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Tapping into new technology - how data streaming is transforming the payments industry

Peter Pugh-Jones Profile picture for user Peter Pugh-Jones October 3, 2023
Summary:
As digital payments increase, so does the responsibility for financial institutions to be on their game with processing data at speed. Confluent's Peter Pugh-Jones looks into the trends tipping the balance.

Digital Payment and Online Cash Back Concept,Phone,Floating Coin © triple-t-3dsign - Canva.com
(© triple-t-3dsign - Canva.com)

Digital payments volumes have increased considerably in recent years accelerated by the global pandemic and the convenience of tap-and-go payments.

In the UK and most of Europe, real-time contactless transactions are becoming the norm — for everything from a cup of coffee to a quick dash around the shops. Instant digital payments are proving to be just as popular — and important — for business transactions too.

As a result, this surge has resulted in a number of specialist payment methods, all leveraging the appetite for instant, seamless transactions, and the emerging technology available to facilitate them.

Yet with this rise in digital payments comes a need for banks and other financial institutions to raise their game when it comes to processing these transactions quickly and accurately.

With security, privacy, and regulations all high up on the agenda it’s vital that data is collated, monitored, and moved precisely. And when viewed in the context of the colossal number of payments being processed every second, this is not a challenge to be sniffed at. 

So how do these institutions deal with this task? A recent survey by Confluent showed that data streaming is increasingly being seen as an essential requirement for business success.

The trends tipping the balance

The global study of 2,250 IT leaders found that almost three-quarters (72%) of those using data streaming are applying this to power critical applications. Over half (52%) of IT leaders in the finance and banking sector said data streaming is one of their top strategic priorities — something of significant interest given the huge disparity in how payments are being made.

Indeed, the financial landscape has seen a number of shifts over the last two decades, many of which have had a seismic effect on how people and businesses make payments. This has had a knock-on impact on how banks and other institutions organize both themselves and their services to cater for these changes in behavior.

Take ATM usage, for example. Over the last 20 years, banks have been steadily closing branches, which means fewer ATMs and less cash in circulation. This is likely to continue until there are only a handful left in key strategic city locations, as banks become more strategic about which physical branches remain open. Combined with better online services, the decline of cash — and a huge growth in digital payments — this has transformed the way people manage their money.

Factor in the pandemic in 2020 — when contactless transactions not only became the ‘trendy’ thing to do but the safest thing to do — and we have a payments revolution on our hands.

As a result, several new technologies have emerged in the race to become the retailers’ method of choice when it comes to enabling fast, reliable, real-time payments services for their customers.

Embedded payments, for example, enable apps and online platforms to be modified to include payments within just about any type of website or service. This is prolific in gaming, where people might pay to access a new level, or in online gambling.

One of the most commonplace advancements in this area is the digital wallet — the most obvious example of which is the Apple Pay function, which allows people to link their debit and credit cards directly to their phones and make easy and instant payments on the go.

Where innovation meets instability

However, these technologies present a double-edged sword when it comes to the opportunities they open up. Functions such as digital wallets make it very easy for people to make payments. But they also make life easier for fraudsters, as higher limits on payments translate to a high level of risk when associated with debit cards.

And it’s not just security that poses an issue to banks and financial institutions. One of the biggest challenges is sheer volume. They have to manage the millions of transactions being made every minute, while keeping a weather eye on security as this data travels through the cloud.

It’s a situation familiar to Moniepoint, an award-winning bank based in Nigeria. Its payments technology is used by the large majority of retailers in the country, and its reputation has been enhanced significantly by the ability to process payments quickly. 

Moniepoint started using Confluent Cloud last November. The company’s engineers can now focus on tasks that produce more value to the business, says Chukwudum Ekwueme VP of Engineering at Moniepoint:

They can focus on developing the product. We don’t need to think about databases anymore. Instead, we can get creative on how to use the things we have, rather than fixing things when we scale up. Confluent is a solution that works and is flexible. And we can scale up or down according to our needs, and that's very important.

This is where data streaming technology comes into its own. By using a centralized streaming platform, these seemingly enormous tasks can be shrunk into manageable chunks, channeling data through specific models and enabling real-time responses.

Ekwueme says the ability to spin up new instances quickly gives Moniepoint a lot of power when it comes to its day-today business processes:

So, maybe we need to aggregate data to do some sort of credit score on an individual. Now, it’s so much easier to do and I can just stream the data. The business also asks for complex reports, such as real-time information on a particular issue. It’s so much easier to architect our data to meet business demands. With a traditional reporting system, you might get a report once a week. Now, we can have real-time dashboards.

Data streaming also allows institutions to tackle the matter of volume control to supply payments data cleanly and quickly to critical parts of a business in areas such as, for example, the finance department.

Working this way also helps to soothe the perennial headache of regulatory compliance as it allows firms to build specialist legal, risk, and audit-focused applications to meet specific standards and accreditations, such as PCI-DSS or ISO 20022.

Data streaming – getting the basics right

Using a data streaming platform, the giant task of data organization becomes smaller and more manageable resulting in quicker, more secure, and more accurate payment transactions. From here, you can:

Store sensitive customer data such as account balances, credit scores, and credit limits, to meet regulations and assure people their information is safe.

Track every single payment, their status, and their progress through the transaction process. This ensures complete visibility and a future record if needed.

Manage every payment as it goes through the clearing and settlement processes and the reconciliation as it is settled. This results in consistency, eliminating duplications and errors, and prioritizing accuracy.

The payments industry has moved at a rapid rate in recent years. What’s important is that the technology and the capabilities to harness this progress also move at the same rate.

With data streaming, the banking industry has found a companion for its transformation journey. Which is just as well, as tap-and-go payments are just the beginning of the payments revolution. By embracing the technology to keep up with the latest developments, firms will be able to cash in on the benefits for years to come.

Find out more on breaking down data barriers across your entire data ecosystem.

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