Payment providers are under more pressure than ever to adhere to customer demands, facilitate real-time payments, and do so without room for error. And as the benefits of fintech innovation become more accessible, a staggering number of providers are turning to the capabilities of the cloud to deliver what their customers really want.
On that note, James Bushby leads a story here that explores the highs and lows of mainstream cloud adoption in payments.
Bushby currently serves as Mastercardsenior vice president of real-time payments, and here he uses his position at one of the world’s leading cloud innovators to detail the considerations for cloud adoption within the broader payments landscape.
In addition, Bushby explores how cloud technologies are helping markets move to real-time payment systems and the impact this is having on key market areas such as privacy:
How cloud technologies are revolutionizing the payments landscape
Over the past decade, we have seen a huge increase in the number of marketplaces looking to modernize their payment systems. Both consumers and businesses want access to seamless, secure, real-time payments, and innovation in areas such as cloud technology plays a vital role in achieving this.
Cloud computing is not new and certainly not unique to the payments industry. Industries around the world are using cloud services to better meet their customers’ needs as well as their own. But the growth in adoption is staggering, with research from GFT Financial finding that 86 percent of bankers have already adopted cloud services to some degree to harness its virtually limitless scalability.
Rapid growth and increasing resilience
So why are we witnessing this rapid growth? First, cloud technologies break down old barriers. Previously, systems like those in payments had to be built, stored and managed in-house. Barriers to change, such as cost and complexity, are removed in favor of efficient, open and scalable platforms accessible to all. Not only does this mean that it is easier to achieve consistency and compliance, but there is also greater potential to quickly develop new products and services and bring them to market.
Back in the 1960s, Gordon Moore predicts that computer processing power will double every two years. Although there are some caveats, this prediction has proven to be incredibly accurate and highlights how quickly technology can advance in a short time. Today, there are few areas where this is more true than in cloud computing.
Development of the new age
Indeed, technological advances have made it possible to handle increasingly complex and critical payment processes in the cloud. Cloud-based services from the likes of Microsoft, Amazon and Google have proven to be highly viable and cost-effective solutions for some aspects of payment processing in production environments. Many of them have previously implemented cloud technology themselves. But third parties now manage many of these services externally.
While security, privacy and control will always be paramount in the payments industry, they are constantly being improved through targeted collaboration with financial institutions and fintech companies using cloud technology. As central banks and regulators are currently exploring the most appropriate way to manage potential risks while realizing its potential, the ability of financial institutions and fintech companies 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 largest companies are already embracing the cloud. in 2020 Capital one announced that it was going “everything in the cloud” and moving away from its traditional eight data centers. Companies included An apple, You are and Goldman Sax also said they will adopt cloud technology. The ability to demonstrate the benefits of cloud technology in key areas will be vital to the wider adoption of critical payment applications.
Payments at 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 technology, the amount of information being sent back and forth over cloud connections is growing rapidly. This puts more and more burden on the central nodes that work with this kind of technology.
One emerging solution to this is to allow more data flow and computation to happen outside of these nodes, at the edges of the network. More and more we see this happening in our everyday transactions, such as tapping our card to make a payment. In addition, the shift from private to public clouds enables financial institutions and other businesses to scale their services without having to build their own data centers, and the shift to 5G networks accelerates the transfer of data to and from devices.
This not only allows cloud systems to scale with ease, but also enables exciting new innovations such as ‘smile to pay’ in the payments space, which can increase convenience by eliminating the need to reach for a wallet or smartphone. when hands are full. Mastercard’s own work in this space is already advancing the way people pay for goods with our biometric payment program, meaning all people will need is to be able to pay for goods themselves , when they leave a store.
Focus on privacy
While this advancement in cloud technology will be huge in terms of speed and convenience, an additional challenge is the issue of data and privacy, which is essential to the necessary trust and security needed to promote the use of a 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 localization laws that require data to be stored and processed within a country’s borders. This seeks to overcome some of the geopolitical concerns we see around the world today, but carries with it the risk of additional cost and complexity. It would also be important not to limit the ability to provide services at the network level on a global scale, especially in areas such as fraud and cybercrime, where criminals actively use schemes, systems and national borders. That’s why it’s critical that we protect privacy in a way that doesn’t stifle or limit the efforts of financial institutions and payment providers to monitor data on a global scale in the fight against fraud and cybercrime.
We are already seeing solutions to this challenge such as Asia-Pacific Economic Cooperation (APEC) system of cross-border privacy rules (CBPR), which allows companies that comply with internationally recognized data privacy protections to share data within a region.
Adoption at scale
So, given the benefits, why isn’t adoption on a larger scale? To answer this question, we need to look at all the data and privacy concerns that are understandably in the sights of central banks and regulators. Rapid advances in cloud technologies also play a role, as keeping up with the pace of change is a significant undertaking.
But despite these challenges, the benefits are clear. Cloud-related technological advancements are increasing the speed of payment modernization. So this speed becomes the speed at which new capabilities enter the market.
The challenge now is for everyone working in the payments industry to come together to address these issues and ensure that more people can take advantage of the benefits of cloud computing.
This guest post is a continuation of Mastercard’s payments modernization series, with previous segments available here.