Innovation is touching all corners of wholesale activities in banking, as financial institutions (FIs) serve up a range of cash management, payment solutions and other services for their corporate clients. The industry, of course, is moving from batch to real time in a transformation that is happening at scale — and quickly.
To that end, Mike Blandina, managing director and head of Wholesale Payments Technology at J.P. Morgan Chase, said there is one overarching theme in the daily life of a payments technologist: “It starts off by waking up to Europe and going to sleep to Asia.” In other words, a global mindset is pervasive.
Blandina’s is one of the largest payments engineering teams in the world. In the background of moving anywhere between $6 trillion to $9 trillion daily across all currencies, payment types and rails, sleep stands in short supply. Innovation, though, never springs fully formed from the head of Zeus.
Success Starts With Short-Term Wins
Said Blandina of his own firm’s approach to innovating for the sake of J.P. Morgan’s clients, in solving frictions and pain points that may not be articulated by those enterprises, short-term wins are the goal, with the focus on a crawl-walk-run strategy. The short term may first rest on developing a platform or getting a product out the proverbial door, with plans to build a platform around that product at a later date.
“Clients may know what they need, but they may not necessarily know what they want” in terms of the end deliverable (i.e., a product or a platform), said Blandina. The payments technologist must seek to “abstract” clients’ concerns and develop solutions that will have a positive impact on the broader market.
There’s a paradox at play here, he remarked.
“As I tell my team, ‘We need to be working ourselves out of a job’” with an eye toward future-proofing applications and platforms, he said.
As an example of that approach — and as an example of platform-as-a-product — Blandina pointed to the fact that J.P. Morgan rebuilt its core transaction engine, and now offers two versions. One is for real-time payments; the other (with cloud-based acquiring for merchant services) is for non-real-time payments. Of the former, he said, “we’re putting all new real-time payments traffic onto it, and we’re slowly moving our older traffic off of numerous other platforms onto this platform.”
Amid the great digital shift, he said, platforms need to be configurable, and the configuration needs to be configurable. The more flexible the technology, the less engineering time it takes to deliver new products that give clients what they want — and that means skating to where the puck is headed, not to where it’s been.
Part of the payment technologists’ role, at times, is also to nudge clients away from some of their ideas. Blandina noted that J.P. Morgan has had some clients come to the firm asking the bank to perform know your customer (KYC) processes on J.P. Morgan’s clients’ clients.
“We had to take a step back and say, ‘Is this a one-off request? Or is there a real business model here?’” said Blandina of the third-party KYC endeavor.
Elsewhere, the company has had to be deliberate in determining whether the “next big thing” in payments is a trend or just a fad.
As to the “next big thing” of the moment — and the conventional wisdom that all things point to cryptocurrency (as a wholesale payment method) — Blandina said, “We can clearly state today that Bitcoin and Ethereum have failed to become payment methods.”
They have succeeded as commodities, he said, but then again, no one’s going to want to pay taxes on selling bitcoin in the event that they want to buy a cup of coffee.
He said central bank digital currencies (CBDCs) are likely to appear across the world, especially when China’s digital yuan is fully launched, with the U.S. to follow.
“What works for consumers is not always the best technology … I think there’s a market for decentralized currency, but I think it will be less a form of payment and more of an investment vehicle,” maintained Blandina.
Looking ahead, he said, the wholesale payments technology team is working on a broad set of services for its clients’ clients in a way that might be likened to a marketplace like Amazon or eBay, spanning B2B, B2B2C and B2C offerings and treasury management services.
The most important trend that will determine the long-term future of (business) payments, said Blandina, will be real time — “and, specifically, real time with zero risk and high fidelity. It’s a model that leads to a broad set of services that we can offer our clients that others cannot.”