Our world is going real time. As consumers who live increasingly digital lives, we expect instant access to relevant information, products and services. This has implications across all aspects of our lives, and payments are no exception.  

“Shaped over time, payment processing has traditionally been an overnight business,” says Peter Hazou, Microsoft’s business strategy leader for worldwide financial services. “But the world is adopting real-time everything, and this has significant implications for payments.”  

While over 118 billion real-time transactions were made globally in 2021, this figure is expected to rise to almost 428 billion by 2026, according to ACI’s Prime Time for Real Time report, which was released in 2022. The report highlights a clear correlation between real-time payments and economic growth – real-time payments helped generate an additional economic output of $78 billion in 2021 across 30 countries. But this is just the start. By 2026, this figure is set to rise to $173 billion. 

“The move to real-time payments is happening fast,” says Hazou. “There are several reasons for this. First, we have seen rapid digitalisation following the Covid-19 pandemic. We’ve also seen an increased focus on supply chain resilience and risk management following the war in Ukraine.   

“But that’s not all. Banks face stiff competition from digital-native non-banks, which are often born in the cloud and free from many of the legacy challenges facing traditional financial services firms. As a result, banks have realised that they need to find a way to level up if they want to succeed in the future. Delivering real-time payments – via a cloud-based platform – enables them to do that.”  

Indeed, the cloud is instrumental in the success of real-time payments. “The cloud is not just a data centre in the sky, it's a series of very powerful technologies,” Hazou explains. “These technologies can facilitate business transformation by dramatically improving payment processes.”  

Moreover, the cloud can also help aggregate and process the data from real-time payment processes. “The resulting insight that comes from a constant stream of real-time payment information is where the real value lies for banks and their clients,” says Hazou.  

That’s because, according to Hazou, the business of payments is evolving. “It’s no longer just about processing payments as widgets – but it’s actually very rich in useful data. A lot of the changing shape of business models in financial services is about data. Data is rich in insights, obviously, and a lot of those insights are incredibly valuable to clients. So, whereas banks were traditionally places you would go to process something, now banks – and their business models – are evolving so that they can provide much more value-added services.”   

Historically banks haven’t done much with this data as it flows through their systems. However, data standards such as ISO 20022, along with new cloud-based tools, make it possible to analyse vast volumes of information and contextualise it using artificial intelligence (AI), machine learning and analytics. The resulting analysis can help banks understand customers, personalise offers, improve liquidity and identify opportunities for further innovation.  

“Those insights can also be put at the heart of risk models for understanding and assessing counterparty risk, as well as for cash flow forecasting and preventing financial crime,” says Hazou. “Ultimately, cloud technologies like AI, machine learning and contextual services can help banks provide a better service and more value-added services to customers.”  

And it’s these cloud technologies that Microsoft – along with its global community of partners – is perfectly positioned to deliver to banks.  

According to Frost & Sullivan’s 2022 Global Cloud User Survey, almost half of all financial services institutions use Microsoft Azure to run their cloud applications and data. An overwhelming majority (94 per cent) say they are satisfied or very satisfied with their Azure services.  

The reasons for choosing Microsoft Azure over other cloud service providers reflect the industry’s unique challenges. Over half of Azure users cite “easy-to-use developer tools” as a key selection criterion – for firms that prioritise innovation as a means to compete with fintechs, the ability to quickly develop, deploy and update software is essential.  

Azure also helps financial services businesses to close the knowledge gap. Respondents cite managed and professional services from Microsoft and its partners to help them implement and optimise their clouds.  

Microsoft also has its industry-specific cloud – Microsoft Cloud for Financial Services – which integrates cloud services across Azure, Microsoft 365, Microsoft Dynamics 365 and the Microsoft Power Platform – all underpinned by an industry data model and pre-built data connectors designed to accelerate insights and improve business workflows. 

“Microsoft’s core role with financial services companies is really about helping them modernise,” says Hazou. “This was a different story just a few short years ago. In past issues of Technology Record, we’ve spoken about the struggle banks were having in moving to the cloud. I think that's all pretty much done and dusted – the cloud is ubiquitous now. Today banks recognise that the cloud is the dominant technology going forwards because it is modern by design and facilitates agile development. It’s easy to consume because the components are already compliant. A lot of that heavy lifting is already in place, enabling banks to modernise in a more comprehensive, quicker and safer way.”  

This helps financial services organisations to feel secure in a constantly changing operating environment. “It’s important to recognise that no one knows the future,” says Hazou. “No one predicted Covid-19. No one predicted the war in Ukraine or the impact that it’s having on global economics. The only certainty we have is that our world is in flux. And therefore, the best way a bank can address modernisation and stay at the forefront is by achieving the agility it needs to respond effectively and quickly to changes in the environment.”  

The cloud provides banks with this agility. Rather than forcing them to adopt technology for technology’s sake, it gives them a platform through which they can adopt the most relevant software solutions that serve both their own needs and those of their clients.  

“Ultimately, the cloud helps banks get to a position where they can expect change and respond immediately and seamlessly,” says Hazou. “As a result, they can quickly solve customer needs. That has to be the overarching goal – and that’s a goal that we, at Microsoft and through our partner community, help our banking customers to achieve week in, week out.”  

A variety of Microsoft partners also contributed to this feature: EBizcharge, Finastra, Orbus Software and Paymentology. Read about how they are helping financial services organisations to create faster, more modern payments systems. 

This article was originally published in the Autumn 2022 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.

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