Jim Bowers Payments Solution Specialist @ IR
Lu Zurawski Practice Lead for Retail Banking Products @ ACI
Speakers: Lu Zurawski, Jim Bowers, Janae Smith
Janae Smith: Good morning or good afternoon, depending on where you're tuning in from, and welcome to today's webinar on Payments Clarity and Certainty in Times of Crisis. My name is Janae Smith and I'm the Product Marketing Manager here at IR. Joining me today is Lu Zurawski, Practice Lead of Retail Banking at ACI Worldwide and Jim Bowers, Payment Solution Specialist here at IR.
At this time, I just wanted to take a moment and let our speakers formally introduce themselves. So with that, I will pass it over to you, Lu.
Lu Zurawski: Thanks very much, Janae.
As Janae said, my role is Practice Lead of Retail Banking. I cover a range of countries centred around product management and typically get involved in lots of consumer finance, consumer payments initiatives.
Jim Bowers: And I’m Jim Bowers, a Payment Solution Specialist at Integrated Research. Over 30 years in the payment industry working for various retail banking, fraud, mobile and wireless solutions.
Janae Smith: Great. Thank you.
So before we dive in, I just wanted to cover a couple of webinar logistics.
- So the slides are available for download under the Attachments tab.
- If you have a question, please send it through and we'll go through them at the end of this webinar.
- We suggest that for better viewing you go full screen.
- At the end, this webinar will be available on demand. So please share it with your colleagues.
- You'll also be able to rate the webinar at the end. So please do so and share your feedback to help us improve for next time.
- And as always, please visit IR and ACI Worldwide online for additional resources.
I also just wanted to cover a high-level agenda for today's presentation.
- So Lu will kick off the webinar addressing the need for resilience and how you can prepare for alternative payment methods.
- He'll then pass it over to Jim who will cover the vitality and hardening of payment monitoring solutions as the mix of payment methods expand.
- And again, at the end of the webinar, we'll answer any questions from the audience.
With that, I will pass it back to you, Lu.
Lu Zurawski: Thanks very much, Janae, for the slides
Okay, well, I'm delighted to have been invited by IR to discuss both ACI and IR’s respective roles in the provision of systemically important critical systems and the need for oversight and monitoring and the analysis of those systems. Not just as individual IT platforms but as holistic business operations. Sorts of payments operations are currently stressing and straining to deal with some unprecedented demand that crises like COVID-19 is throwing at us.
Focusing on payments today and making sure that payment flows and related economic activities can function regardless of whether that's by ensuring that digital payments can handle the unusual surges in e-commerce trade, which is obviously very highly up in some sectors, or whether it's ensuring that for those that need it, rely on it, they can still get access to cash where that's applicable. And for those fast innovating merchants who found new ways to engage with local communities, we're there to try and offer any payment in every possibility.
I want to spend about 15-20 minutes looking at the need for both agility and resilience in modern payment systems, which are twin pressures. Agility and resilience are not necessarily complementary. Like, how do you have a fast-moving and changing product at the same time as a heavily regulated platform, overseen by senior executives, whose heart rate might rise every time a system upgrade chart appears. So this, this webinar is going to explore how to reconcile some of those—sometimes unpredictable—changes with the creation of some form of clarity for the benefit of customers. And when I talk about customers, I don't just mean consumers. I think we need to look at the wider demands of citizens from society and different governments. And so some of this talk will also cover the regulatory and public policy initiatives, the actors leading indicators, sometimes for us in the payments industry.
Now, ACI is one of the world's largest payment software businesses. We deliver real-time to any electronic payment solutions to banks, intermediaries, payment processors, service providers, purchase billers, and we've been around for a while. We've been around arguably for quite a few crises. We formed in the era of the fuel crisis and the energy crisis, the 1970s, that arguably led to the first big wave of plastic payments and electronic commerce. And those sorts of crises, like the fuel crisis, were, in some ways, shaped by the way in which governments reacted to those big crises. That time they encouraged greater competition, they lowered barriers of entry. They tried to encourage freedom of choice. And innovative firms at the time, including ACI, were able to move in and set up fancy new ATM type operations, providing self-service and an all-new range of choice. And I think we're gonna see similar patterns emerging post-COVID. I mean, there's going to be some reckoning when we have to unravel the various emergency stimulus packages that are put in place and some of the behaviours that have been adopted by society in response to this crisis that was going on for some time.
So, API has been around for a while. We've provided services to some of the world's largest banks and processes, which are household names that need bulletproof reliability and provide 24/7 kind of service. And in many places where we operate, governments and agencies like Central Banks see ACI as a systemically important part of the national central infrastructure. So we know what it's like to be under scrutiny, not just for the quality of our software, but also how our solutions are deployed and for ensuring that those operations deliver the best possible outcome given these tough times.
We're probably best known for our retail payment solution. Now, some people will be familiar with the base24 platform, which is probably known as the original gold standard, a card processing used by issuers and acquirers and sometimes schemes themselves. But obviously, those sorts of solutions these days are not limited to cards. They provide issuing and acquiring services at any payment instrument. Including any sort of new, real-time payments initiatives that are emerging. Our solution folks also include payment intelligence, like fraud analytics and the provision of support for merchants both in-store and pre-com. We provide electronic banking for digital channels and we have a sizable bill of business as well. And we provide our solutions either on-premises, through software delivery or by a platform on-demand, including a public cloud option, which is obviously seeing an awful lot of attention post-COVID. Particularly anybody who's been relying on an offshore outsourcing arrangement and has been affected by lockdowns were recognized.
That's enough commercial about ACI. I want to move on to what will become a recurring theme in this presentation, which is the number R. And the most observant of you there will say “What the hell are we talking about? Why are you referring to a number when it’s a letter?”
It should be a number which is on everybody’s consciousness at the moment. Because I'm referring to the virus reproduction number, that’s the number used in epidemiology. This stands for the reproduction number and it's the rate at which something could go viral, it’s naturally going and being reproduced at. So we think the COVID-19 probably got a natural R north of three. Anything above one means that it's going to go viral and it’s going to infect lots of people, anything less than one, it starts dying off. So R is quite an important number at the moment. I would like to think that governments around the world at the moment are probably using dashboards and looking at key metrics, very similar to an IR platform to go and see all the leading indicators that are hopefully showing signs that we’re over the top of the curve and not about to re-emerge on another phase of a pandemic. And hopefully, some of these people get to tell me when I can go to a football match again soon, as well.
But also in the world of payments, R is significant. We have our own Rs. We have lots of times you refer to non-functional requirements (NFLs). But we also have some fairly fundamental ones like reliability, always available; robustness, you know, being able to deal with bashing and knocks; and also the concept of having real-time availability, being available all the time to real-time access and accurate data. So we make sure that these key sorts of insight in the guts of our solution can be brought together in the form of meaningful dashboards for business users.
Now, it's probably a little bit naive to think that in this kind of new normal of this particular pandemic, that transaction patterns after COVID can just suddenly be tracked by a shiny new dashboard. It's a little bit more complicated than that. It does require a bit of expert technical insight into knowing what's going on both of the technical levels and the interplay of the different technical things building up, supplying some business-specific intelligence, useful for people that are responsible for running these operations and these payments businesses.
And that's kind of quite important because, at the moment, we're seeing some very, very weird patterns. I mean, if you look at some of the peaks that have occurred in COVID of e-commerce transactions, we're seeing some online retailers who do delivery obviously, in the UK, the volumes are going up 300%. So these are the sorts of volumes where ordinarily they would show up as a denial of service attacks on a physical system and dashboard. And you need to make sure that these systems can be monitored with delicacy to make sure that the dashboard’s on bright red and they're showing false signals.
Now, if we look at the period before COVID, transaction patterns were already becoming difficult to predict anyway. Customer choices were being driven by sometimes fairly irrational, what I call behavioural economics. This is the idea that people, given a choice, will do things with their finances, even if they’re not necessarily in their best economic outcome, the whole concept of unusual consumer demand. So that's kind of like the economics of psychology, which means that people use different payment types to buy different things because they like to associate different pain of loss with different things. And you can rationalize it if you go deep enough, but it's not easy obviously to somebody monitoring, monitoring at high-level.
One way to look at these different four forces and trends that have been creating uncertainty for payments over, actually, since the last great economic crisis. You go back to 2007-2008 when we had the great financial crisis. A lot of activity took place in public policy, government regulation level to make sure that banks were protected, trying to avoid a financial crash again. In particular, there was a lot of focus on new competition to make sure that people didn't keep on using just the old banks and also trying to stimulate innovation. So a lot of new banks were created. You think about it, FinTech itself was created as an outcome as the last great crisis. And I guess we ought to be thinking now about what will be coming out of the COVID crisis in terms of new businesses, new ways of operating, and new kind of demand.
Some of that public policy activity I mentioned is being driven by a recognition that the world is changing, the world is obviously going digital. Instead of just talking about the interaction between people and businesses, we now need to start thinking more in terms of the interaction of people and machines, machines and machines, the Internet of Things, the role of artificial intelligence—it depends on that—and of course data, which obviously is feeding the AI and a lot of the decisions being made in that new world.
So if you will think about the fourth industrial revolution is—as you know the first one’s steam, the second revolution was about transport, the third was communications of the ’50s, ’60s, ’70s. Now we're in the fourth industrial revolution, where we need to think about what it means to be a human. Even more so now when we’re thinking fairly soon about handing over control over some of our data and privacy, in the form of these health trackers which might get us out of this pandemic.
So a lot of opinions and attitudes to fairly fundamental things like the privacy are changing, as part of this combination of the fourth industrial revolution, but also as a result of the crisis being overlaid on top of it.
I mentioned my behavioural economics kind of area here. I always like to refer to the unpredictability of payments and the fact that it kind of works differently in borders and platforms as well. So all these people on this slide here are Nobel Prize-winning economists, apart from the lady on the right, whose name I can’t remember, I’m afraid. She appears here with Richard Thaler in the movie The Big Short. Which is obviously a movie about the last crisis, which kind of explained the madness that led to the irrational exuberance, property buying.
It can be further explained by Daniel Kahneman where we kind of tend to do things very rationally and then we post-justify what we do right by our slow thinking brain—that people will tend to do very easily in the world of banking and payments. The guy on the left, by the way, this guy’s Jean Tirole, another Nobel Prize-winning economist who’s famous for his advice on regulating the two-sided markets. Two-sided markets, like the credit card industry where you have issuers on one side and processors, acquirers on the other side in many different ways of being promoted.
To highlight how unpredictable this payment world is, this is a slide I use, probably, four or five years ago. It was just gently making fun of the use of QR codes of fuel retailers. This is actually a real marketing brochure. The reason why there had to be a very large QR code in this scenario is so you don’t have to get out of the vehicle. So you typically tend to be quite a long way from your fuel pump and you want to go and use a QR code to initiate payment at the pump. I thought what a ridiculous idea this would be. And now I get my opinion was not totally unique. We put a famous flip chart thing here about people designing new payment instruments and saying no, definitely we're not going to have QR codes, no.
The problem is, we were totally ignoring what was happening over in Northeast Asia or in China. I might have been right about my design not to use QR code. But unfortunately, 1 billion Chinese people can't all be wrong. So I think we are now getting used to the idea that there's gonna be a whole range of new things initiated by QR code, either by presenting your mobile phone app or by scanning somebody else's app. So these are the realities that are changing pretty quickly and it's a very unpredictable way.
Another one of these areas, which might be worth inspecting, is the relationship between public transport and payments. It’s a fantastic bit of evidence about how Tap-and-Go, the idea of CMV contactless cards, took off within the UK, specifically in the Greater London area. At a rate far, far greater in that Greater London area compared to the rest of the UK. And it can be attributed to the use of bingo cards on London Underground, on transport, and on the buses, where people migrate away from paper cards or paper tickets into a piece of plastic shaped just like a normal card, but were able to swipe it over a gate or just gently tap it and that was the learning of this new experience of tap-and-go became very, very easy for people to get used to exactly the same ceremony, the same kind of experience when it came to a retail site. So that's why contactless tap-and-go has been such a big hit in the UK and many other metropolis areas as well where it’s been adopted for public transport.
We have a bit of a problem at the moment. Because with lock-down and with the current COVID arrangements in the UK, and sadly quite a few London bus drivers have died—and ten bus drivers have died, the last time I looked. So there have been changes in the arrangements in the way in which you enter a bus. The front door, for example, is now closed, and there is a big sign saying “no need to tap-and-go”. So basically, bus journey’s have become free. So it's going to be interesting to see how that’s going to change people’s behaviour to both transport and payments once the lockdown starts to reverse.
Let’s try to predict a few new future things as well.
The world of identity, electronic identity, is still tricky and kind of motive, but it's not very far away. These logos here are all examples of bank relevant schemes which are used primarily for customer onboarding or familiar customer kind of purposes, but they're also equally usable for transaction-level ID and authentication systems. And these guys have been quite important, specifically in Europe, where we see a lot of confusion still about how the PSD2 directive is going to be enacted in terms of how strong customer authentication will work. And there is a strong suggestion that the use of recognized brands that can facilitate that authentication might be a good way of doing it. Now, this is up for debate. But what's really thrown this whole e-ID thing in the spotlight, as I mentioned before, is the focus on electronic trackers to work out whether you might have been infected or whether you might be infectious or whether you come in contact with somebody. And though this is practised, at the moment it is really debatable whether you're going to give up your identity or your credentials on that kind of device. And it's going to be a big debate about how we can manage our identity safely. Both now in terms of crisis where there's an overriding need to share that information or even afterwards where you might want to volunteer or opt in to some of this information as well.
I think it's gonna get a bit more complicated in the world of payments. There’s a lot more into connectivity and complexity that needs to be simplified if the people running these operations can get to sleep at night. And I get that it is possible to try and help them with their sleep if we look preemptively at some of the usage patterns. And indeed some of the trends are going to affect those usage patterns in the widely interconnected payments infrastructure transactions.
And that's why we at ACI spend a lot of time with IR and their prognosis platform, taking what are already very robust and reliable systems. Like, basically for RPS and RTPS of real-time payment solutions. For a world where it's going towards a new kind of R, the new kind of non-functional requirements. Not just the world of being robust and reliable but also including the things that have to do with openness and the idea of actually dealing with some of those new modes of authentication or connectivity that I just mentioned.
Let me summarize before I hand it over back to Jim.
I’ve mentioned that there’s going to be a recurring theme, the R number, in this thing. I believe very strongly that the important thing here is not just reliability but resilience. Resilience is not the same as reliability. Resilience takes aspects of being agile, being able to react, being able to bend, being able to change your mood. The important thing with future payments is to be resilient across systemically important critical infrastructure.
It's a good time, I guess, for me to hand it over to Jim to talk about how we’ve been working together to provide practical insights.
Jim Bowers: Great. Thanks, Lou.
All right. So with that, I will continue on with the topic of resilience specifically providing payment resilience and real-time visibility.
So with Integrated Research and our prognosis offering, we've pretty much cut our teeth in the same sort of manner as ACI, historically. We really started with monitoring the card payments on the HP or, back then, tandem nonstop systems. Which were inherently fault-tolerant, highly resilient, really built to handle any single fault by replicating each and every component within the application. So it really started to set our minds on how we architect our solutions to be highly available, highly scalable, highly resilient for critical infrastructure environments.
But with Integrated Research, what happened beyond the payment systems is we began to monitor the infrastructure that surrounded the payment application. And eventually, that led us to monitoring solutions, such as the fraud detection engine that complement those card payment applications and, oftentimes, are tightly coupled to the authorization and routing of the card transactions where they actually have to give a thumbs up or down on whether these transactions are potentially fraudulent within milliseconds. So again, highly performant and require high availability. As if anytime those fraud solutions are down the bank or the processor is putting themselves at commercial risk. From there, we extended into authentication methods, some of the authentication capabilities that the internet was adopting in mobile and tokenization schemes with all the mobile wallets and those kinds of capabilities. And again, more recently, we've moved into the wire in ACHspace. We're monitoring ACI's RTPS solution. The formerly MTS and the components around those applications.
So we're not only doing the retail banking applications, but we're working on the transaction, the corporate banking side as well with the disbursements of large dollar amounts with smaller transaction volumes.
And again, Lu was talking a little bit about these new accounts to account authorization schemes. The US resulting to be the popular one is there a myriad of others at this time, that is rolling out as well to an equally effective. Talk a little bit today about what's been happening in that space during the virus. It’s quite interesting to see that this appears no longer to be a generation Z type application scheme. We’re actually seeing adoption across different geographic areas and population groups.
And then finally, the prognosis is beginning to monitor the immediate payment, the faster payment systems. Again, this new generation of wire and ACH and immediate disbursement. And with the need to have everything faster and in more real-time it really falls into prognosis’ strength. The same strength that we developed our core capabilities in our current payment systems. We’re basically taking that same DNA, that same resilient capability of architecture and engineering and applying that not only to the card payment application but basically all payments throughout the infrastructure.
Finally, to point out, too, that up at the top of the diagram, where we might have been historically known for our IT operations, and infrastructure monitoring of those card payment applications. We really provide dashboards across three core component areas within the organisation. We are providing the executive-level dashboard, providing business with immediate visibility to do their approval rates or processing rates et cetera. Or when the business stakeholders want to look at the information, and slice that information in slightly different ways, where they may not be so concerned about the profitability of the corporation itself, if they're concerned about customer loyalty and support of the customer, so their tenants, their customers and being able to understand exactly where their positions are, if they’re using their payment and transaction instruments throughout the institution.
And then finally, the IT operations where I think we really initially started understanding how, what I like to say, how we maintain all the nines. Making sure that all those payment systems are up and running and are as healthy as they can possibly be.
So as I was thinking about this presentation, I immediately started to think of three events that have happened fairly recently.
- And so from my recollection, I started thinking of the Y2K event that we all kind of went through, back just before 2000. What was unique about this is that we only had a deadline. We all knew what that deadline was. And there was a tremendous amount of commotion to fight that beast, to understand what we did with these two-digit dates for the year and how we dealt with that processing. So a tremendous amount of disruption into the payment industry as a whole for us every application, frankly. And I think that campaign or that effort, if you will, largely paid off. There didn’t really seem to be too many outages or disruption for that Y2K. But it was a considerable effort, considerable disruption.
- The next one that came to mind immediately for me was the 9/11 event. Which was predominantly US-centric, but it really got the world thinking about: “What are our DR policies? What happens here if we have a data centre or a command centre that is just completely de-commissioned? Are we ready with our planning to understand what happens to our business models and our practices if we have that level of disruption?”
- And then, of course, the third one that came to mind is the more recent one, the one that we're talking about largely today which is COVID-19.
So it got me thinking, “Okay, do major events, do good things or bad things come in threes?” So it didn't take me long to Google that query around and find out, no. It’s really more of a matter of human nature and our behaviour or our thinking patterns that we actually look for patterns and random data. In a way to extract order from disorder. And we just generally tend to lump things together with that number. So that kind of gave me the freedom to immediately think “Oh, yeah. We've had other events that have happened recently.” Lu mentioned the US housing loan crisis. We've had certainly a long trickle of the sophistication of cyberattacks. And there are many, many other events that we have dealt with in the last few decades here. That was more of a matter of, like I said, my behaviour and our thinking, trying to create order out of that chaos.
So as we begin to look now at, really, the impact of COVID-19. And the initial impact I think all of us are facing is the social distancing and telecommuting and what that impact meant to the payment industry.
So, the initial impact was clearly, one of connectivity, visibility, accessibility. Suddenly, with everybody not being able to be in the office and share comments. If you’re in the IT organization, you might be in some sort of command centre with all these big screens TVs that might be the envy of the Strategic Air Command or NASA. And the amount of information in displays that are front of you that monitor to help these applications.
But even if you're on the business or the executive side, you always want to have this ability to help with the overall business at your fingertips. The ability to drill down, to help customers with any potential issues or concerns they may have. Initially, that’s really where we see the explosion of things like Zoom, web meeting, teleconferencing and how we all work from home disparately. But it also means that, hey, we have to have the name disability. The value of the money that we spent on all the big screen TV and all those monitors, we really need to have that accessibility brought down to our tablets and our PCs so that we can have that information at your fingertips as we work from home.
Another key element to this is as everybody began to work from home was the shock to the automated operations, or what we like to call lights out. They talk an awful lot about lights out data centres. About how they're unmanned or how they’re unattended. But suddenly, we're running the risk of having almost a lights out operational staff. How did we work to maintain all these nines, keep these systems up and going and really maintain all that critical infrastructure capabilities that our governments require the payment industry to maintain and have?
Well, we'll talk a little bit about that and some operational practices around that.
It really boils down to having browser capabilities or key performance indicators. And have all that information at your fingertips so that you can have access to the dashboard, those reports and that query. And basically, do that from wherever you are. Whether it's your phone and tablet at home on a PC having that information at your fingertip. Frankly, tying this back to resilience as Lu kind of mentioned. Resilience is more than just reliability, availability, or scalability, the typical NFRs that we discussed.
I like to include predictability when I talk about monitoring. And I mean that in actual sort of two definitions if you will.
The first one of predictability is that when you monitor a system, you can never impact that application. So if we're monitoring a retail payment solution, we have to ensure that we never negatively impact the performance of that application. If it's struggling or having issues or there's a burst of reversals or timeouts or some exception processing, we have to ensure that we don't propagate or make that issue even worse than it already is by pre-monitoring that particular situation. And it's very challenging to do but our architecture and our means of storing that information out, dissecting it, pushing it in front of consumers, really, truly does ensure that its prognosis is predictable. That regardless of what's actually happening within those payment applications, we’ll be able to provide you visibility without ever negatively impacting that application. And that becomes very, very critical given all the fluctuations that you see in your payment application.
The second definition of the predictability I like to look at is more of the crystal ball, the future look. You have to be able to have the predictability to understand not only the availability aspect of keeping the systems up and running, all the nines. But there's business rules and business logic around here. We have growth goals. We have new customers and tenants that we want to bring into the system, we want to be able to grow our application. And so when you look for that revenue growth and that application growth, we need to be able to help you guys predict “Well, how do you size the applications?” “How do we ensure that you have your operational perfection to ensure that it's properly staffed and managed and maintained across those hardware applications?” And that's really another core component of what we try to provide through that resilience.
When you look specifically at the payment industry, around the processors, financial institutions and merchants, what we really want to do is try to bring as much automated operations possible. So, here's the situation where we want to be able to use your tools to ensure that you can work in that light off scenario. Many of you have already been using prognosis for decades. And with each situation you encounter, you generate new alerts, you generate new automated commands to go back into those ACI payment applications to query those payment applications and understand what is health, what’s the status so that you can generate the proper alerts. You can automatically handle situations where maybe I need to bump up the expense on a file size, maybe I need to bounce a fleet of APM stuff in the field or perform key exchanges, all of these things that can be done automatically based on event messages through the applications or threshold points on those applications, again, in prognosis monitors.
But there's also the need to reduce the false positives. With all those alerts you need to ensure that hey, we still have the ability that says, if we couldn't automatically detect that situation, we do need to pull in a human being we do need to get out and say, “Hey, we need somebody to come and look at this. We’ve tried all these steps. We’ve tried all this automation, but it's still not in a stable state.” So you want to have to reduce the false positives by correlating those alerts and making sure that it’s not based on static information saying “We’re over a certain threshold or at a specific limit.” Those types of alerts can be very, very complicated, so you need that flexibility to create those dynamic, flexible alerts.
Another important aspect as we've seen institutions deal with here through the COVID is the ability to rebalance workloads. By rebalancing workloads, I don't mean like re-routing transactions or anything on that sort of technical level. What I really mean is more of a skill set analysis. It almost falls back to like an HR or a management responsibility to say, “Hey, from a DR perspective. What happens if Bob or Sally is suddenly caught with this and they’re decommissioned for a couple of weeks. Or someone in their family is impacted and they have to take PTO or they have to take some medical leave.
You need to understand everybody’s skillset within the organization and you need to be able to rebalance that. You may have pockets of knowledge that you have hired over the years that they have skills that you're not even aware of. And so by querying people and understanding their skill sets, that's the level of rebalancing and resiliency that you can get. It's nothing to do with monitoring payment applications. But it really is a very important aspect of maintaining that availability throughout our data centres.
Back from a payment perspective, we definitely want to monitor deposit fluctuations. That's the keyway of looking at the health of individuals and corporations and their liquidity. So we can provide a lot of availability or a lot of benefits to folks by looking at the deposit fluctuations. And as always, you want to have the ability to have automated operations to say, “Hey, if we can't automatically fix it, we need a human being to look at it.” Let's have the dashboard that displays the reports, the ad hoc querying capability so that we can troubleshoot to drill down on those specific issues.
Another area of payment necessity for the payment processors and banks that we've looked at too is really to provide insights and trends, opportunities and risks. Right now, we might be focused a little bit more on the risk side of that than the opportunities. But frankly, the capability is still the same. There's a lot of buzz in the industry around AI and machine learning and it hasn’t passed the monitoring solutions space as well, too. And as you're probably aware with the prognosis, we have the ability to build what we call historical profiles or dynamic thresholds. The payment business is very cyclical, right, It’s almost cyclical in seasons also. So a lot of times it doesn't make sense to compare this week to the previous week, but rather this January's and last January, this March to last March. And so to be able to do that, you need to be able to look at the historical information and the patterns and bring that back into your dashboards and your reports so you can see the comparisons. Now, that really helps reduce the false positives, right? Because if you do have odd sorts of spikes, frankly, a lot of that can be adjusted by how you look at deviations and variants. Over previous three-day-weekend processings, over payroll processing fees. But typically from an annual perspective rather than a comparison of this week to last week or this month to last month.
We also have the need to build models now based on information that says, “How is this particular merchant category code looking? How does this particular merchant compare to others within their peers or within their room?”
We, as human beings, always want to know how we compare to others. Whether that's one bank to another bank, one processor or to another or even merchants. There's a good way to tell about the health of say, yes, everybody's down 30%, 40% or whatever their impact is and perform that type of analysis to understand what those impacts are by the various data elements, whether it's different hard programs or merchant category codes or whatever those metrics may be that are a particular interest right now. So having that kind of capability and that kind of power on your fingertips is very, very powerful.
And we talked a little bit about the alerting and notifications of those deviations. There are times where it makes sense to say, “Hey, a disk is 75% full, give me an alert. If the CPU is above 90% for 30 seconds or a minute, send me an alert.” More often than not on the business side, it's not just that type of simple threshold. It's very complex. If A and B, or C, and it's over this type of period and how it compares to a previous period, that type of complexity of looking at the deviation, that can show you patterns and you either your customer’s health. Whether they're corporations, whether they're individuals, whether they're small businesses and understand their health, their activities through all their payments.
So all this kind of capability, you can easily lead into machine learning, modelling and building. But I kinda wanted to part this slide on a note where I'd like to say that I get a little bit frustrated sometimes when I talk to customers, and they talk about machine learning and AI and they want to use it, basically to kind of dummy down the application saying, “Hey, I want the system to kind of adjust itself and kind of run on its own without any interference or without any human knowledge. I want it to be able to do everything completely automated by itself.” And I'm reminded of a time where a very simple use case when prognosis is monitoring ATM usage. And we saw you in the middle of the day that particular ATM was being used less and less frequently until it finally went down to zero. Nobody was using this ATM for a couple of hours in the middle of the day. And it was very clear that it wasn’t a very popular, busy place of town, it should have had higher transaction volume, it used to have higher transaction volume even a month ago. So, we sent somebody out to look at the ATM and understand why people were using it in the morning and in the evening but they weren’t using it in the middle of the afternoon. And it turned out to be that a building across the street was being built that had all that reflective glass or mirrors facade. And the sun was hitting that building and reflecting on the ATM screen so people couldn’t read the screen. It was a pretty simple solution, they ended up putting a little booth or visor around the ATM and the transaction volumes went back to reality.
And it kind of dawned on me, I know it’s an extreme example. I could look at all of the data of the rotational axis of the earth, and where we are around the sun. And I could look at, I don’t know, city building permits and maybe material information, and merge all that information with my payment information and I still could not find that, “Hey, I’m going to have an outage here with this ATM.”
So AI isn’t going to be the answer to everything. AI is really going to help in the areas that Lu was talking about. Systems are going to become far more complex as we begin to move into a service-oriented architecture world. With open API banking and components of these transactions are done by outside entities, such as authentication, which Lu was referring to. We’re going to run into very complex orchestration and responsibilities. And where those outages are, where those bottlenecks are is going to become very complicated for us to manage. That’s an area where, I really think, AI and machine learning, and those capabilities are going to really help us build more robust alerts in the future as these solutions grow inherently more complex. I don’t see it as a way for us to kick back in our lounge chairs and just let the systems take care of themselves.
Enough of that, let’s move on to the next slide.
From a consumer perspective, I think, consumers are already re-thinking cash. The card was already king with retail payments. I think, with the COVID epidemic that we’re certainly having customers even re-think cash even more so.
We certainly all probably read all the articles about the new contactless and mobile adoption rates. While all payment methods are generally down, we’ve definitely seen a shift to the tap-and-go, what we like to call in the US the contactless payments and mobile wallet capabilities. Talking to a lot of the issuers, mostly in the US, they’ve also said that “Yeah, we are seeing that the account-to-account transfers and people using mobile-wallet payment schemes to transfer money to their friends or others have not dropped down as much the others have. In fact, they are starting to see that those payment methods are being used beyond the Gen Z folks out here. It’s also being used by other people and other classifications and generations as well too.
There was also an IBM report that came out, I think, just a few days ago. Where I was kind of a shock to see that they pulled 75,000 people in the US through one of their surveys and found that over 50% of those people said that they would be willing to telecommute at least part-time after the virus is over. So we’re going to see some shifting taking place. The real question here is, “How much of this is an emotional response to where we're at right now, and how much will go back to normal? And how much of it really does change the psychology, the behavioural practices of people as we move forward?” My crystal ball isn’t clear enough to tell that right now, but it’s going to be interesting to see what happens here.
We’re certainly seeing areas where subscription services are seeing the burst of activities. If you’re in the retail payment world, the people with their gym notifications, and various other month-to-month payment schemes where people are taking advantage of the free month of Netflix and then you want to disable it afterwards which has been leading to an excessive number of chargebacks. Everybody’s got more time to look at their bill statements now and saying, “Hey, wait a second. I need to stop these monthly services that I can’t take advantage of anymore.” Which led to an increase in chargebacks and processing.
So if you’re suffering from those or trying to manage those on spreadsheets, please talk to us. Because we have the means, both of us ACI and IR, we have means of helping you out in that space.
Finally, the last thing I want to talk about is really a need where it involves more of the immediate payment schemes. Something that we’re behind the world on in the US. When we recently had this stimulus checks that were sent out, it would have been ideal, it would have been beneficial to everyone if instead of writing paper checks and physically mailing those out to people we had the ability to deposit that money and provide that money, those funds to them in real-time. And that’s really what immediate payments are looking to do.
A lot of corporations, governments, massive entities to disperse those transactions in real-time and make those funds available to people even faster. That’s a classic use case of why the US really needs to catch up with the rest of the world in this immediate payments arena because liquidity is going to become absolutely critical. We need to figure out ways where we can disperse this money evenly, fairly, and as fast as possible. That’s going to be critical. One of the lessons we’re going to have to focus on as we move forward.
Here my last slide is really to talk about our partnership.
If you guys aren’t aware IR and ACI have been working together since 2010. Again, we’ve both been in business long before that. We’re sort of like, what you call, pseudo-partners, I guess. We’d run into each other in all the conferences. We were already monitoring, I think, at one point 80% of all of ACI’s payment applications were monitored by prognosis. We’re still kind of king of the hill and the trusted partner in that space.
Again, I think one of the key elements here is that both companies were both financially sound. We’ve got solid business practices. We’ve got solid business models. And I know doing business with partners that are going to be safe and secure becomes critical in this area too. Understanding that we are going to be able to make it out to the other side. And we will still be providing robust capabilities that we do offer in the payment space.
It’s also worth pointing out that ACI somewhat rebranded our solution. We refer to it as prognosis while ACI refers to it as payment service management. So if you hear of ACI talking about payment service management, they’ll often say that it’s powered by prognosis. And it’s also, kind of, worth mentioning here about the adoption of cloud. I didn’t really speak too much of that but that’s another outcome that we can see from the COVID virus is that people are going to be questioning “How many data centres do I really need? And if these are that risky and complex, then maybe we need to consolidate and look to move some of these applications to the cloud.
Both ACI and IR have cloud solutions. We have our own public cloud offering. We have a private cloud. We can run inside clouds, if you prefer to run our applications in our cloud, you can run it there. Or alternatively, you can run it in your data centre. We really don’t care how this stuff is deployed and we’re pretty locked up in those offerings as well too.
With that, I think, Janae I’m going to hand it over back to you. And we’ll get to the Q&A portion.
Janae Smith: Awesome presentation. Thanks, Lu and Jim. And thank you to everyone who joined us online today.
Before we dive into Q&A, I just want to go through some closing reminder.
- You can find contact information on this slide.
- So we encourage that you follow up with any questions, thoughts or experiences on the topic.
- Again, the slides are available for download and the on-demand webinar will be sent out shortly.
- And lastly, we would really appreciate it if you could rate this webinar and help us improve for next time.
And now we'll open it up for questions. So if you haven't had a chance to submit your question, please do so now. But it looks like you have a couple coming through.
I'll go ahead and kick it off.
The first question that we have: Have you seen any specific new demands or requests from ACI in response to this crisis? As we moved further into the situation have those demands evolved at all.
Lu Zurawski: The initial reaction or the initial kind of responses we had or rather requests that we had, you might imagine that the initial request would be about support; Are we available? What are our procedures to make sure that people are able to continue to operate and provide that resilience that they’re asked for?
Some of them are very basic stuff, like us having to reassure that we have our own remote working capabilities and that we can still continue to provide either proactive or reactive support through our process. But that was in the early days, in the early stages when the thing was looming.
As things have gone on, there has been a change. There’s a couple of directions or dimensions to it. One is the strategic dimension, Jim was just talking about his interest in the cloud. I think we’ve seen a noticeable uptick in the interest in trying to have alternative support mechanisms, alternative ways of creating resiliency by using nearshore or public cloud offerings. For example, an alternative to what’s been the norm for the past 20 years which is offshore. And another dimension is more about the need to innovate quickly with meaningful propositions. By meaningful propositions, I mean, things that really help people. I’d help people because it’s a good practice or because the government is telling you to do that. For example, payment holiday, making sure people are not asked to pay when they go accidentally into overdraft.
So we’ve had quite a few requests about tweaking systems to make sure that control limits can be overwritten and can be changed. I think that’s probably something which is going to stick, the ability to have more granularity and control over limits and stuff like that. There are very palpable changes.
Janae Smith: Awesome. Thanks, Lu.
Another question that we have here, how has the pandemic impacted real-time payment alternatives, as opposed to cards and e-commerce?
Jim Bowers: You want to take that one first and I can jump in?
Lu Zurawski: No, you go and I’ll jump in.
Jim Bowers: Sorry. So yeah.
I tried to speak on this a little bit. And talking to a few issuers that I’ve spoken to during this. Some of the alternative payment methods they’ve actually seen that the percentages have actually dropped off. Like I said, all payments across the board have dropped, particularly in the retail side. Obviously the payroll and bills payment. The corporate side is not impacted as dramatically although there are changes there as well too.
But in terms of the new payment method, there’s actually less of an impact in those payment methods. As I said, they’ve seen increased adoption from different generations. For example, my folks who might still struggle with all the apps on their phones were actually wiring and transferring money to each other using Zel and other applications in the US. My wife is from overseas, so in Singapore and China and other parts of the world-- For the Chinese New Year, they like to ensure that they paid off all their debts before the Chinese New Year starts. So that kind of coincided here with this outbreak. And they saw huge uses and adoptions were in the past you might be able to have the opportunity to go out and have lunch and pay off all those gambling and betting debts, if you’re inclined to bet on football and other sports, as I was known to do at the time while I was overseas. But we’re taking them out to lunch and making sure that you are paid off before the Chinese New Year and enter the year in the most prosperous way possible. Now people are able to do that remotely and safely using their mobile phones.
I hesitate to say that it’s actually an increase but I do think that we’re going to see a continued increase in adoptions once we get out of the other side. There are more people now who are comfortable with that technology and capability.
I’m going to stop there and see if you can add more.
Lu Zurawski: I do have anecdotal stories. One is a genuine interest in the uptick in the interest of processors and acquirers. This is specifically in Europe, where I am based. There has been a lot of focus on the creation of faster payments, real-time payments infrastructure. Again, coming back from the government. There’s a lot of focus on that pre-COVID, in Europe anyway. People kind of like started to use it on an informal basis and therefore close their interest in getting ahead and making sure they got propositions ready when they get a little bit more industrialized.
Now here’s the anecdotal story. My son, he’s not in a university at the moment. He started gigging and doing some delivery work. And he started working at a local, trendy, pop-up burger type place. And when you take an order from them, the only way you can order is through Instagram. That automatically makes it problematic for people at a certain age. But when you send your form on Instagram, you go to the payment page, they didn’t want cash nor card, they wanted a direct transfer. So they’re relying on a network of local, they are trusting they will be paid by the direct transfer. And I think that kind of mechanism which is currently based on informal trust will be superseded by things like request-to-pay--but it’s already happening. You can see this driven by some generational things. I can see the demand is definitely picking up.
Janae Smith: Thanks, guys. It was a super interesting example.
And it looks like we are just at the top of the hour. There are a few other questions that came in, but we will just follow up with you personally. And again, thank you to our presenters, Lu and Jim and everyone who attended online today. We hope you have a great day.
Lu Zurawski: Thank you so much.
Jim Bowers: Thanks, everyone. Cheers.