Thought Leadership· 2min October 3, 2022
The payments space has evolved so rapidly in recent years that it has become cliché to ask what ‘the future for payments’ looks like.
Now, I don’t have a crystal ball, but I’ve worked in transactional banking for a quarter of a century. From my perspective, there are several key trends that are going to drive future change in payments and migration to the cloud is perhaps the most central amongst them.
While many financial institutions operate their payment gateways on premises, there are definite advantages to using cloud-based technology here. With the increasing number of transactions being made, the scalability of cloud services means that the system can deal with any peaks and troughs.
However, much of the debate around cloud migration for banks was whether it was best to take a public or private approach. The former gives the bank complete ownership of their cloud but comes with a great deal of expense, while the latter offers virtually infinite scale but means the bank is at the mercy of the cloud provider to some degree.
My view is that while this debate is valid, it misses the point somewhat. The achilles heel of a single cloud approach—whether the bank owns that cloud or not—is that there’s a single point of failure.
For payments, the best way forward is the multi-cloud approach. Rather than migrating to the cloud and choosing between Amazon, Google or Microsoft, you choose all three. This means if one of these three has an outage, then you can redirect activity and data to another one. It’s basically the ultimate resiliency play. Don’t rely on a single provider, spread the risk across multiple providers instead.
Multi-cloud will pay dividends in a number of ways. The growing demand for real-time settlement and the increased volume of payments being made require robust, flexible infrastructure; the kind that a multi-cloud approach can provide. Due to the interconnected nature of the global economy, the volume of international payments has picked up a lot in recent years. These cross-border payments are happening not just for large trade items, but also for smaller exchanges of services. Using multiple clouds is a solid basis for providing the support required for the increased number of cross-border payments being made.
Operating a payment gateway on premises is very expensive. There are the facility costs and hardware to consider, and an awful lot of connections to make depending on which territories you deal with. Standards change all the time, so maintaining all of these connections, applying all of the security patches and so on is a considerable drain on resources. Think about all the work involved in supporting Swift's migration to ISO 20022 or connecting to the forthcoming FedNow platform—it's a real headache.
By moving the payment gateway to the cloud, facility and hardware costs are taken out of the equation, and management and maintenance also becomes a lot easier too. Of course, cloud migrations have to be handled carefully. It will also provide a steady foundation for the continuing evolution of payment services in the future.
Dave joined Form3 in 2022 in order to lead the charge to bring Form3’s platform and capabilities to bear on the US market.
Dave has worked in transaction banking for over 20 years and has joined Form3 from SWIFT where he was Chief Executive for the Americas, UK and Ireland with responsibility for the company’s largest relationship as well as its global securities business.
Prior to SWIFT, Dave was the Global Head of Financial Institutions at Barclays, responsible for the bank’s correspondent banking, FI trade, flow FX, and liquidity management businesses for FIs.
He has also worked at Deutsche Bank and Bank of New York in both product and strategy roles and across various products lines including cash, trade finance, custody and corporate trust.
Dave holds a MSc in Development Economics from the School of Oriental and African Studies in London, and a BSFS in International Relations from Georgetown University.