Head above the clouds with Deepak Gupta

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Cloud is especially relevant today as the payments business is undertaking change

Deepak Gupta, global head of Software-as-a-Service (SaaS) at Volante Technologies, took some time out to discuss the advantages of financial institutions moving their payments processing infrastructure to a managed service running on Microsoft Azure, AWS or other cloud platforms, with Tom Groenfeldt, senior staff writer at FinTech Futures.

Gupta began by articulating the fundamental benefits of the as-a-service approach using cloud technology. “Cloud offers lower cost, faster deployment and a vendor-managed service. Banks don’t have to buy hardware, updates are implemented immediately without any burdens on IT, the system scales up to meet demand and payments become an operating expense rather than a capital investment.”

Volante is a leader in the payments business with VolPay which combines corporate to bank connectivity, corporate onboarding, and end-to-end processing of all domestic and cross-border payment types, including real-time/instant, in a unified on-demand cloud service from capture through to clearing.

In the many conversations Gupta has had with leaders in banking, he sums up the essence of their observations “Banks are under pressure from competitors, regulators and customers so they are looking at every opportunity to improve efficiency and reduce time to value. By moving payments to the cloud, banks can have a system up and running in weeks rather than months or years. Until recently, issues around security were a major concern, but cloud technology has matured considerably in the past 2-3 years – it is now far more robust and is proving a serious option for them.”

The payments business is huge and keeps growing — more than $2 trillion in revenues. If payments were a country, it would be in the top 10 largest by GDP, bigger than Brazil.

However, said Gupta, because volumes are growing faster than revenues, margins on a per-transaction basis are falling, which is why payments processing on the cloud is an essential component of any payments modernisation programme—the right cloud strategy can deliver savings of over 40% in total cost of ownership (TCO).

Cloud is especially relevant today as the payments business is undertaking the biggest change in decades since automated clearing house (ACH) technology was launched — the cause of this change is the move to real-time payments (RTP) that we are witnessing across the globe.

“Every mid-sized and large bank knows they have to offer RTP / instant payments to their customers to stay ahead. Tier one players have figured it out because they have the resources, but a mid-sized or small bank wants to consider RTP / instant payments as a service rather than an in-house deployment because they know the time, and cost it takes to change legacy systems as well as the risk of getting it wrong.”

Adding to the deterrent of an in-house build, is that these smaller banks are already stretched with regulatory requirements, including the Second Payments Directive (PSD2) in Europe and they simply don’t have the bandwidth to deal with such a challenge.

“Volante has been providing financial message integration and payments processing for the past 20 years,” Gupta said. “We have a large maintained and growing library of APIs for most financial message standards and banking and corporate enterprise resource planning (ERP) systems to support rapid implementation times. If a customer has a homegrown system, we can build the interface very quickly, with very little coding if any – it’s all about configuration,” he stated.

One additional challenge posed by RTP is the requirement for RTP services to operate 24x7x365, facilitating account-to-account transfers within seconds, whatever the day or time. Accommodating zero downtime can be a significant burden for legacy infrastructures, but is a natural fit for cloud-native architectures.

Corporate and wholesale banks are being driven to offer RTP capabilities to their corporate clients, as corporate treasurers are showing strong interest in RTP, especially for managing intraday liquidity. This is especially valuable for large corporations for whom reconciling start of day and end of day positions with intraday movements, can be a real challenge.

Another area where corporates find value is receivables – corporations that receive a lot of payments by check or traditional ACH have shown interest in receiving RTP, not just for the speed, but for the ISO 20022 information that travels with the payment. An RTP transaction can carry with it the entire content of pages of check stub and remittance information, moving the reconciliation process to automated electronic straight-through-processing.

Certain industries have been faster than others in moving to RTP. The insurance industry wants to make payments to customers quickly after a claim is approved so the customer can get their home or business back into use after an unfortunate accident or disaster. Businesses that import or export, such as companies that need to receive and pay for raw materials for their manufacturing processes for “just in time” operations find that real-time payments simplify operations and the finance behind them.

As companies compete on speed and convenience, traditional payments become a business problem. Sellers on Amazon, which can deliver in two days, one day or same day, face financing charges or running out of stock if they have to wait three or four days to get paid. Uber can pay its drivers in near real-time up to five times a day, a real edge in the gig economy. It is clear that in today’s payments industry transformation efforts, RTP / instant payments is a fundamental component in this space.

Now banks of any size can offer real-time payments with VolPay as a cloud-based service, from payment capture through to clearing.

“Our end-to-end payments processing platform, VolPay, was built for true cloud deployment, it isn’t a legacy system which is often found in other options that are placed into a cloud environment. As a cloud-native payments processing system, VolPay is an ecosystem populated by microservices-based, fully interoperable payments business services, so users can choose which pieces of software they want to use and then configure it the way they want to suit their payments processing requirements,” Gupta added.

Volante partners with Microsoft Azure, as well as on other well established and popular financial services clouds such as AWS. With cloud, banks can scale to meet demand with ease. When new features become available, users can just turn them on, no need to bring in armies of programmers.

VolPay provides the same software on the cloud for small banks that it does for the tier one banks. In fact, Volante is offering free RTP/ instant payments processing on the cloud with no charge for implementation, service or transactions.

“We have the software built for cloud; large maintained libraries for rapid integration and financial message transformation; we offer products that scale impressively and, the time to value we offer is very, very quick; we can implement in 60 days or less. For these reasons we are seen as a disruptor, because we are challenging the current modus operandi of the legacy systems approach,” he said.

“Some banks, often the larger institutions, have a need or desire to own end-to-end delivery to customers. They have the resources and they can do it themselves,” said Deepak.

But increasingly, Volante is hearing from mid-size, smaller banks, and even from some very large banks, that they have a ‘cloud-first’ strategy — anything new goes onto cloud – first.

Volante’s free RTP service includes connectivity with US TCH RTP or EU SEPA instant payments (RT1 or TIPS) and is offered as-a-service on the cloud, with the same tech as tier one banks. The firm is democratising payments by providing easy access to the same level of technology and opportunities to all types and sizes of banks through a single platform on the cloud.

Gupta concludes with “We believe passionately that any bank, regardless of size, should be in a position to offer immediate payment capabilities to their customers as a fundamental building block of their payments modernisation journey. And by offering RTP processing free of charge, we are encouraging banks onto the path of payments modernisation and the creation of innovative banking services and products.”

By Tom Groenfeldt