The retail payments landscape has always been ripe for disruption and innovation not just because of evolving consumer behaviour but also due to regulatory reforms, and governments’ agenda on financial inclusion and digital payment. This is particularly prevalent in emerging markets wherein there is a large unbanked population and a high mobile penetration rate.

For instance, Thailand’s government and central bank have been promoting a nationwide digital economy through its National E-payment Master Plan (NEMP) since 2014. In a move to transform the country into a cashless economy, PromptPay was rolled out in 2017 as an interbank mobile payment system leveraging national ID and mobile phones. The government also launched a national programme to drive point of sale (POS) installation while the central bank introduced a quick response (QR) code payment standard to foster an interoperable payments infrastructure.

Banks in Thailand have developed their respective digital strategies and have been building infrastructures to support the nationwide transformation to e-payments. Siam Commercial Bank (SCB) is among those that support the digital movement. The bank is one of Thailand’s oldest and largest banks by assets, loans and deposits. Aiming to become the country’s leading transaction bank, SCB embarked on a journey to develop a modern digital payment system that is aligned and part of the NEMP roadmap.

Need to optimise operations and payment solutions

The bank implemented a future-proof real-time payments platform and identified key business issues to be addressed, namely limited system capacity for supporting customers’ real-time transactions and the bank’s workload expansion, time to market new initiatives and products, and cost-efficiency.

“The main goal of developing a payment hub is to drive innovative payments via application programming interface (API). Once we have an available platform, we will be able to launch more payment solutions not just from our side but we will be able to connect them with all the partners we have. This will significantly reduce cost and time to market as we can leverage existing assets we have created in product development”, explained Trirat Suwanprateeb, chief technology officer at SCB.

SCB, through the project, will also be able to increase its bank entry channels by expanding its network of banking agents. The bank enables merchants such as 7-Eleven convenience stores and Big C superstores to act as agents and allow SCB customers to perform real-time banking activities through these channels.

Moreover, the bank aims to strengthen compliance with international (ISO) and local regulatory requirements. With the implementation of the real-time payment hub, the bank will be able to meet ISO 20022, Bank of Thailand regulations and timelines, and in the process protect its market position.

Leveraging technology to build a real-time payment hub

SCB partnered with FIS to implement an innovative payment hub platform with standard services that would support customer processing and accelerate the launch of new products in the market.

FIS was selected for its experience and expertise in building successful real-time payment hubs through its technology solutions. SCB also greatly considered FIS’ execution capability, specifically the tech vendor’s mobility to quickly provide capacity to deliver the project on time.

SCB achieved its transformation objectives and modernised its system architecture to build new business capabilities. The project seamlessly integrated with the bank’s existing legacy systems without the need for data migration.

Modular services and APIs power the payment architecture

One of the distinguishing features of the project is the implementation approach of the Open Payment Framework (OPF) to deploy the real-time payment hub. The component-based architecture is designed to be scalable and secure to adapt to future growth needs. It is also devised to provide configurability which is essential in faster implementation and quicker turnaround time for products. It aims to achieve operational optimisation and centralised payments by providing the operations team with a single view of customer transactions.

The bank leveraged innovative architecture that can easily integrate new channels or payment types into standard services API. The payment hub exposes the API to originate and process a wide-range of products such as customer credit transfer, customer direct debit, bills, inquiry, and inward payments.

The payment hub supports services from a variety of SCB channels thus it allows for easier end-to-end mapping in the payment chain and enables better support from automated testing tools. Payment services are developed as an aggregation of key business services that can be configured or switched on and off based on the business use cases.

FIS and SCB continuously conducted scalability and performance tests on each release. This ensured that the application can handle any future demand

Rapid Implementation

The project is being executed in a three-phase approach which commenced in 2017 and expected to end December 2020. The 2019 phase began in January with nine successful live deployments throughout the year, with the first live deployment achieved in less than 5 months. The project did not experience any time and cost overruns.

The solution covered over 30 types of channels including customer facing channels (mobile app and internet banking), automated channels (ATMs, CDMs and VTMs), internal system (fund management systems and merchant channels), bank agents (7-Eleven outlets, Big C and AirPay), partner institutions (Ripple and other partner bank), as well as bulk channels (payment file processing).

A software as factory-like model was established based on agile scrum with small cross functional teams to continuously deliver the bank's initiatives and payment hub components. The parallel development under a ‘One Team’ mentality produced monthly releases or GoLives.

Daily risk assessment processes were conducted to evaluate and mitigate risks such as quality issues, defects, scope changes and priorities. Continued automated testing and integration by the vendor as well as forward pipeline and backlog planning by the bank's business owners made this project nimble.

Delivering business ROI

The project implementation has provided the bank agility and capacity to respond to increasing consumer demands for real-time transactions. The payment hub was scaled up from 80 transactions per second (TPS) to 1000 TPS across all payment types including but not limited to ATM cardless cash, QR code, cross bank bill payment, and request to pay bill payment. As a result, the bank reached nine million total customers and recorded a transaction volume that totalled nearly 50 million per month.

Moreover, the project led to significant business improvement resulting in a shorter time to market new products from eight weeks to four or five weeks. It improved software quality through reduction of defects in production leading to a better performance. In April 2020, SCB and convenience store giant 7-Eleven were the first to offer deposit and withdrawals via QR code which increased monthly deposits via 7-Eleven by 102% from April to June 2020.

Banks need to innovate to maintain market share

Payments is a rapidly evolving industry. Although it is already saturated with banks and non-bank players, there is still huge opportunity especially in markets with large unbanked populations or cash-dependent economies. The growing demand for innovative payment services over the years can be attributed to the convergence of increasing mobile usage and rise in e-commerce. The success of implementing a successful retail payments technology does not rely on financial institutions alone. It is also achieved through regulatory initiatives that drive low value and real-time payment solutions that are agile, compliant and interoperable.

In Africa, corporations are partnering with fintechs and leveraging national payment infrastructure to offer new real-time cross-border solutions. For instance, Kenya’s Family Bank and SimbaPay introduced an initiative that connects China’s WeChat payment service and Africa’s M-Pesa ecosystem in real-time. This enabled instant money transfer service between the two countries. The platform also allows micro-small firms without bank accounts to purchase from China thus boosting trade.

In Sweden, consumers enjoy instant digital payments via Swish – a mobile payment app launched in 2012 which enables real-time payments across banks. The 24/7 service works among Swedish banks through a private settlement platform, BiR, which is jointly owned by banks and in partnership with Riksbank. In April 2020, Riksbank also introduced a new service, RIX-INST, enabling inter-bank payments to be settled in real-time. The private sector offers payment services to its customers and Riksbank is responsible for settlement in central bank money.

Meanwhile, India’s Paytm built an ecosystem through its unified app for banking, investment and e-commerce. Paytm leveraged the government’s unified payments interface (UPI) to drive instant payment adoption in the country. Currently, it is the leading contributor to UPI payments in India as well as the largest platform for money transfers. It implements an API-driven solution allowing it to form strategic partnerships with other financial services players and add services to its existing digital wallet.

Industrial and Commercial Bank of China (ICBC) leverages API in strengthening its payment platform. ICBC’s e-Wallet is a scenario-based personal financial integrated service solution based on the API open platform. It established an ecosystem for internal and external partners through an open service-oriented application development platform. ICBC's special products such as e-letter, e-payment, e-enterprise payment, and aggregate payment are accessible to the public.

SCB is one of the early adopters in providing payment solutions in response to the National e-payment roadmap driven by the Bank of Thailand. The bank, through this payment hub, has modernised its architecture and laid down the foundation for future innovation. It would be interesting to see how SCB can further scale this platform in not just providing real-time payment solutions but also building a larger payments ecosystem.