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Final Juniper Transcript

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Final Juniper Transcript

  1. 1. Australia’s rapidly-evolving payments landscape may throw up a host of security and investment challenges as financial service organisations try to keep pace with technological advancements. FST Media and Juniper Networks hosted an exclusive luncheon in Sydney with senior executives of leading financial services organisations to discuss the environment for innovation in the payments industry in the coming years. The promise of NPP With Australia’s New Payments Platform (NPP), an industry-driven initiative to create a fast, data-rich, low-value payments infrastructure now underway, executives highlighted the need for an architectural approach to have a cohesive, multilateral framework. According to Mangala Martinus, Managing Director, Payments Consulting Network, Australian financial services organisations will have to leverage the ISO messaging format of the NPP, which provides for advanced data capabilities. Banks should also consult with their customers to evaluate opportunities, Martinus added. A payments hub like the NPP will support innovation and banks are likely to see more opportunities arise on the corporate side than customer. “There are also more payment hubs coming together within banks compiled through single interfaces, and multiple channels and systems,” Martinus said. “Being able to see all their different payment channels on a single portal has been good for [banking] clients.” Louise Boreham, Director, CB&S Operations, Group Technology & Operations, Deutsche Bank, which offers payment services globally, noted “The NPP or other initiatives could make it easier from an infrastructure perspective to set up a global transaction banking model in the local market.” According to Matthew Brotherton, Director Payments Technology, Westpac, the innovation envisaged by [Reserve Bank of Australia] should not stop with NPP. Top row (from left to right): Paul Jennings, Chief Technology Officer, eftpos; James Lind, FSI Account Director, Juniper Networks; Kieron Fitzpatrick, Head of Capability Development, Citibank; Eren Dogan, Chief Engineer – Network and Communications, IAG; Trevor Dixon, General Counsel and Company Secretary, BPAY; Adam Townsend, Program Manager Pi, CBA; Mangala Martinus, Managing Director, Payments Consulting Network. Bottom Row (from left to right): Steven Spizer, Vice President, Banks, FI & Public Sector Group, Citi Treasury & Trade Solution, Citibank; Brett Death, Head of ASP – Life & Investments, Zurich Financial; Natasha David, Editorial Director, FST Media; Louise Boreham, Director, CB&S Operations, Group Technology & Operations, Deutsche Bank; Nathan McGregor, ANZ Managing Director, Juniper Networks; Matthew Brotherton, Director Payments Technology, Westpac; Absent: Tony Ritchie, General Manager, Digital, Technology & Operations, Virgin Money. Revolutionising the Australian Payments Landscape to Deliver World-Class Banking
  2. 2. REVOLUTIONISING THE AUSTRALIAN PAYMENTS LANDSCAPE TO DELIVER WORLD-CLASS BANKING “Many of the innovative things that will materialise have not been thought of yet,” said Brotherton. “The NPP will be an enabler of some of those [innovations].” Martinus noted RBA’s efforts to introduce a level-playing field through the NPP and a core infrastructure that can create the opportunity for innovation, whether through a more flexible messaging platform or by boosting real- time payments. “It is about giving your own internal systems that flexibility to adapt for change going forward,” said Martinus. Kieron Fitzpatrick, Head of Capability Development, Citibank, noted an often- cited challenge with industry-wide initiatives is that it could potentially inhibit innovation. “There will be a lot of smaller bank initiatives targeting the real estate sector or getting rid of a particular niche – whether it is cheque payments or leveraging data. That is where we will see innovation happening a lot more quickly,” said Fitzpatrick. Brett Death, Head of ASP – Life & Investments, Zurich Financial Services, questioned if standardising all the messages in data will stifle the ability of organisations to differentiate themselves against competition. According to Martinus, banks should spend 18 months to two years talking to their customers about their problems, as well as with value-added service providers in the industry verticals they liaise with. “That is where they will get quicker coverage and access expertise,” said Martinus. “Expertise will be on a bank-by- bank level, leveraging the platform, rather than necessarily at an industry-level.” According to Martinus, the next couple of years will see a few battle lines emerge in the payments space. For example, there will be friction between eftpos and card schemes, as eftpos is facing flat-line in transactions for the first time because of contactless payment technologies. There are also changes underway in the ATM space. “In two or three years banks might re- evaluate the utility for ATMs,” said Martinus. “There will be a battle line with Apple Pay and where they are trying to take a click.” Brotherton sees hurdles coming from several fronts – security, dealing with non-traditional partners, changing expectations of customers to changing the way organisations will do business in the future. “The battle lines will be multi- dimensional,” said Brotherton. Constant innovation a challenge According to Martinus, constant inno- vation is a challenge for financial services organisations. “There is always a new innovation every six months,” said Martinus. “The challenge for banks is they havetobackeveryhorse,andunfortunately it is hard to pick a winner.” Like retailers, banks are also making a push into branch transformation and self-service check outs, Martinus added. “For some branches, 50 per cent of deposits that were previously over-the- counter are now being done through a self-service device,” he said. “Eventually we will have cheque truncation and automation. Banks are also potentially looking at cash recycling – and that creates issues around infrastructure and how to support that in back-end systems.” Martinus noted Australian banks’ strides in the contactless payments space, citing data from Visa that pegs 58 per cent of face-to-face transactions in Australia are now contactless. He also noted ANZ Bank’s recent foray in contactless ATM. According to Brotherton, it is important for banks to have a business-led strategy. “We have to understand what we are trying to achieve, the drivers, and how we will derive value from it – whether it is financial, social or other… And then from there we select the right technology,” said Brotherton. “We have to build and design our architecture to ensure that we are able to adapt as the technology or the market demand changes.” Tony Ritchie, General Manager, Digital, Technology & Operations at Virgin Money Australia, said the challenge of mobile payments goes beyond merely bringing together financial industry players. Lining up handset manufacturers and operating system and network providers is also a key hurdle. “People do not know which horse to back,” said Ritchie. “In the absence of that, “The challenge for banks is they have to back every horse, and unfortunately it is hard to pick a winner.” – Mangala Martinus, Payments Consulting Network “We have to build and design our architecture to ensure that we are able to adapt as the technology or the market demand changes.” – Matthew Brotherton, Westpac
  3. 3. REVOLUTIONISING THE AUSTRALIAN PAYMENTS LANDSCAPE TO DELIVER WORLD-CLASS BANKING they choose to wait – both at the institutional and consumer level.” Ritchie cited the example of eftpos, which started out in the 1980s as a series of bilateral arrangements, and took nearly eight years to garner critical mass. Canada’s payments system, as a counter- example, launched a multilateral system that was supported by all banks, and reached critical mass within three years, he added. Paul Jennings, Chief Technology Officer, eftpos, emphasised the importance of an architecture-driven approach. “You need to think about capabilities,” said Jennings. “If you are entirely business- led, you tend to back the horse that is currently leading, which could easily be overtaken.” Focusing on capabilities allows financial organisations to think about running projects like infrastructure projects that lend flexibility in go-to- market strategies, according to Jennings. “Despite having large shareholders and members, we are a company of modest means,” said Jennings. “We have to be careful to not back too many horses because of our limited resources. Hence that capability-based approach becomes particularly important.” Trevor Dixon, General Counsel and Company Secretary, BPAY, a leader in bill payments services for its member banks, sees BPAY’s role as an enabler of innovation for its banking partners. “Weworkcloselywithourbankpartners to make sure the experience of paying a bill or other financial activities using BPAY is as seamless on whatever device they use,” said Dixon. “Our goal is making sure we are channel agnostic for our bank partners.” Steven Spizer, Vice President, Banks, FI & Public Sector Group, Citi Treasury & Trade Solution, Citibank, also noted that banks face the challenge of building the right international payments architecture while rationalising multiple different correspondent partner relationships. This rationalisation has been driven by the complexity of managing counterparty, regulatory, and market risk – in addition to understanding the payment systems developments in multiple jurisdictions around the world. According to Spizer, the questions facing financial intuitions revolve around “[how to build] the very open architecture that will plug into legacy and next generation payment platforms around the world, while at the same time building out a unique customer value proposition.” Fitzpatrick added that financial services organisations will have to think across consumers, merchants and corporate requirements. “You have to move across a spectrum of [stakeholders], not just ‘Oh, I am in retail, that is all good’,” said Fitzpatrick. Fighting fraud Innovation in the payments space is also increasingly fraught with security and fraud-related risks that financial organi- sations must address. With the emergence of real-time payments for even large transactions, fraud monitoring becomes even more critical, noted Martinus. “Sixty per cent of Apple Pay transactions are done on fraudulent cards,” said Martinus, adding that fraudsters are taking advantage of any cracks in Apple’s authorisation mechanism. Nathan McGregor, Managing Director, ANZ, Juniper Networks, added that the scenario of real-time international payments could make the fraud risk exponential. “Banks need to prepare themselves for the fraud risk as much as the new entrants risk that comes with other capabilities,” said McGregor. “The risk is that the new entrant will take the customer relationship and customer experience, which translates to the app on the smart device, dumping the risk of fraud on traditional banking players.” Death noted that the insurance industry faces similar issues. “We want [payments] to be easy, but there is a risk that people will not see the value in what we are selling,” said Death. “Are customers seeing apps as the thing that is valuable above the promise that a bank or an insurance company provides?” Ritchie added the approach by financial services organisations is driven by market forces, risk, and customer demand. “When you look at complexity in payments, it is in the operational require- ments to manage risk,” said Ritchie. “This is not just a payments issue, there is a broader issue around IT security and it’s becoming tougher.” McGregor sees opportunity in financial services organisations monetising data Steven Spizer, Vice President, Banks, FI & Public Sector Group, Citi Treasury & Trade Solution, Citibank discusses payment’s strategy “We work closely with our bank partners to make sure the experience of paying a bill or other financial activities using BPAY is as seamless on whatever device they use.” – Trevor Dixon, BPAY
  4. 4. REVOLUTIONISING THE AUSTRALIAN PAYMENTS LANDSCAPE TO DELIVER WORLD-CLASS BANKING they glean from customers, and not just from payments. “You can monetise data that you extract about a person in many ways. It does not need to be direct correlations,” said McGregor. Disruptive threats Executives noted the threat from non-bank disruptors taking increasingly larger market share of the payments space that could potentially dis-intermediate banks. For example, players like Apple have a presence in payments and command a huge mind share, according to Death. “Whether it is a toe in the market to [Apple] doing something in the future, that is a hindrance to us doing something else ourselves,” said Death. Spizer added that many banks are still assessing the right value and how they should target a changing market. “The next generation of payments platforms are capable of passing much more information; what is the information that we are going to value and how will that data allow for improved client experience; intelligence and automated reconciliation?” asked Spizer. He added that banks and their clients will need to work out the value the data provides and who will be conducting the analysis. “There is a part of the banking transaction that will always stay with a traditional bank; the ‘rails’, as we call them” said Spizer. “But what portion of the payment and client experience moves into this next social money interaction environment remains to be seen.” According to Ritchie, the trust element connected with banks will remain an important consideration. “It will be of importance, irrespective of age, as to ‘Can I trust where my money and information is going and being dealt with?” said Ritchie. Increasing regulation is another challenge for many banks. “All the markets around the world are doing something different. They are all constantly introducing new changes,” said Spizer. “We live in this global ecosystem. The financial flows are becoming ever more international and intertwined, and we have significant amounts of rules, technological, regulatory, and social that we constantly have to stay on top of.” According to Jennings, the next few years could see a contest between open and closed network. “The iPhone 6 added an NFC controller which allows tap-and-go, but it is only for Apple users, whereas Android allows open use of NFC,” said Jennings. James Lind warned against the exposure to multiple platforms across the world and transacting inter-country with the emergence of several digital wallets. “If we can set the standard [in Australia] for a model that the rest of the world would want to emulate, that would be the ultimate goal,” said Lind. “There is an opportunity for a healthy discussion among the banking and payments fraternity of Australia to set best practices for other markets to emulate.” * “We want [payments] to be easy, but there is a risk that people will not see the value in what we are selling.” – Brett Death, Zurich Financial Services About FST Media FST Media produces the most successful technology conferences, roundtables and publications for the banking, insurance and wealth management sectors across the Asia Pacific region. With extensive management experience in conference production, journalism and business development, FST Media prides its reputation on unparalleled access to senior financial services executives, and the delivery of high-quality information on trends and disruptions in the financial services sector. About Juniper Networks Juniper Networks is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that transform the experience and economics of networking. The company serves customers and partners worldwide. Additional information can be found at