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Education

Future proofing the providers have done a good job of offering applications that
allow users to quickly create and post payments (which
payments back office can be done in seconds). The problem, however, is that the
payment is not truly completed until it is settled, and most
back-office settlement systems are batch-oriented.

When payments hit a batch-oriented back office, they are
not processed to completion. Instead, they are basically
gathered into big batch files that are collected throughout
the day and then generally submitted for settlement once
or twice over this period. Until that point, the payment has
not been completed.

Another issue is the inability to change or adjust back-
office systems without extensive code updates. Most
of these legacy systems were designed for card-based
transactions, and modifying them so they can support
newer digital and account-to-account payments requires
extensive software changes.

By Casey Scheer One of the biggest challenges companies face is
supporting new payment message formats such as ISO
BHMI 20022. For decades, the industry has used ISO 8583 as the
international message standard for payment systems that
nly a few short years ago, it would have been exchange card-based transactions. However, ISO 20022 is
hard to imagine making real-time payments an emerging global standard that is being used by faster
using our smartphones and watches, yet dur- payment networks and rails around the world, offering
O ing this time, we have seen the rapid adop- much richer, more robust data capabilities.
tion of these technologies. While it is an exciting time
for the payments landscape, the industry is facing many Additionally, companies are often unable to provide a
challenges as today's payment processing environment real-time enterprise view of all transactions. This lack
becomes increasingly complex—especially in the back of visibility into the true status of payments during a
office. processing day means payment positions cannot be
truly known until the scheduled, periodic settlement has
The payments back office takes over as soon as a transaction occurred.
is authorized. The back office performs critical functions
like transaction reconciliation, settlement processing Issues with real-time disputes management
and funds movement, and includes the assessment of
transaction-based fees and the management of disputes. With the growing demand of real-time payments inevitably
Additionally, the back office should provide access to real- comes the rise in dispute volumes. While disputes are
time transaction data and financial positions, allow users fairly straightforward for card-based transactions, it is not
to perform transaction research, provide accurate and quite so simple when it comes to real-time payments.
timely reports, and many more related functions.
Traditional payment methods have been available for
Although a company's back office does the heavy lifting decades, and as a result, the dispute regulations for these
for its payments processing, back-office systems are often programs are well defined with regular updates released
grossly overlooked. at predictable, set intervals. Additionally, most users of
these payment methods understand the general risks and
The primary challenges financial liability involved and have a high degree of trust
that a dispute will be resolved correctly in a reasonable
With the rapid adoption of real-time payments, companies amount of time.
now must support many new processing requirements.
For example, the transfer of funds from a payer's account Conversely, real-time payment options such as P2P
to a payee's account must occur in a matter of seconds. are relatively new in the marketplace, and the dispute
However, many companies are using back-office solutions, regulations and procedures being created by the different
built decades ago, as batch-oriented systems. These real-time payment networks are still in the early stages of
platforms were not designed to support the continuous development. Their update cycles are not well defined and
processing requirements for real-time payments and as a the people using these payment methods may not know
result, back-office systems became a bottleneck. who has the financial liability for a dispute until they
are involved in one (and it can change from network to
For example, with settlement processing, financial service network).

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