Channels and Connectivity
Online and Mobile Banking
Definition:
Accessing banking services and performing transactions through the internet or mobile devices.
Importance:
- Provides convenience and 24/7 access to a wide range of services, from fund transfers to bill payments.
- Enhances customer experience by offering a seamless and user-friendly interface.
Mobile Applications, Wallets, and Peer-to-Peer Payments
Mobile Applications:
- Apps provided by banks or third-party providers for conducting transactions and managing accounts.
- Digital wallets like Apple Pay, Google Wallet, and Samsung Pay that store payment information securely for easy transactions.
Peer-to-Peer Payments:
- Services like Venmo, PayPal, and Zelle enable direct transfers between individuals.
Traditional Channels: Branch Banking, ATMs, and Telephone Banking
Branch Banking:
- Physical bank locations where customers can perform transactions and receive services.
ATMs (Automated Teller Machines):
- Machines for withdrawing cash, depositing funds, and other basic banking transactions.
Telephone Banking:
- Conducting banking transactions via phone calls.
Proprietary Electronic Banking Platforms
Definition:
Platforms developed by banks or financial institutions offering tailored electronic banking services to their clients, often for corporate use.
Host-to-Host
Definition:
Direct connectivity between the systems of a corporate client and their bank for secure and efficient transaction processing.
Usage:
- Common in large enterprises for bulk transactions and treasury management.
SWIFT gpi (Global Payments Innovation)
Definition:
An initiative by SWIFT to improve the speed, transparency, and tracking of cross-border payments.
Benefits:
- Faster settlement times, end-to-end payment tracking, and greater transparency.
Payment Networks: RTGS, ACH, Visa, MasterCard, SWIFT
RTGS (Real-Time Gross Settlement):
- High-value, real-time payments settled individually.
ACH (Automated Clearing House):
- Batch processing system for low-value payments like payroll and utility bills.
Visa and MasterCard:
- Card networks facilitating electronic payments globally.
SWIFT:
- A messaging network for secure financial transactions, widely used in cross-border payments.
Digital Transformation (Fintech)
Fintech
Definition:
The use of technology to enhance financial services, leading to innovations like blockchain, AI, and digital currencies.
Impact:
- Improved efficiency, reduced costs, enhanced user experience, and increased competition.
How Countries Organise Payments
Trade Bodies:
- Organizations that represent the interests of the payments industry and promote standards and policies.
Operators:
- Entities that manage the infrastructure and systems for processing payments.
Regulators:
- Authorities that oversee and regulate the payments industry to ensure security, compliance, and efficiency.
Technology and Infrastructure
Centralised vs. Distributed; Competitively Provided or Participant-Owned
Centralised Systems:
- Single, centralized entities managing payment processing (e.g., RTGS systems).
Distributed Systems:
- Decentralized systems where multiple participants share responsibility (e.g., blockchain networks).
Competitively Provided:
- Payment services offered by private companies competing in the market.
Participant-Owned:
- Systems owned and operated by the members or participants (e.g., SWIFT).
Creating Business and Technology Architecture
Interfaces and Challenges:
- Designing systems that integrate various payment channels and methods, ensuring compatibility, security, and efficiency.
Challenges:
- Managing legacy systems, ensuring cybersecurity, and complying with regulatory requirements.
Bodies within the Payments Framework
NACHA:
- Manages the development and administration of the ACH network in the US.
Australian Payments Network (AUS):
- Governs the payments system in Australia.
Payments Canada:
- Oversees the operation of national payment systems in Canada.
EPC (European Payments Council):
- Manages SEPA (Single Euro Payments Area) schemes in Europe.
Euro Retail Payments Board:
- Promotes the development of an integrated, innovative, and competitive market for retail payments in the euro area.
Target 2:
- RTGS system for the settlement of payments in euros in real-time across the eurozone.
Platform Business Models
Definition:
Business models that create value by facilitating exchanges between two or more interdependent groups, typically consumers and providers (e.g., PayPal).
Importance:
- Enhances connectivity, scalability, and efficiency in the payments ecosystem.
Infrastructure Transformation
Focus:
Modernizing payment systems to leverage new technologies, improve efficiency, and meet evolving customer needs.
Examples:
- Migration to cloud-based systems, adoption of blockchain, and integration of AI for fraud detection.
New Business Models under Open Banking and Payment Services Directive (EU) / Payment Services Regulations (UK)
Emergence and Role of Enhanced Data
Definition:
The availability of richer transaction data through APIs and other technologies.
Benefits:
- Improved financial services, personalized offerings, and better risk management.
Role of Blockchain and DLT in Payments
Blockchain:
- Distributed ledger technology that enhances transparency, security, and efficiency in transactions.
DLT (Distributed Ledger Technology):
- Provides a decentralized database managed by multiple participants.
Implications:
- Reduced transaction times, lower costs, and enhanced security.
New Forms of Money and Their Implications
Cryptocurrencies:
- Digital or virtual currencies using cryptography for security (e.g., Bitcoin, Ethereum).
Stablecoins:
- Cryptocurrencies pegged to a stable asset (e.g., USD Coin, Tether).
CBDCs (Central Bank Digital Currencies):
- Digital currencies issued by central banks, representing a digital form of a country’s fiat currency.
Implications:
- Potential to reshape the financial landscape, improve financial inclusion, and offer new ways to transact.
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