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The future of finance in LatAm & the Caribbean

June 16, 2021

Modernizing payment infrastructure is a matter of survival

Oct 28, 2020

Payments

With the inclusion of biometric data and the advances of machine learning, the security strategy for payment methods must be redefined, writes Jorge Cano

 

As the payment world evolves through the innovations introduced by some companies, new business models are being adapted to consumer requirements.

In a global context of accelerated economic growth, the adoption of technologies capable of modernizing and simplifying the dynamics of organizations’ securities transactions is increasingly emerging as a competitive differentiating factor on which these companies depend to stand out from the rest.

According to a study by Oxford Economics, the digital economy has grown 2.7 times more than the traditional economy since 2017. The World Economic Forum estimates that this trend is growing more than 10% annually and that soon it could represent 25% of the world’s economy.

The Covid-19 pandemic should cause global investments in digital infrastructure to accelerate and take the lead. A survey conducted by European consulting firms IJGlobal and M&E Global of 242 high-level executives from major banks and other financial institutions, developers and engineering firms revealed that 63% believe that the pandemic will give a significant boost to digital infrastructure as people become increasingly dependent on connectivity.

The quarantine imposed by COVID-19 has forced many companies to seek new digital channels to keep their operations active and this has led to a large increase in the use of online payment methods.

To get an idea of the volume this implies, e-commerce invoiced $77 billion more than expected between March and June by researchers of the Digital Economy Index (DEI) a real-time analysis of consumers’ digital purchasing power conducted by Adobe.

Instant payments are now a reality

Latin America has always been a step behind in the number of purchases made over the Internet, either because of the limitations of investing faster in online platforms or because of the low level of digitalization of the population which, although already connected, still has little access to digital banking services.

However, the pandemic may be the missing push to bridge the gap and could do for the region what SARS-CoV did for Chinese e-commerce in early 2000.

It is clear that the increase in the number of new providers in the instant payment industry will force the establishment to adopt rules and regulations that protect the consumer and free competition in the market. With the growth of the payment ecosystem and the arrival of Real Time Payment (RTP), methods of payment are undergoing an unprecedented transformation.

The new demands in banking transactions are practicality, convenience and speed, which lead to new business opportunities by offering diversified services, the possibility of strategic alliances and advantages that were previously not very feasible for users and companies.

Constant innovation: the soul of business

In the past, a company had to rely on suppliers every step of the way when trying to develop proprietary applications. Today, open source allows for much faster innovation. Through faster updates, open source responds to changes in regulatory requirements resulting in hitting the market faster. In addition to having the freedom to improve solutions at their own pace, open source allows companies to provide better services to their customers.

With new trends in the adoption of open application programming interfaces (APIs), the growth of digital payments and new international payment options, companies are constantly challenged with providing innovative services in an agile manner to outperform the competition.

New security risks require advanced protection

The arrival of new technologies also brings new risks to the market, especially in the financial sector where cybercrime is increasingly complex and difficult to prevent. And the rise of this problem is brutal: in May, the FBI recorded more cases of online fraud than during all of 2019.

Effectively checking the accuracy of information sent over the Internet has never been more important in reducing risk and ensuring supplier trust.

With the inclusion of biometric data and the advancement of machine learning, the security strategy for payments must be redefined and a more systematic application of the standards established by the Payment Card Industry Data Security Standard (PCI DSS) must be considered.

This is where open source stands out again as it is the most recommended way to approach this new paradigm. Technology allows organizations to develop simpler and more adaptable structures with less technical costs, which encourages innovation in new payment platforms.

Open source as a catalyst for technological innovation

In times of uncertainty that demand the rapid implementation of large-scale custom solutions, there is no doubt that open source – code that can be modified and used publicly and for free – is the way to success for payment methods.

It is no coincidence that cloud-born banks manage to stand out from established companies. These organizations invest from the beginning in open source and cloud infrastructure in order to offer a more agile, scalable and innovative service.

This strategy has become best practice for the payment industry, one that is being adopted not only by more traditional companies but also by governments and central banks trying to secure a place in the digital era. In this new reality of payment processing through different systems and IT environments, the orchestration of containers and the kubernetes ecosystem (open source technology) are fundamental to be able to scale and manage services without sacrificing quality.

Proprietary software works well, but with the current need to update and even customize applications, there is no doubt that open source opens a much faster and more precise path for technological innovations.

Jorge Cano is a Financial Services sales executive at Red Hat Mexico.

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