At a time when pretty much everyone is longing for a return to normalcy and the way life used to be, at least one top banking technology leader says the pandemic has brought about so many positive changes in such a short period of time that there’s no turning back. And that’s a good thing, Sara Castelhano, J.P. Morgan‘s managing director and EMEA head of payments and solutions, said in a recent interview with Karen Webster.
For instance, Castelhano called the rise of real-time payments “the most impact that I’ve seen” from the pandemic. “Real-time has become a reality,” she said.
Just 18 to 24 months ago, Castelhano noted, plenty of corporates couldn’t even see a use case for real-time payments. But amid the swirl of unexpected and unprecedented disruption, corporates have grown comfortable with banking in the fast lane – whether that’s in the form of real-time payments, real-time reporting or real-time visibility of cash being sent.
“What we saw and what we continue to see is flux in the market, which means having visibility of your cash becomes even more important,” she said.
Castelhano said the need for real-time understanding of clients’ exposure and knowing where their cash is at any given moment has become more important than ever – and bank customers have come to expect it.
“As banks, we need to realize that once you give your clients real-time information, they need resilient infrastructure and access to information uninterrupted,” Castelhano explained. She predicts that will be the future of financial institutions’ communications with clients.
And since “U-turns” on real-time payments aren’t likely to happen, she believes that will lead to infrastructural and procedural ripple effects throughout the global payments industry.
“The technology needs to be able to absorb changes in an agile manner and focus on eliminating downtime to core applications and make sure there are well-practiced resiliency protocols in place,” Castelhano said.
COVID-19 And Corporates
Castelhano applauds “all the corporate treasurers out there, because they became very strategic and very important in their organizations, as they had to really focus on supply chains and the disruption that’s happened over the last couple of months.”
Prior to COVID-19, she said the treasury had focused on lean operations, with little time allowed for deep dives to investigate other things. However, the past eight months have changed that.
Today, treasuries have taken on a new priority. And they’ve been given the green light to utilize informational tools from banking providers and get them deployed quickly, “rather than trying to do absolutely everything in-house,” said Castelhano.
Machine Learning And Automation
Another trend Castelhano is watching is the constant corporate focus on improving reconcilement around transactions. That’s a task she calls “very difficult” – and one that has been made even more challenging by the many manual processes within it.
The goal, she said, is to find new tools to automate reconcilement and improve the overall process.
“I think conversations around leveraging different tools have become part of the forefront,” Castelhano said. While reconcilement has always been important, COVID-19 has seen organizations increase their budgets and adjust their focuses to drive value into their supply chains and operating models.
As far as artificial intelligence (AI) is concerned, Castelhano said machine learning (ML) is part of the suite of analytics solutions the bank hopes to make available to J.P. Morgan AccessSM users in the future, and which will progressively “touch every element of J.P. Morgan’s payments ecosystem” – from handling return payments to direct debit collections.
“When we start looking at how machine learning works and implementing that into a corporate treasury environment, it enables more ease of business and can reduce the operational strain,” she noted.
Castelhano believes that ML gives treasuries “the headroom they need to be more strategic.”
Build It, Buy It Or Partner?
“At J.P. Morgan, we look at things and ask, ‘Will we build it?,’ ‘Will we buy it?’ or ‘Will we partner?'” Castelhano noted.
The bank decides to build when it’s something that’s core to its global treasury and payment strengths, such as its virtual accounts.
As for acquisitions – such as the bank’s purchase of InstaMed or WePay – Castelhano said those companies had technology that was able to fill important gaps to help clients.
On the partnership front, Castelhano believes that’s best done when a tech company has something that could become an industry utility, such as DocuSign, which has streamlined client onboarding through its e-signature platform, reducing paperwork and generally speeding up other processes.
Castelhano said another benefit of partnerships is that they allow for mutual learning and growth for both parties. That happened with J.P. Morgan’s recent strategic investment in Icon Solutions, a company where Castelhano is now a board member.
“Not only will the bank learn, but Icon will also learn from the fact that we’re an established financial institution,” she said, citing J.P. Morgan’s board constructs and governance framework within a highly regulated industry versus a FinTech company that was built in a more agile way.
“I think I can learn from the way they do things, and they can learn from the way I do things,” Castelhano added. “And I think that’s a perfect kind of synergy for pushing the boundaries on the best operating models.”
Continuous Innovation Is Key
Castelhano said it’s important for FIs to continuously innovate – not only for themselves, but also to help customers discover new business models. She cited the emergence of QR codes as an example.
“I’ve been so impressed with going out to a restaurant and being able to take a menu via a QR code and pay for my meal,” she said. “That’s a new thing that’s happened since COVID. And now it’s completely integrated into the consumer and payment journey – and as an industry, we all need to support that and stay ahead of it.”
As far as her outlook for 2021, Castelhano expects further acceleration – especially on the open banking front, which is already a reality in Europe and the U.K. Leveraging the open banking framework to do things like validating that customers’ names match their account numbers will be important in the fight against cybercriminals, she noted.
“There’s so much more potential with open banking,” Castelhano said. “I envision that in 2021, we’ll continue to unlock that.”