996. Insights: How are real-time payments reshaping global finance?

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1:57Money is moving faster than ever, across borders, between people, and even from machine to machine. Real-time payments and account-to-account technologies are reshaping global payments, challenging the systems that have long defined how we pay and how we get paid. Real-time payments are becoming a powerhouse of the global economy, enabling capital to move faster. Can the payments infrastructure keep pace with these changes? I'm Benjamin Ensor, and in this episode of Fintech Insider Insights, we're exploring the rapid evolution of the payments landscape, the modernization of payments infrastructure, the future of real-time payments, and how account-to-account payments are starting to change commerce.

2:42Joining me to unpack this fast-moving problem is our expert panel of guests today. First of all, we have Helena Forrest, Executive Vice President, Product and Commercial for Real-Time Payments at MasterCard. Welcome to the show, Helena. It's great to have you on the show and here in the studio with us. Can you tell our listeners a little bit more about you and a little bit about your role at MasterCard, please? Thank you, Benjamin. Absolutely great to be here. In terms of my role at Mastercard, so I'm responsible for delivering our product strategy, product development, and commercialization of account-to-account real-time payments.

3:20And that covers a whole set of infrastructure capabilities. So maybe not everyone knows, but actually Mastercard powers 12 markets around the world with our technology for real-time payments and batch payments. and more recently also we are really focused on developing value-added services on top of these rails ready to help our banking clients fintech customers to drive more innovation unlock new use cases on top of these rail time payment rails and yeah that's what i'm usually busy with great to be here fascinating role i can't imagine you get get bored very often and now we also have a warm return to the podcast for Andy Sacre, Head of Payments at Monzo.

4:08Welcome back to the show. Monzo has obviously been very busy and a lot of our listeners are well aware of Monzo, but can you tell us a little bit about your role and a little bit about, you know, what you've been up to in payments at Monzo? Yeah, good to be back. So I run payments for Monzo and that's everything from card issuing and manufacturing and getting cards into people's wallets and purses, right through to our core banking infrastructure, our connection to faster payments, international payments, open banking, all of that sort of stuff. And I responsible for that over a sort of commercial and product lens as well.

4:42What have we been up to since we last spoke? We're building some stuff I can't talk about just yet, which is great fun and we'll come and tell you guys about that at some point soon, I'm sure. But we've also, we've recently just launched a product that sits on top of faster payments and a couple of other payment types that allows customers to undo a bank transfer. It's this really small, cute feature that hopefully you never have to use. I'm ashamed to say that despite my job role, I have had to use it in real life, which is after paying the wrong plumber. But yeah, a couple of things like that, I think, shows that there's still room in innovation for faster payments.

5:22It is a very cool little feature. And you also have a very busy job. And I'm also delighted to welcome Ogni Buracina, Group Chief Executive at Payable. It's really great to have you on the show, Ogni. I'd love it if you could tell us a little bit more about Payable for people who haven't come across the company and a little bit more about your role. Sure. Thank you so much for having me. And really great to be here with such esteemed panelists and the ones that are already not here for the first time, which is great. So for those who don't know Payable that well, we're a payment service provider and we consider ourselves as the Lego of the payment industry.

5:57Saying that, we really mean it because we incorporate all financial services to our clients that they may require. We're mainly focusing on B2B and that involves acquiring, card issuing and also type of bank accounts or so-called business accounts as well to incorporate for our clients and merchants that they would be able to use that infrastructure seamlessly in one place. So we're a very peculiar payment player. We're not just an acquirer in a sense. And my role, obviously, as the global CEO, is to run the company and the group through all of the challenges across all of the markets that we operate.

6:37And we have quite a few of those. So it's definitely also a very interesting role and a role that keeps on teaching me quite a few things as well. Fantastic. Well, welcome to all three of you. I always love to start with customers. I always think customers is a great place to start. And of course, in payments, you have two groups of customers. You have the people who are buying things, the sort of consumers, the buyers, and the people who are selling things, you know, typically the merchants and so on. Andy, I'd love to start with a sort of customer or sort of consumer perspective from you and just think about, you know, what are some of the challenges that still face customers?

7:12Because we don't always think about payment. It's just sort of something you sort of do until it doesn't work. So how have payment systems got better from a customer perspective over the past few years? And what are some of the problems that still face customers that maybe you hear from Munzo customers complaining about? Yeah, definitely. This is really interesting. I think if you look at the UK, we've had a really mature payment stack since about 2008. And so payments have been fast, easy, fairly instant to settle since then. So the question we ask is, how do you make that better? If you can get money to somebody within a few seconds, safely, easier, what's next?

7:54What's the next version of that? I mentioned it earlier, but our latest innovation is a way to help customers kind of just keep themselves safe if they've sent the wrong money to the wrong person or included the wrong reference and they can undo that and fix it and send it again if they like. You're basically putting in a sort of one second delay or a two-second delay on a payment, is that? Yeah. Maybe technically more complex than that, but that's what it looks like. No, it's almost as simple as that. It came from like a hack day idea. It was built in a couple of days, put out and tested with a small group of customers to get some feedback.

8:27But I think they loved it. You can set the timer anywhere between, I think it's 15 seconds and a minute, just to kind of take the pressure off. It's designed just for that everyday banking moment of people being busy and in a hurry and the last thing they want to spend their time thinking about is making a faster payment. Ugne, what about from the merchant perspective? I mean, merchants often feel like they're at the sharp end of payments because they're the ones who have to sort of deal with the chargebacks. The fraud often hits the merchants. I mean, sometimes it hits the customer too. But what are some of the sort of challenges that you're hearing from the merchants or some of the problems you're trying to help the merchants tackle?

9:08Sure. Chargebacks is definitely a good point to mention, but I think if you look at the infrastructure and the place that our clients are operating, it's very complex. So in most cases, they will be selling their services across the globe and they have clients paying in different currencies with different payment methods. So the complexity actually for them comes from the fact, how do we get those payments? How do we make the experience seamless for the end user purchasing that service or goods in this case? and how to also do it in a way that it is compliant, that the bottom line doesn't bleed completely.

9:51So the challenges are actually quite few and quite complex in a sense of what they can provide for the end consumer, how to get all of those payment options, what are the right payment options also for those said clients, and then managing all of that within their own infrastructure and their own CRMs and systems, making sure that they reconcile and that they know what the client is ultimately paying. So it's a very difficult landscape and I'm happy to say that companies like Payable are there and not only us, to help the merchants navigate through all of those challenges as we are the experts.

10:31And in most cases, we are very well equipped to operate in those markets and we can be the advisory partner that they need and also not only from the advisory side, but also from the technical side. So from the technical side, making it easier and reducing the complexity in where they operate. And of course, not forgetting fraud prevention and chargebacks. This is also one of the things that is, you know, definitely I'm sure that not one's got mentioned during this podcast. And when you take all of those things, you know, together, it's a pretty hefty environment, you know, to be operating in.

11:08Helena there's a whole bunch of really interesting points that I'd love to unpack there but one of them is that that point that it's easy to assume that payments in your own country work just like payments in every other country and that sort of payments are kind of the same all around the world but of course that's not true is it? No absolutely not and you know MasterCard obviously with a global footprint from the cards perspective and then being live in 12 markets from instant payments perspective, we absolutely see that. There are such huge differences and nuances domestically. So when you try to patch that together, cross-border, that certainly increases complexity across multiple dimensions.

11:51Technology is usually the one that is the easiest to solve for. Also, there are absolutely different standards and quirks that you need to be aware of. But a lot of this is also driven just by different regulatory environments, right? Different AML, KYC requirements, sanctions, and so on and so forth. And also different ecosystem players. You know, certain countries allow participants to be not just banks, but also PSPs, wallet providers. So that just adds to that value chain and relatively complex kind of puzzle that needs to be assembled to appear seamless and safe and secure to the end consumer or the merchant.

12:35So that transparency, speed, security is incredibly important. And this is what we are all thriving for. But it is not always easy to achieve. But I think over the last probably, especially the last five years, I think we have absolutely seen significant improvements, incredible innovations in that space. New participants entering that space and really, I guess, shaking up the more legacy players. certainly from MasterCard's perspective and Okne, you touched on that in terms of keeping the consumers safe and having that fraud prevention capabilities is something that we have and continue to invest heavily into.

13:20Something that we want to continue providing to our banking customers and fintech clients so that they can keep their customers safe. I also think one other point that's interesting about the difference in countries is the habits, because each payer, each customer, we have habits. There's ways we've paid for things in the past, and so the easiest way to do anything is to do it the way you did it before. And so you do see these patterns between different countries where people are used to paying in a particular way, and it can be quite hard sometimes to sort of nudge people into new systems. Not young people so much, old people like me.

13:57You know, changing habits, it takes time. But just going back, before we sort of talk more about some of the challenges that need to be faced. You made a really good point about all the changes we've seen over the last five to 10 years. And we tend to sort of take them a bit for granted. But, you know, just from a sort of Mastercard perspective, what are some of the big changes we should be most pleased about over the last sort of five to 10 years? Because we sort of take the innovation that's happened for granted, but actually if we reflect back, there has actually been quite a lot of change, isn't there?

14:24Absolutely. So I guess if we just continue the topic of cross-border, I would say there are probably three kind of main themes that I would group them into. So one is we're certainly seeing from real-time payments perspective that that domestic success is now being tested, I would say, cross-border as well. So initially, you see more and more countries developing bilateral interlinkages with other domestic real-time payment schemes. Particularly the Nordic countries, for example. for example, but also in APAC. That's quite a well-developed kind of bilateral setup. And then, you know, the majority of you would have heard of the initiative Nexus, and that was coined initially by the BIS, but will be going into implementation by 2027, where, you know, five countries in APAC will be interlinking their domestic instant payment systems with one common set of rules and schemes to really enable that speed, interoperability, transparency, and lower cost to the end consumers.

15:35So it is initially focused on the P2P flows. So that's incredibly exciting. In addition to this, I would say it's almost every week we see some type of announcements of partnerships between digital wallets. that's another way of I guess enabling some of these flows and probably the third one that is worth mentioning is the new tech and kind of blockchain enabled capabilities whether proprietary or open source definitely enjoying some test scenarios in the industry I would say. We need a longer podcast. One of the things I would like to talk about is just briefly talk about the UK, not because we happen to be sitting in the UK, but because it's actually quite an interesting market because of the way the government and the Bank of England has laid out a national payments vision and are trying to modernize the payments infrastructure.

16:31Maybe I can come to you, Andy, first and just say, to what extent does the government action to try and modernize payments and so on, how much does that matter to you and your customers? Are you spending a lot of time thinking of that or is it actually not that significant without wishing you to criticize the British government obviously? I'm not going to do that. I think between like HM Treasury and the Bank of England, they've got a really difficult job in motivating the industry to upgrade its infrastructure. And because we've already got faster payments and settlements pretty good in this country, like we're sort of the forefront of a lot of things like speed, ease of access regulatory environment, it makes it quite hard to say, well, what's the benefit of doing all this?

17:20Because payments won't get faster and easier and maybe not cheaper as well by doing the national payments vision and coming up with the new infrastructure. So I think corralling the industry and getting everybody together to say, right, we're going to upgrade the pipes and it's going to make it easier to run and it's going to make it more scalable and future-proof is the important message. That's the important bit. The benefit to customers is going to be fairly negligible in the short term, I think. Payments won't be faster, easier, cheaper because they're those things already. What's your view, Ogni, maybe more from a merchant perspective or from a sort of non-UK perspective?

18:02Is there ways to make things faster, cheaper, better for the merchants, perhaps? I love how Andy basically paints this picture of speed and efficiency and I'm really jealous. I wish that I could say that this is how it is for a regular merchant or for a regular client operating even let's say let's not go very far. Let's not go to Asia, let's not go to Latin America, that's a whole different story. Let's say we're just a merchant operating in Europe and UK, let's say right. Even Europe alone is very fragmented. If we look at the payment options that are there and all of the things that the merchant have to take into account while operating in those markets is definitely not cheap, definitely not fast, and in some cases not really even frictionless from the side of end consumer and how the checkout experience looks like, because in a lot of the cases there is not really full control of how that experience looks like at the end of the day, right?

18:57So I think we're still quite far away from having it all completely unified in some even European markets alone. There are definitely initiatives. Also, Vero is coming into play in Europe shortly. So I'm really looking forward to having the same statement as Andy, to say that actually the improvement will not be significant, but actually anything that can be done in those markets and in the fragmentation that we currently have for our merchants, I think it would be a very significant improvement, right? both from cost perspective and accessibility and the fragmentation alone. So having everything, you know, a little bit more better organized.

19:42Thank you. Helena, you've already given us a couple of examples, but if you've got any more examples of where other markets can learn from, you know, markets around the world that are modernizing their payments landscape, that countries like the UK, other European countries, or even people anywhere in the world should be sort of looking to? Which are some of the most interesting markets? I think it's a difficult question because, again, having that experience and track record and presence in multiple markets around the world, you see that the starting point is different. The ecosystem participants are different and therefore the demands, the needs and the priorities differ.

20:22So I don't think you can ever have that kind of apple to apple comparison. It's not a competition, but it's about working and learning Who can you learn from? No, absolutely. I guess it depends on what the priorities are. And Ogne was bringing up a good point, because if we think about real-time payments, capabilities and infrastructure, the initial kind of birthplace is domestic. But then as soon as we start thinking about merchants who have maybe a regional footprint or a global footprint, I guess the importance of anything that is future-proof and can cater for these kind of needs of participants that have not just domestic needs, but cross-border needs is incredibly important.

21:08So having that modern, flexible infrastructure that enables evolution, whatever that evolution may be in five to 10 years' time, I'm sure many of us a year ago wouldn't have imagined that, I don't know, agentic pay would be a thing. So therefore, it's difficult to predict. None of us have a crystal ball to say, exactly how consumers or businesses will be paying in 10 years' time. But having a modern, resilient, flexible infrastructure that enables that evolution and progression is, I think, incredibly important. So from our perspective, you know, we are ready and incredibly excited to support the National Payments Vision in the UK and bring all the learnings that we have developed across the 12 markets between deploying FPS in the UK and kind of freely bringing the UK to the forefront of account-to-account is something that, you know, we're incredibly excited about and really ready to do.

22:09What are some of the... Sorry, go ahead. No, sorry, just something very quick also to add to what was just mentioned. I mean, adoption is really key, right? You can have, you know, changes and you can make, you know, payments, you know, a veteran account to account is a very good example because it does offer a significant improvement from both sides, from the user experience and from the merchant side in terms of cost as well. So I think that's also very crucial because adoption is driven by the end consumer. And if the checkout experience is not seamless and there's no incentive to move to another option, then it's a real struggle to make those changes as was already mentioned before.

22:51That's definitely true. I suppose the question is, are there ways to encourage people to change their behavior? Can you encourage people to embrace a new system? And I think there are ways that can be done, but sometimes that means that the merchant or someone has to give away a bit of margin. And as you rightly say, it has to be a really good, easy customer experience, doesn't it? Yeah, we launched a product about a year ago, which was it's a way to top up your Monzo balance using open banking APIs. So top up your Monzo balance with another bank account's cash using only the Monzo app. It's backward people who haven't got their main current account at Monzo.

23:32What are they thinking? One for another day. But it's really slick. And like most people in the UK, when you want to move money from one place to another, you'll log into the place where the money is and you'll push the money out of that balance into where you want it to go. Whereas this feature is very much the other way around. You log into the destination and you pull the money across. And we've seen great uptake of that. And it's really like, customers have really got into that pull the money mindset rather than push the money mindset. And it feels very natural and you're using it. You're kind of like, why hasn't it always been like this?

24:03There's a lot of work that went into the user experience to get that design right. Okay, now I'd love to come back to you on the infrastructure point that Helena was making. So from a sort of merchant standpoint, what are some of the infrastructure challenges that are maybe making those cross-border payments so much harder? So you've got, I don't know, a company in Italy or Greece that's exporting food to Finland or Britain or whatever. What is it in the infrastructure that is making it so much harder for merchants? Why, I suppose I'm asking why cross-border payments so hard. I mean, I know why they're hard.

24:39But what are some of the biggest problems for merchants with the cross-border payments? Oh, my God. Many, I'll name a few. Even if you look at certain countries who have different currencies. Let's take an example of different currencies, right? So even that alone is quite a big challenge if you're operating. and that also impacts speed. So the time of the transactions and how fast those would take place between the collection of the funds and also the settlements of the funds. But I think we're coming back to the same point is that the fragmentation is the hardest bit, right? So the fragmentation and the challenge of getting all of that aligned for your needs of your end consumer and offering that experience in a completely seamless and frictionless way, right?

25:26So that's why we see a lot of other options coming up that the merchants are also willing to uptake because that does increase the speed of how fast they can also receive the funds because ultimately for any business, the way that you look at it is in very simple terms. They want to make sure that they have the cash to do and to operate in all of the things. And the faster they have it, the better it is. So the infrastructure is different from every payment method. If we take cards, cards is great. Cards is already laid out and even then there are some issues that remain in terms of settlements and speed and cross-border payments in those cases.

26:11But there are many payment options that rely on different rails. So they're definitely not instant in some cases and they're not cheap. So operating even in friendly countries that you think that are not that far from one another still imposes quite a lot of challenges for merchants alone. So even from currency perspective, from the speed and from the time that they can also utilize the cash flow. And I suppose just the administrative cost, the complexity of managing multiple systems. Correct. And also, when you think about it, we deal with multiple large merchants all across different markets.

26:51You know, in most cases, their payments team will be larger in some cases than some of our companies are in the payments industry, right? So you would have clients that have a payment team of 350 people. And you ask yourself, why is that? Well, there is a reason for that. if you're operating in more than a couple of countries and a couple of regions and you have different you know billing options and uh it's really really really complex you have to take care of a lot of things for for different markets and it makes it very very hard you know to operate so uh it's important that um we have uh partners and players like mastercard as well who are offering the right infrastructure for us as payment providers also to utilize so we rely uh on those to bring products that make life easier for our clients.

27:39And our end goal ultimately is just to streamline as much as we can, but we can only do so much if the infrastructure doesn't stretch. So if there's nothing happening at the end, there's only so much that I can improve the payment page or the way that it looks or the speeding of the settlement, even if I bring the settlements forward to the merchants. So we are very reliant on what happens around us. and I suppose that's the beauty of payments as well. So we are there to make it better, but we ultimately have to always rely on the infrastructure surrounding us, right? So any improvements there are very significant for us and then we pass it on also to our merchants.

28:21Wonderful. That's a really good summary of, a passionate summary of some of the challenges facing merchants today. Thank you. So we'll just take a quick break and then after the break, we're going to discuss how innovation in payments can help solve some of the problems facing customers and merchants today. Though I feel like the summary of what we just discussed is that actually for customers, it's pretty easy. And for merchants, it's a bit of a nightmare. So we will be back very shortly.