Tim Decker, Head of Payments Product Development, Global Transaction Banking, Lloyds Banking Group, discusses how the group is helping clients deal with uncertainty both in the UK and globally.
Global Finance: What are the key drivers of change right now?
Tim Decker: For Lloyds Banking Group and the payments industry in general, several factors are driving rapid changes and impacting how we do business. New regulations, economic factors, technological innovation and increased competition have drastically altered the business landscape over the past few years and will for the foreseeable future. Firstly, there's now a customer expectation for transactions to happen immediately—and that expectation has migrated to our corporate customers. Secondly, demand for real-time payments is increasing, changing how companies think about their customers. We have worked hard and invested heavily to meet those demands, now and for the future.
GF: How are new UK regulations affecting clients and businesses?
Decker: The most impactful regulation is the Payment Services Directive 2 (PSD2)—going into effect in January 2018. The original PSD determined the timing and cost of making payments in Europe; PSD2 covers payments going into and out of Europe. It opens competition for payment services to non-banking entities, including Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs), which could bring a range of new innovation to the market.
This competition and other regulatory initiatives could really open up the market as demand for instant payments keeps growing. In 2016, for the first time, more than half of UK payments were made electronically, and we are investing heavily to meet growing and new demands from clients.
To connect individuals and companies around the world who want to make same-day payments into the UK, we launched Instant Payments UK (IPUK) on the rails of the UK Faster Payments Service (FPS). Traditionally, they would make a bank transfer via the UK (RTGS), (CHAPS), which is quite expensive. Now if a US bank customer makes a payment into the UK, it's routed through FPS, so the UK customer gets the money almost instantly. It's cheaper and payments happen much faster.
GF: How is the landscape for cash management and payments changing?
Decker: It's changing across all our customer segments. For years, only large companies could afford automated systems. Using cloud based technology and innovation, those systems are becoming available to smaller firms across multiple devices, and at a much lower cost. LBG has over 1 million business customers, and these changes allow us to provide sophisticated treasury management functions to the businesses that bank with us.
GF: What attributes should clients be looking for in their banking partners?
Decker: Choosing a bank is like entering a long-term relationship—it's not done on a whim. And a business needs to know in advance if it's going to work out. Our clients want a reliable partner—and we see it as a partnership—that is responsive and adaptable.
The ability to respond quickly and effectively can't be underestimated. There were more changes in the payments industry in the last two years than in the previous 15. The UK coming out of the EU will have implications for cross-border payments and banking regulations for years.
With all the changes and increased competition, one could either see a threat or an opportunity. LBG sees a fantastic opportunity to support our customers through these changes.
Now more than ever we must ensure that back-end systems can support rapid change. We have invested in new core banking platforms that can quickly adapt to new developments and support our customers and their needs.
GF: What is the key focus for Lloyds Banking Group around the UK's exit from the European Union — and beyond?
Decker: For over 250 years, LBG has been dedicated to supporting its clients and helping them prosper, even in uncertain times. The bank continues to evolve, but at our core we help customers make and receive payments at home and abroad. That's what we do—have always done—and we have had tremendous success with it. Though leaving the EU poses challenges, we'll weather the storm. Another challenge is always around the corner, and we are ready to meet whatever comes.
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