It would be difficult to pick a single reason why payments modernization is currently accelerating. But Domenico Scaffidi, head of market infrastructures for FinTech software maker Volante Technologies, told PYMNTS in a recent interview that better cloud technology, proven cost efficiencies and COVID-related lifestyle changes are all partial explanations.
All told, Scaffidi said the modernization process is simply growing up. “It is interesting to observe that cloud technology and digital transformation are now mature enough so there is [no longer any] lack of trust in security or bandwidth on the bank side,” he said.
Modernization is also accelerating because the pandemic and consumer desires to maintain social distance are increasing the need for payments’ digital transformation. Scaffidi said things are moving fast enough that the European Central Bank (ECB) is currently considering the consequences.
“We can see that cash has been reduced in favor of electronic accounts and instant payments,” he said. For instance, Scaffidi said that real-time payments (RTPs) are gaining trust at the same time that credit cards are not always seen as the right payments instrument. And it doesn’t hurt that most financial institutions (FIs) offer RTPs for free to individual consumers.
“Credit cards are an interesting point because there are a lot of interchanges involved, while real-time payments are bank account to bank account,” he noted. “We are not saying that [RTPs] are going to cannibalize the credit card business, but there are new use cases, mainly coming from reducing user cash and other opportunities like loyalty programs.”
Digital Transactions Up, Data Center Usage Down
Volante recently announced a collaboration deal with Goldman Sachs to provide a payments platform for the bank’s digital transaction service.
Scaffidi said the tie-up represents an interesting trend and a “big area of revenue growth for the bank.” Aiding that is the fact that VolPay, Volante’s API-enabled platform, includes analytics, liquidity management and virtual accounts and can process domestic and international payments.
On the flip side of that, Volante Founder and CEO Vijay Oddiraju told Karen Webster in June that data center usage by FIs will go the way of the dodo bird within five years.
Scaffidi echoed those remarks in his latest comments to PYMNTS, saying that the data center “is becoming less common and less important than in the past.” He said that’s because they require huge budgets and other resources that often exceed the time and money allotted.
A Seamless Future
But Scaffidi added that no payment modernization trends make sense unless they give customers better, more seamless experiences.
He said that’s why Volante is focused on making sure FIs can deliver high-quality experiences and value-added services, such as the instant payments service Request to Pay in the United Kingdom and Request For Pay via The Clearing House’s RTP(R) network in the United States.
“We can’t have digital transformation without payment modernization,” Scaffidi said, adding that the trend is being driven by customers who put pressure on corporates, who then put pressure on banks.
But in short, Scaffidi said, “digital transformation is growing – and is here to stay.”