In recent blog posts, my colleague discussed how advances in technology, consumer demand, and government regulations are poised to transform the payments industry in three critical areas:
- Instant account-to-account (A2A) transfers, moving money directly from one account to another, eliminating the need for intermediaries like credit card processing and bank checks. Apple Pay, Google Wallet, and Venmo are examples of instant A2A transfer applications.
- Open banking, the new framework enabling financial services firms to more easily support instant A2A transfers.
- Cross-border payments, financial transactions by individuals or organizations requiring a transfer of funds across international borders. These transfers often require currency conversion, adhering to different regulatory frameworks, and working through different payment systems.
Earlier this month, Finextra Research hosted a webinar on this topic, delving into the progress of payments modernization in EMEA. The blog provides a summary of some of the key priorities and challenges discussed, and why GridGain should be considered as part of the solution.
Current Progress on Payments Modernization
Consumer demand for easier payments has compelled action on the part of banks and regulators, but change is not taking place at the same speed everywhere. The webinar notes that Australia, Brazil, and India are great examples of countries leading the way, with Europe and the U.S. lagging. The one certainty across the global financial industry is that banks will need to continually adapt to support what is likely to be constant technological innovation for the next several years. And by “adapt,” I mean incorporate new technologies, such as real-time payments (RTP), and change workflows, even as they must continue to support legacy capabilities like checks and credit card payments.
One of the greatest challenges will be meeting new real-time SLAs, such as contained in the FedNow regulation in the U.S. and the SEPA Instant Credit Transfer regulation in Europe. A common target of these regulations is a completion time of 10-seconds or less from initiation to the funds being available in the recipient's account. Other new SLA requirements are related to 24/7/365 operation; resilience and business plans; compliance and security, including real-time fraud and Anti-Money Laundering (AML) screening; interoperability and API performance, and error handling and notifications.
Real-time verification of payments (VOP) and bulk VOP, which focus on fraud prevention, operational efficiency, and regulatory compliance, will also have a profound impact on financial IT. As will the likely eventual adoption of a “stablecoin,” a type of cryptocurrency that, unlike traditional cryptocurrencies like Bitcoin or Ethereum, minimizes price volatility by maintaining its value relative to a "stable" asset, such as a currency like the U.S. dollar or a commodity like gold.
GridGain as the Foundation for a Payments Transformation
For me, one of the highlights of the webinar was the audience response to a question about the biggest challenges banks will face in moving to open banking and RTP. The answer: legacy infrastructure. Adding new real-time data capabilities along with robust AI processing at scale will be an imperative to improve efficiency and security, while meeting the SLAs – all without breaking existing processes.
But how can financial services firms hope to add all these new real-time data processing at scale capabilities at a time when most firms face finite and often limited budgets? They can’t just rip and replace. It would cost too much and take too long.
That’s where GridGain comes in. GridGain enables businesses to create a data foundation that lets them adopt and scale new workflows without having to rip and replace existing infrastructure. GridGain’s in-memory data grid can be deployed between existing applications and legacy databases (e.g., mainframes, relational databases, payment gateways like SWIFT, ACH, etc.). Streaming data to the memory grid offloads the burden from legacy systems. And by acting as a low-latency data hub, GridGain can unify siloed payment data (from core banking, fraud platforms, FX systems, etc.) into a single, real-time source of truth.
GridGain also delivers:
- Ultra-low-latency processing at scale: GridGain's in-memory, distributed architecture supports processing millions of transactions per second with millisecond latencies, enabling banks to meet new SLAs. GridGain’s fault-tolerant design ensures high availability and resilience, crucial for payment systems that must be available 24/7/365.
- Real-time Fraud Detection and Risk Management: GridGain supports hybrid transactional/analytical processing (HTAP), which is the ability to perform real-time transactional processing (OLTP) and complex analytical queries (OLAP) on the same data simultaneously. This means that high volumes of transactions can be screened for fraud, AML, and sanctions violations in milliseconds before they are settled – without impacting transaction performance.
- AI/ML Integration: GridGain provides a real-time data store for AI/ML models, enabling real-time feature engineering, vector embeddings, and prediction caching and model serving – key capabilities for fraud detection.
- Enhancing customer experience and enabling innovation: By unifying diverse payment data in real-time, GridGain enables a comprehensive customer view, supporting personalized services, real-time balance updates, and improved mobile banking experiences. GridGain's flexible platform allows financial institutions to quickly develop and deploy new payment services and adapt to evolving customer demands and regulatory changes.
Conclusion
Regulatory requirements and customer demands are driving payments innovation in Europe, and North America is quickly catching up. Financial institutions that are grappling with how to solve the challenges that lie ahead can learn much from the experiences of businesses in regions that are further along on the journey. One lesson is clear. These organizations will be required to transform their data infrastructure, so the question they need to start answering now is how to do this reliably, smoothly, and cost effectively.
GridGain can help. For more information on how we can address your specific payment infrastructure challenges, book a technical consult.