Navigating The 2023 Payments Landscape

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In the aftermath of the pandemic, payments and businesses have had a somewhat turbulent year as banks pivot to meet customers' needs. The coming year promises to accelerate progress in two key areas, which should allow for faster, more efficient and innovative payments.

Many financial institutions (FIs) and businesses have been caught off guard this year as consumers have become more reliant on digital payments, online payment gateway and economic realities have forced many entities to cut back on technology and innovation spending. As we enter the second half of 2023, there are a few areas where progress is likely to resume – and even accelerate – in order to make more efficient payment processing a reality.

Open banking and real-time payments are two initiatives that have slowly but steadily gained traction in recent years. The pandemic may have highlighted the importance of these initiatives, as consumers and businesses rely on the ability to transact and move money quickly, easily, securely, and remotely. We anticipate that 2023 will see resurgence in these areas, providing FIs, businesses, and consumers ...
... with more seamless payment management options.

This article examines two major shifts that FIs and businesses can expect in the coming year.

A More Proactive Approach to Open Banking
Open banking, which allows third-party providers to access banking and transaction information from financial institutions via APIs, is laying the groundwork for real-time payments while also serving as a major source of other financial innovations. Although financial institutions around the world have been slow to embrace the open banking concept, an increasing number have realized that open banking will be required to deliver more customer-centric products and services and compete in a crowded marketplace.

Currently, FIs that use the open banking model must cover a wide range of payment activities via APIs, including many different settlement types, time-restricted payments, and high-ticket transactions. Because some of these payment types are limited, they must be removed in order for APIs to push those payments through settlement networks.

As open banking technologies are becoming more flexible and easier to integrate, more financial institutions are likely to adopt an open banking model in 2023. To capitalize on this opportunity while minimizing internal headaches, financial institutions must consider the types of APIs currently in use, the types of payments that can be supported by APIs, and how customers and vendors can use those APIs. Digital transformation and payment modernization will undoubtedly necessitate an examination of core systems as well as the costs and time required to implement a new framework.

Many payment companies are adopting an API-led approach to connect internal applications, devices, and data with minimal risk. This approach simplifies data sharing, allows for third-party applications and collaboration, and allows for rapid development — all of which can provide a competitive advantage for organizations that use APIs in a proactive manner.

The advantages of open banking for financial institutions and API-led connectivity for fintechs are undeniable. These approaches have the potential to simplify banking connections, provide deeper insights into payments, and enable self-service options. As a result, financial institutions and fintechs can direct resources toward more strategic initiatives and devote more time to developing faster, more customer-centric products and services.

Progress with Real-Time Payments
Real-time payments are still in their early stages of development, relying on a variety of technologies that must mature. Nonetheless, the push for real-time payments is expected to make significant progress in 2023.

Real-time payments have numerous applications for businesses, banks, and customers. The quick movement of money isn't the only advantage. Real-time payments have the potential to improve communication between financial institutions and their corporate and retail customers. Not only will payments through the best online payment gateway be processed faster, but entities will also be able to transfer funds multiple times per day.

This has significant implications for businesses that face difficulties sending wires against cutoffs and deadlines, which can impede timely transaction settlement. Real-time payments enable you to accept payments at any time and from any device. This enables businesses to manage cash flows more effectively, gain faster access to funds, and gain greater insight into transactions.

A few areas related to real-time payments should improve this year, including settlement networks, open banking, and technology. As FIs and fintechs continue to collaborate and build more efficient settlement networks, the path to real-time payments will become clearer. Expanded settlement networks can provide better features and allow for larger transaction amounts, resulting in more efficient payment processing overall. User-friendly technology will also be critical in the push for real-time payments, which should pick up steam in the post-pandemic landscape.

While the pandemic hampered some payment-related initiatives, it also highlighted the need for greater collaboration, increased innovation, and more efficient payments. FIs and businesses are continuing to adapt quickly to changes in the payments landscape, and this effort should be aided in 2023 by a greater emphasis on both open banking and real-time payments. It's almost certain that the payments landscape will undergo significant changes in several areas over the next year.