Scan the headlines in these early days of 2023, and you would be forgiven for thinking we’re embarking on the year of digital currency. Not so fast, however.

CBDCs and digital currencies certainly merit a close and sustained look from Swiss financial institutions. But Bottomline’s analysis of proprietary research shows that the smart money is on the faster horses. Specifically, instant payments and the regulations surrounding them will be the most important competitive factor within Swiss borders, as well as the confines of the European Union. And that’s not the only highlight in the study. Just as the Swiss government has decided to promote open banking, it too has shown up as a high priority for its member banks.

But back to instant payments. The switch to that priority has taken place at a dramatic clip. Last year’s Competitive Banking Report put digital transformation via Saas-based technology at number one in terms of “the most relevant topics” for global FIs. The results were consistent when broken down by geography (EU) and individual country. In 2021 45% of all respondents put digital transformation at the top, followed by instant payments.

Fast forward one year, and you will see that 63% picked instant payments as the most relevant topic, followed by fraud detection (54%), cross-border payments (52%) and digital transformation (45%). We would like to think that digital transformation has slipped in relevance because FIs have made so much progress in migrating toward SaaS platforms. By the same token, we surmise that instant payments have risen to the top because banks are driven by the need to innovate and address the preferences of their commercial and retail customers.

The finding becomes even more significant in the context of the instant payments regulatory proposals coming from the EU finance commission and the March 20 ISO 20022 deadline coming from the SIC group. By mandating ISO 20022, the SIC group has all but guaranteed a focus on instant payments within Swiss borders. The EU proposals – which will be taken up more formally later this year – come at a time when banks are under heavier and tighter scrutiny and regulatory oversight than ever before. In the Bottomline report, 45% said compliance and regulation were a key focus. And they should be.

However, these regulations in our view will help speed up bringing instant payments to market. It’s tempting to see regulations as undue pressure on product roadmaps and resources. Part of the answer again focuses on SaaS, where a joint industry solution across multiple banks and FIs benefits from speed-to-market and automatic adherence to new mandates.

Open doors for open banking

The competitive banking report was also notable for its relatively high priority placed on open banking, which checked in at 41% on the relevance scale. That’s an 8% increase in the early stages of open banking delivery compared to last year. This boost should come as no surprise in the face of an increasing number of highly published discussions around open finance and new use cases. But what might be surprising is the Swiss government’s endorsement of open banking, which resulted from the Federal Council’s meeting on December 16. The Bottomline report did part ways somewhat with the stated use cases from the Swiss government. Bottomline found that 43% of global finance leaders said PIS (open banking single payments) would be the lead in their offerings, 40% said open banking enabled refunds, and 39% said Confirmation of Payee. There was also a key preference for variable recurring payments at 35%.

Contrast that to the Federal Council statement that

“promising projects have been launched in areas such as retirement provision, portfolio management, payment transactions, and multi-banking. However, more concrete progress and greater commitment are needed with regard to the opening up of data interfaces.”

On a global scale, the report shows an urgency to deliver innovation, gain a competitive advantage, or stay in the game and avoid disintermediation. Everything is real-time now, and everybody expects everything to work with ‘one press of a button’. The truth is, of course, more complex, and the reality about competing in Switzerland hinges on its sovereignty as well as its membership in the broader EU. However, for executives looking for answers, there’s only one issue: competition. Swiss FIs will need to compete for customers. They will need to compete against fintechs. And they will need to continue on a journey toward digital technology and iron out new wrinkles like open banking to strengthen their competitive set.

Make sure your financial institution is on track to maximise the changes impacting the payments ecosystem and accelerate your digital payments transformation strategy today – that is where true competitive advantage can be leveraged.

Interested to read more about that topic, check out the study “The Future of Competitive Advantage in Payments & Banking “- Read the Report & Take the ‘Live’ Benchmarking Report Now

Featured image credit: edited from Freepik here and here