Microsoft gets deeper into payments amid coronavirus' spread
Microsoft has boosted its role in the digital payments migration through a series of ventures, using its cloud computing platform to support merchant upgrades and real-time processing.
It’s most recent collaboration involves Volante, a Jersey City, N.J.-based company that develops software to comply with messaging protocols that enable payment processors to support digital payments.
The collaboration creates ways to link fintechs, banks and other stakeholders to financial message automation, open banking and ISO 20022. Microsoft and Volante will focus on managing dramatic increases in wire volumes by migrating Fedwire payments to a Microsoft Azure cloud. Microsoft and Volante announced First American Trust as one of their initial users.
ISO 20022 and open banking are designed to support Swift, The Clearing House’s Real Time Payments service and the pending FedNow real-time payments network.
Fedwire fund transfers usually involve residential and commercial mortgage settlements, syndicated loans, treasury management, B2B payments and other transactions — generally larger payments that carry transaction fees of between $10 and $25.
“But that is only if the payments are processed in an efficient and timely manner,” said Vijay Oddiraju, CEO of Volante Technologies. “If they fail or are delayed, that can have major repercussions for both senders and receivers, and of course for the bank’s reputation and margins.”
E-commerce requires merchants and financial institutions to support these and other faster payment rails. Additionally, the coronavirus pandemic has led to a quick uptake in digital transactions covering businesses of all sizes, as well as consumer payments.
The move to digital payments accelerated an existing trend, but also posed a challenge since the acceleration was so sudden it harmed visibility. PayPal, for example, has ramped up hiring in its analytics department in an attempt to understand how “societal norms” have changed, according to Bain & Company, which adds IT strategies will need to change for any company that touches the payments industry — processor, bank, fintech or merchant acquirer — due to the uncertain mix of transaction channels in the near or long-term.
“None of us has a crystal ball right now, but the cloud has an advantage in helping manage the flexibility needed for transaction processing,” said Tom Feher, an industry director at Microsoft. “In the payments industry there’s a transformation going on in which people are looking at how to manage all of these changes but do so in a ‘consumable’ manner and not having to do it all at once.”
Cloud computing has already demonstrated it can help business owners handle unexpected volume, as retailers in the U.K. turned to cloud providers to enable online orders. And Deutsche Bank and Google Cloud on Tuesday signed a letter of intent on a multi-year agreement to co-develop financial services technology. Deutsche did not make an executive available for an interview, but its PR office said payment projects are being assessed as part of the agreement.
Deutsche’s internal research from earlier in 2020 predicts the move to digital payments and blockchain will spur a “rebalancing” of global economic power over the next five years. The overall public cloud market is expected to reach $266 billion, up from $228 billion in 2019, according to Gartner, which adds new technology systems are “almost always” cloud enhanced to make it easier to quickly deliver digital business capabilities.
Microsoft’s Volante partnership was preceded by a recent collaboration with Plaid to launch a consumer finance tool, a 2019 deal with Kroger to build retail technology, and a partnership in 2018 with Mastercard to develop digital authentication tools.
“The cloud enables us to see how banks are responding to changes in how they are interacting with clients,” Feher said, adding Microsoft sees Azure and APIs as a way to enable banks’ competition with fintechs. "Everyone's taking a different approach."