Vincent Brennan, EBA: "The financial industry is ripe for change and innovation"

About Vincent Brennan
Vincent is Head of Group Operations & Payments at Bank of Ireland where he is responsible for Business Electronic and Payment Services, Customer service & Fulfillment Operations and Credit Operations. He is also responsible for the Bank of Ireland’s participation in the Irish, UK & European Payments Industry including BPFI, UK Payments Council, LINK and the Euro Banking Association (EBA).

Vincent Brennan is a keynote speaker at the upcoming EPCA Payment Summit 2015 which will take place between 9 and 10 March in Brussels. Mr. Brennan will address EPCA delegates on March 9th discussing on how to advance payment innovation by banks opening up digitally.

What is the mission of the Euro Banking Association?

The Euro Banking Association plays a major role in the financial industry as a network of payment practitioners with a pan-European mind-set and vision; it provides a country-neutral forum for discussing and driving pan-European payment initiatives in the cooperative space. Over the years, the EBA substantially evolved its activities in the areas of thought leadership, knowledge & research and education, underpinning its position as a key body for European payment matters and related business practices. In this context the EBA runs a number of working groups composed of payment practitioners. These EBA groups are either geared at driving the development of new payment initiatives or at providing additional insight into evolving market areas or new rules and business practices.

How would you characterize the current European retail payment systems?

The financial industry is ripe for change and innovation. Some of these changes are being mandated by regulators. Other disruptions are coming from new technologies such as the rise of apps, mobile devices and social media which have an irreversible impact on customer demands and requirements. In the field of payments, it implies demands for new and innovative payment initiation methods, which are commonly called electronic Alternative Payments (e-APs). The growth of non-bank owned payment methods and innovative customer engagement strategies are propelling interbank organisations and member banks to reconsider the positioning of traditional ACH payments, cards and cash. The EBA has therefore taken up a role in promoting innovation and secure approaches to the design, implementation and use of (new) best-in-class electronic ACH and alternative payments, designed to help member banks keep up with change and stay competitive.

With the internet and retail sector evolving at a faster pace, the payments industry starts acknowledging the need to develop new and innovative payment services, among which electronic Alternative Payments (e-APs). What are the key benefits of these services and the implications they may have on the traditional payment infrastructure?

The e-APs derive their success from addressing the convenience and functionality gaps that are left open by traditional payment propositions. Many banks are now realising the need to develop compelling modern electronic alternative payment solutions along with value-added services if they are to compete. However many banks have to overcome institutional inertia and the heritage of legacy systems that were never designed to cope with such pace of changes. Due to the complexity and the urgency of the task, there is now an exponential need for open collaboration and sharing of information between suppliers, financial service providers, scheme operators and financial institutions. Otherwise, the bank industry franchise on the supply side risks losing relevance.

Real-time payments, APIs and digital identity are the core ingredients of EBA’s vision on the further growth of Alternative Payments. Could you elaborate more on what drives the success of these services?

Digital identity offering new opportunities for payment innovation

As the number of online transactions is increasing, there is an accelerating demand of consumers and businesses for reliable and safe digital services. Solutions enabling the sharing of personal data in a private, controlled, secure and convenient way represent a large pocket of unlocked value. As a result of customer expectations, the demand for e-identity is growing exponentially driven by more users of digital transactions as well as the rise of transactions per user.

The market is further fuelled by an array of security, privacy and Know-Your-Customer (KYC) driven European regulation (PSD2, General Data Protection, SecuRe Pay, eIDAS, AML4). In the traditional shopping experience, consumers are authenticated at the check-out point. Merchants are increasingly looking to position the authentication at the start of the shopping experience so that a better identification and understanding of the customer needs could be made at an earlier stage and hence merchants could enrich the customer shopping experience and improve their conversion rate. Controlling one’s digital identity services is the tool through which true customer centricity can be achieved.

For consumers, the benefits are compelling too: faster service, lower prices, and products better suited to their needs, to name a few. In an increasingly digital society, personal data have become a new form of currency. The challenge is to establish the trust that keeps this information flowing. Traditionally, authentication is part of a payment transaction. Banks have an opportunity by unbundling the authentication/authorisation services from the payments, and by opening up new e-identity opportunities.

There are a number of reasons why banks should move into the digital identity space. The first one is to seize the opportunity while other players are only warming up to the opportunity. Secondly, banks can anticipate and react to upcoming regulations and thirdly banks have an opportunity to monetise on three of its unique assets:
1. trusted consumer brand: Their regulated position has earned banks the trust of consumers, businesses and the public sector
2. interbank network and reach: Banks are experienced with cooperation in two-sided markets, as the payment market represents such a market as well. This experience provides banks with the network that is needed and enables them to build services on top of that network. Banks know this way of working better than any other industry.
3. Know-Your-Customer information and anti-money laundering investments

By leveraging on its existing assets, banks have the potential to deliver added value by enhancing both customer and merchant experience.

Real time payments, the payments of tomorrow

Rapidly evolving technology and new customer requirements have driven a major innovation thrust in the payments industry. Consumers and merchants now have a growing expectation for immediacy: immediate information and immediate payment or at least certainty of payment. New payment services will have to evolve towards immediate execution of payment orders followed by ‘quasi instant’ availability of funds for the payee.

Bank APIs driving future payment innovation

Banks are clearly being disintermediated in online payments and need to act. The underlying conviction is that a world where both transaction volumes and customer value are maximised is one with a key role for banks. APis are key components to a layer that will link the bank infrastructure to a service layer that will enable banks to deliver proactively need-based services that are relevant to the evolving customer requirements (i.e. digital identity, real-time payments etc.). It will also allow the creation of an ecosystem that lets banks and others innovate and respond quickly to new opportunities. For instance providing a standardised controlled access to the bank account can provide new value to both banks and alternative payment providers. Merchants have been looking forward to this and demanding it unequivocally. APIs is seen as the biggest technology trend that is driving future innovation in payments.