in a one solution.
Only a few days before the launch of new capabilities within UP Immediate Payments, Wundr, the London-based retail payments platform, selected the UP e-commerce payments solution to enable its mid-tier and large retailer customers to connect to alternative payment methods. It said at the time that it was looking to enable end customers to conduct crossborder payment processing and local acquiring with ease.
As part of its delivery of real-time, any-to-any electronic payment solutions for banks, intermediaries, merchants and billers, ACI Worldwide had to make pandemic-specific, automated updates to keep payment options flexible for clients. Against this backdrop, we asked its head of public Cloud, Ciaran Chu, how he sees them responding to the new environment as we emerge from the crisis.
The Fintech Magazine: During this pandemic, the Cloud has demonstrated its ability to handle a sudden change in demand. How ready are banks and intermediaries now to move business critical operations to it?
Ciaran Chu: From a recent study we ran with Ovum of 1,200 C-level bank and financial intermediary executives, 93 per cent are sold on Cloud computing, with 84 per cent saying it was mission critical and they want to move to it in the next 12 months. Not only do banks understand that security in the Cloud is enhanced, in many cases beyond their data centre levels, and a lot of them are convinced by the elasticity of the service – containers, elastic scalability, and DevOps. But now they’re also reassessing their operating models. That’s the big shift being accelerated by COVID. They want to make it easier for end customers to consume their services, be that fraud management, core banking, merchant capabilities or payments. So, what’s become important is the overlay of services – and this is where the payments-as-a-service piece taps in.
It’s not a one-size-fits all for Cloud deployment; you want to ensure that you’re leveraging the best pieces of your on-premise operation while you transition that away. Then you can grow your business out and focus on transformation, as opposed to getting involved in a big migration or setting up a new solution in the Cloud and then thinking ‘am I just going to spend the next 18 months recreating a lot of what I had on premise?’.
The hybrid transformational approach is really important, because it ensures clients unlock value every step of the way, whether that’s faster time to market, reduction in cost or being able to launch more surrounding services that help them differentiate themselves.
TFM: With the astonishing increase in the number of transactions during the pandemic, we’ve seen a corresponding rise in online fraud. How can fraud monitoring be wrapped into a Cloud-based payment-as-a-service?
CC: The more data you can access, the more opportunity you’ve got to not only stop fraud but also, importantly, negate the false positives, which are a massive issue and will continue to be with the shift to online channels. At ACI, we’re able to plug in our capabilities around our core payment and fraud application. Users have an end-to-end, holistic way of monitoring not only their traditional card payments, but also their real-time payments, in a scalable environment. I think that is a game-changer.
Some of the additional value that ACI brings, given our depth of fraud expertise, is providing business support. We have dedicated expertise within ACI that will support clients in evolving their rules, and then plugging in their business processes to the solution so that they can manage them more effectively.
We launched a partnership demo with Microsoft Azure earlier this year to show the ACI fraud application orchestrating with the Microsoft toolkit, which is available to view via the Microsoft Tech Centres. And then we have our database-as-a-service running native within Azure, which ensures that clients can scale up and scale down as needed. Where there are extremely high volumes, such as in India and Brazil, where there’s a big real-time capability, it’s crucial that the solution performs at a very high transaction throughput but is able to back off as needed. This means that clients can focus on protecting their businesses at an optimal cost point. They’re not overpaying for their central processing unit and resources. They also have the support of the ACI staff who are experts in the application and can ensure that the rules being put in place do not have to be bespoke to one bank: if we’ve three or four institutions that are all doing it slightly differently, they can maybe benefit from a more holistic approach.
TFM: So it’s not only in fraud management that ACI is offering consultancy services?
CC: For a long time we’ve been focussed on being the best software provider. What we’re really looking at now is helping customers find the optimal way to run their businesses. Being able to utilise the major payment wallets in a certain marketplace, for example, means they don’t need to maintain 100 payment apps. We’re looking at things that are going to drive their growth at an effective margin.
TFM: How can companies ensure that they constantly evolve and never get trapped in a technology straightjacket?
CC: The model we implement is ‘establish the basics, ensure that it’s scalable and automated in its deployment’. That means you’re not tying yourself down to a massive legacy architecture that’s going to become harder and harder to maintain over time. Using automated deployment and continuous delivery ensure that you can spin up more environments.
If I look at some of the European providers we’re currently working with, alongside Azure, in deploying their solutions, they’re saying ’we’ve got our on-premise capability, what we want to ensure is that we unlock new capability, bit by bit, and show a return’, which then obviously helps to build out a more engaging ecosystem and makes it easier for them to partner with other providers. Taking that one-to-many approach, with all of the DevOps capability, ensures that they’re not getting locked into a single, monolithic architecture which, with all the regulations in the coming years, is going to be more costly and harder to maintain.
We’re versed in evolving those offerings for Tier 1 solutions. We efficiently maintain their operational compliance and overlay the technology advances with a single service wrapper that ensures those banks and institutions can move away from their high level of maintenance and focus on being the trusted provider of choice for their consumers.
For us, it’s about how you ensure that clients are not having to maintain all of the operating components around the core technology. I think, in the past, that’s been something of an oversight. It takes up an awful lot of their time, and it’s something that clients – banks, intermediaries, or merchants – want to get away from.
TFM: What evolutionary aspects would you watch out for as organisations strive to keep up with Cloud architecture?
CC: The big thing to watch in the next six to 12 months is operational capabilities. The architectural vision is well-signposted: containerised solutions, consumed via open APIs with a low-cost database that allows you to scale up and back as needed and can be plugged into surrounding services. How you get to that is by breaking down your solutions, ensuring you’re leveraging all the native capabilities of Clouds. The key there being that you don’t get locked into a specific Cloud. I think the regulatory advisory, in the next few years, in any case will be for the ability to seamlessly move between them. That requires an end-to-end operational review, focussing on a few key use cases where you can unlock value.