Steve Percy
President, Diolkos Commerce Solutions
Aug 2021
“The global payments ecosystem is incredibly complex. Simply put, there are a number of entities and intermediaries throughout the payments process that provide a piece of the puzzle and take a fee for their efforts. In some respects, it is a house of cards with each entity relying on others to manage their parts of the process…
The complexity of the payment’s ecosystem doesn’t stop at the number of entities involved, it is a highly niche environment with specialised skills and knowledge. There are strict regulations and laws at both global and local levels as well as intricate relationships between competing organisations and within different divisions of these companies…”
Justin Pike
Payments in 2021 and Beyond:
Making the Complex Simple
Payments Journal
Aug 2, 2021
In other words, Consumers and their Bankers are paying a small fortune to implement and manage all of their various payment solutions that are in turn hampering true progress to the next level. A true real-time transaction banking solution that addresses all of Front-Mid-Back Office has not been delivered…yet.
Paytech and Fintech experts are still discussing the efforts of anyone and everyone who is working on making the next generation payment solution. One that will take us all to the next level. And of course, they point out the many failings of those that are in place or moving into place with any level of attracting serious transaction volumes.
But before I tell you that I have developed the ultimate solution, let’s think inside and outside the box. Dream some dreams.
Let’s define a “Perfect Payments Bank” [a.k.a. Payment Nirvana]
Here is a long un-numbered list. Prioritize as you wish:
Customer/User as a “first principle” in design - Transaction Simplicity, Effective Reconciliation
“Omni-Channel” One platform for all payments, of all types, for all users (P2P, C2B, B2B, C2G, B2G), for all sizes of businesses
Removes all technical and process driven opportunities for fraud
Designed for and operates continuously for a 7/24/365 global environment
Addresses all internal and external stakeholder requirements for low-value domestic and global payments
Practical: It can be delivered in the current economy and political environment and leverages all of the good elements of payment policy and banking infrastructure
Secure – the architecture of the system supports continuous investment and integration of new security methods as they evolve
“Trust” = Secure and all payment participants including FI’s are accountable
“Real-Time” = Immediate funds transfer, account-to-account, 7/24, globally
All payments are liquid “Good Funds” = $$ are mine. They can’t go back
“Understandable” = Not confusing, doesn’t scare me
“Easy Payment Execution” = Simple using QR
Easy Implementation bringing Merchants and Consumers online with ease
“Privacy” - No PII Data incl. Name, Address, Account Numbers are exchanged between Payor’s and Payee’s
Regulatory Cooperation through effective and efficient Real-Time Multiparty Sanctions Screening and new AML oversight capabilities, including POBO/ROBO and all at costs that match the objective
“Transparency” - Collaborative Full Remittance Data Capture where both parties contribute to the purpose and reason for every transaction
Refunds are “Matched” to the original payment and each of the specific partial contributors
Payment “Approvers” do not need to bank with the same Financial Institution
Payments can easily be tracked by any for the transaction participants, in and between jurisdictions
Strong Risk Management Controls that provides all participants, end-to-end in the payment exchange chain, with the independent ability to control cash movements that they participate
Okay, what about more payment capabilities but delivered through a single platform.
Pre-Authorization of payments
Partial Payments (split a payment in both time and source/destination supporting both BNPL Buy Now Pay Later and Multiparty contribution)
Multi-Party Payors (all banking at different Financial Institutions)
Multi-Party Payees (with Depositors at different Financial Institutions)
Multi-Level Payment Approval - independent of the Payor’s FI (including pre-established payment limits that force Approver engagement)
Cross-Currency Payments (PvP driven Auto FX)
Future-Dated Payments (with Interest compensation)
Time-Sensitive Payments - Payment executes at a specific time, under full pre-authorization by all parties
Escrow Payments (Payor/Payee Direct Control or even an independent 3rd Party)
Payment Terms Automation (Discounts and Penalties based on timeliness)
VAT Tax Collection and Remittance plus ITC Credit management (Canada) and refunds
Payroll and Government Payments, guaranteed to be deposited to the correct beneficiaries account
Charity Collections with full disclosure and tax reporting
Unlock Loyalty Reward Cash (Corporate Balance Sheet Liability) with Integrated non-currency payments for both single and multi-vendor loyalty programs
Digitization of PrePaid/Gift Card/Coupons/Token transactions, Single and Multi-Vendor programs
Let’s step into today’s world of banking and speak in their current language.
What if Banking Operations and Treasury Operations had…
One Payment Platform - that covers all low-value payment transaction types (DDA and Savings system interfaces can be significantly simplified opening the door to longstanding legacy system upgrades)
Transparency - All transactions are visible through the same platform hence transaction execution and status that is simplified and consistent across all payment types
Transaction Investigations where all transaction types are investigated through the same process and platform
Liquidity Risk - Scheduled Payments (Post-Dated and Time Sensitive) are “committed” hence there is advance funding notice to Treasury teams about the exact time of exit and/or arrival of funds
Payment Settlement Risk - Funds are guaranteed to be on their GL/Balance Sheet
Could immediately “Halt Exchange” to specific FI’s, globally (real-time)
What if FI Business Lines could …
eliminate all cheques and associated infrastructure - Finally! (including all hardware MICR/imaging for capture, storage, destruction, statement, reproduction, reconciliation, signature, etc.
eliminate complex Operations groups by moving to a more simplified Merchant Acquiring and Delivery Solution
eliminate expensive systems and provide simplified Mass Invoice Collections (eliminate All CCIN Infrastructure)
eliminate worrisome Pre-Authorized Debit Payments and provide simplified, more secure, and reduced challenges in setting up and removing these transaction types
What if Branches and Business Units could strengthen customer relationships by selling new services such as…
eCommerce Acquiring (post COVID hotbed) – entitlement config, simpler than opening an account
Prepaid Programs (individual and mass distribution) – stable deposits – entitlement config, simpler than opening an account
Escrow Payments– entitlement config, simpler than opening an account
“Guaranteed” Employer Payroll and Government Mass Payments – entitlement config, simpler than opening an account
Time-Sensitive Payments (Lawyers Trust) – built-in, no branch requirement
Loyalty Programs – entitlement config, simpler than opening an account
Client Self-Registered Gift Card, Coupon and Token Payments – entitlement config, simpler than opening an account
What if Risk and Compliance Groups (and associated regulatory bodies) could have…
All Sanctions Screening integrated into the same platform, and applied consistently across all payment types, including Prepaid and non-currency Loyalty transactions
Prepaid Program “Beneficiaries” screened and tracked for AML and Sanctions Screening
Placement and Layering can be tracked FI - to - FI, Account-to-Account, within and across all jurisdictions
Payment Refunds follow the exact reverse path between the exact same transacting parties recognizing all individual partial payments and associated partial refunds (AML Layering benefit)
FI’s can now earn revenue against KYC and AML/ATF/Sanctions assets from non-currency payment types including Loyalty Point transactions and Token Payment Transactions
Let’s add in other important external stakeholders:
What if Financial Intelligence Unit - FIU’s could …
Monitor transactions from account-to-account across:
o Multiple payment types
o Multiple FI’s
o Multiple timeframes
o Partial/Split payments
o Refunded payments
o And Multiple jurisdictions
What if Governments could have …
Accelerated Tax Revenue: GST/HST remittance collections, ITC Automation in real-time
Retain Existing Fiat Currencies that are long established and legal tender
Apply consistent KYC, Sanctions Screening, and AML rules across all payment types and any changes applied to all payment types at once.
Existing Regulation (OSFI, Bank of Canada, Minister of Finance, CRA/IRS, FINTRAC, CDIC, RCMP) - oversight simplifications and improvements for all regulatory bodies
Improved Economic Balance Sheet Risk Management for real-time payments across the entire low-value payment spectrum
Payment system improvements to satisfy industry representative agencies (ex. CBA, FCAC) as both Bank and Consumer protections are improved
No required changes to Law and Regulations - Bank Act, Payments Act, Clearing and Settlement Act, Bills of Exchange Act, Federal Consumer Protection Laws, PIPEDA, PCATF Act, FATCA/CRS,…
So this long examination of “what if…” leaves you asking a couple of questions – Is this possible and how in the world could it be executed in a reasonable timeframe, not only domestically but internationally ?
I can confidently say that it is possible to have a single payment platform that can provide all of the above dreams, including the requirements of all Front-Mid-Back Office including a new risk management model that actually addresses the real-time solution.
So forget about all the details and anomalies of today’s current payment technology layers. It all starts with the introduction of Real-Time GIG Payment capabilities, a segment that has no competitors or industry-wide solution available to all business sizes.
Diolkos Commerce Solutions has a new vision of payments and transaction banking that is designed specifically for the banks and their Business and Retail customers.
This cannot be ignored.
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