Payment providers are under more pressure than ever to adhere to customer demands, facilitate real-time payments and do so with no space for error. And as the benefits of fintech innovation become ever-more accessible, a striking number of providers are turning to the capabilities of the cloud to deliver what their customers really want.
On this note, James Bushby leads a narrative here that examines the highs and lows of mass cloud adoption in payments.
Bushby is currently serving as Mastercard’s senior VP for real-time payments, and here he leverages his position within one of the world’s leading cloud innovators to detail the considerations of cloud adoption within the wider payments landscape.
Furthermore, Bushby examines how cloud technology is supporting markets’ move to real-time payment systems and the impact this has on key areas of the market, such as privacy:
How cloud technology is revolutionising the payments landscape
In the last decade, we’ve seen a huge rise in the number of markets looking to modernise their payment systems. Consumers and businesses alike want access to smooth, real-time and secure payments, and innovations in areas like cloud technology are playing a vital role in achieving this.
Cloud computing isn’t new and certainly not unique to the payments industry. Industries around the world are utilising cloud services to better meet their customers’ needs, as well as their own. But the growth in adoption is staggering, with research by GFT Financial finding that 86 per cent of bankers have now adopted cloud services to some degree to harness its virtually unlimited scalability.
Rapid growth and increasing resilience
So why have we seen this rapid growth? First, cloud technology is breaking down old barriers. Previously systems like those in payments would need to be built, stored and operated in-house. Barriers to change, such as costs and complexity, are being broken down in favour of efficient, open and scalable platforms available to all. Not only does this mean it is easier to achieve consistency and compliance, but also has a greater potential to rapidly develop new products and services and get them to market.
Back in the 1960s, Gordon Moore predicted that computer processing power would double every two years. While there are some caveats, this prediction has proven incredibly accurate and underlines how rapidly technology can advance in a short space of time. Today, there are few areas where this is truer than with cloud computing.
Indeed, technological advances have made it possible to process increasingly complex and critical payment processes all within the cloud. Cloud-based services from the likes of Microsoft, Amazon and Google have proven to be hugely viable and cost-effective solutions for some aspects of payments processing in production environments. Many have previously implemented cloud technology themselves. But now, third parties run many of these services externally.
While security, privacy and control will always be paramount within the payments industry, these are continuously being improved through focused collaboration with financial institutions and fintechs using cloud technology. With central banks and regulators now examining the most appropriate way to manage the potential risks involved, while also realising its potential, the ability of financial institutions and fintechs to demonstrate increased resilience and address their concerns will be critical to enabling the wider adoption of the cloud in critical payment applications.
Many of the world’s biggest companies are now embracing the cloud. In 2020, Capital One announced it was going ‘all in on the cloud’ and moving away from its traditional eight data centres. Companies including Apple, Citi and Goldman Sachs have also said they will be embracing cloud technology. The ability to showcase cloud technology’s advantages in key areas will be vital to wider adoption for critical payment applications.
Payments on the edge
So, what are the potential pitfalls of cloud adoption and how can they be avoided?
One of the biggest challenges on the horizon is the ever-increasing number of new devices connecting to cloud services. From computers to smartphones, to wearable tech, the amount of information being sent back and forth across the cloud’s connections is rapidly increasing. This is putting more and more burden on central nodes which operate this kind of technology.
One emerging solution to this is to enable more data flow and computation to happen outside these nodes, on the edges of the network. More and more we are seeing this happen in our daily transactions, such as tapping our card to make a payment. Additionally, the shift from private to public clouds is enabling financial institutions and other businesses to scale up their services without having to build their own data centres, and the move to 5G networks speeds up the transfer of data to and from devices.
Not only does this allow cloud systems to scale with ease, but it also enables exciting new innovations like ‘smile to pay’ in the payments space, which could increase convenience by removing the need to reach for a wallet or smartphone when hands are full. Mastercard’s own work in this space is already leading to advances in how people pay for goods, with our biometric checkout programme meaning all people will need is themselves to be able to pay for goods when they leave a store.
A focus on privacy
While these advancements in cloud technology will be huge in terms of speed and convenience, one further challenge is the question of data and privacy, which is essential to the required trust and security needed to promote the use of any given payment system. A demonstrable commitment to strong data principles, as well as adherence to a common standard, is what builds this trust.
Some markets are considering data localisation laws, which make provisions to store and process data within a country’s borders. This seeks to overcome some of the geopolitical concerns we see across the world today but brings with it the risk of additional costs and complexity. Additionally, it would be important not to restrict the ability to provide network-level services on a global scale, especially in areas such as fraud and cybercrime, where criminals actively exploit schemes, systems and national borders. It’s therefore crucial that we protect privacy in a way that doesn’t stifle or restrict efforts by financial institutions and payments providers to monitor data on a global scale in the fight against fraud and cybercrime.
We are already seeing solutions to this challenge like the Asia Pacific Economic Cooperation (APEC) cross-border privacy rules (CBPR) system, which is allowing companies that comply with internationally recognised data privacy protection to share data within a region.
Adoption at scale
So, given the benefits, why is adoption not at a greater scale? To answer this, we must consider everything around the data and privacy concerns, which are understandably in the sights of central banks and regulators. Rapid advancements in cloud technology also play a part, as keeping up with the pace of change is a significant undertaking.
Yet despite these challenges, the benefits are clear. Cloud-related technological advancements are increasing the pace of payment modernisation. This speed thus translates into the speed at which new capabilities enter the market.
The challenge now is for everyone working in the payments landscape to come together to address these concerns and ensure more people can reap the benefits of cloud computing.
This guest post forms a continuation of Mastercard’s Payments Modernisation series, with prior segments available here.