During the final session of the 2006 Executive Summit, JPMorgan Chase's Patrick Moore, SVP, Product Executive - ACH and Deposit Services, and First Horizon EVP & CIO Patrick Ruckh agreed that the future of payments, as the presentation was titled, lies in a more collaborative, interoperable environment.
Interoperability between interfaces, between financial institutions, between corporates will become even more essential than it is today, according to Moore. "Infrastructure providers like SWIFT envision an environment of collaboration and partnership," he said.
He also predicted that 10 years out, the industry would enter a time when working capital management becomes more critical than today. The key to surviving in this climate will be to provide faster, more efficient service. In light of this shift, not only is the payment itself important, but so too is the information around the payment, he said.
"If you look at the commoditization of the payments space, it's the payment itself that has become commoditized," stated Moore. "Financial institutions need to see how to extend their value proposition beyond the payment. How do they add value added services to enhance services, mitigate risk and create opportunities for premium pricing?"
This sentiment was echoed by First Horizon's Ruckh. "The information around the transaction is as important as the transaction itself and will become even more valuable," he said. "It tells us who our customers are."
This change will usher in a different market, opined Moore, where the differences between cross-border and domestic payments, high- and low-value payments blur, where pricing is driven by what Moore calls a FedEx-like model where speed and security count.
Two of his points in particular received a great deal of buzz. First, he forecasted the virtual disappearance of checks within a decade as electronic payments come to the fore in all areas. "The opportunity is right to influence the B2B space," he offered, referring to these check-writing hold-outs. "How do you provide an operating model with a seamless workflow? Business processes need real-time information. We've been slow to get there but the opportunity is right. If we make this a collaborative effort, an all-inclusive operating model, there are benefits for all players."
Ruckh was not quite so gung-ho about the demise of checks since "they've been talking about that since I entered banking in the 1970s." However, he acknowledged there is definitely a leveling off of check volumes.
Moore said the industry will be driven to these changes by several factors, including a changing regulatory environment that is trying to accommodate a transforming world; the wider pool of bank and nonbank competitors due to new payments technologies; the drive to differentiate through speed, quality and efficiency; and the push toward globalization and the interoperability necessary to fully achieve this goal.
The other point that raised a few eyebrows was Moore's discussion of how many of our security concerns will be resolved in the not-too-distant future. However, he emphasizes this will only come about through a cooperative effort among those in the industry. "Consumer privacy is a very hot issue," he said. "My hope is that the regulators will focus more on oversight and less on direct involvement in the payments landscape. We don't want the regulations to become stifling."
Ruckh says the technology to achieve this goal is present today, such as biometrics. "The question is, how do you get the devices out there and get people to accept them? Security issues will be solved, but we need an impetus. When the fraud losses get big enough we'll realize we need something more."
Moore was confident in the industry's ability to create the opportunities about which he spoke. Overall, "If there's one thing banks have proven over the years, when there's a compelling reason to do something, we execute," he said. "It will require collaboration and partnership across industries."