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The future of payments for investment platforms

Posted date: 24 July, 2019 Author: David Genn
The future of payments for investment platforms-Goji Direct Lending Investment Experts

For investment managers serving retail customers, being able to efficiently onboard investors and receive funds is a core challenge for customer acquisition. 

Investors increasingly expect a seamless experience – being able to register, deposit and invest in a single session without leaving the investment platform. 

Once funds are on the platform, managers need to settle orders efficiently and report back to investors quickly, clearly and securely.

The last few years have seen a great deal of innovation across the banking and payments space. But how can these changes benefit investment managers looking to provide cutting edge services?

Faster Payments

Faster payments were introduced in 2008 to offer improved payment processing times between banks. As of today, the limit on a faster payment transaction is £250k per transaction and they are typically processed in under two hours, 24/7 but depending on the banks involved, this can be much faster. Some banks will place additional restrictions on transaction sizes.

The introduction of this payment method has been an improvement for customers as previously they would either have to wait 3 days for a BACS payment to clear or pay the high fees for a CHAPS payment which guaranteed same day clearing. With the adoption of online and mobile banking, investors can now easily initiate a payment transaction to an investment platform which will arrive within minutes, potentially even seconds.

The challenge for investment firms is that as banks set increasing high standards for transaction processing, retail investors expect similar experiences across financial products including their investments.

This means investment platforms need to be able to easily harness Faster Payments in an automated manner. Currently many banks do not offer technical integrations into account data so whilst the Faster Payment transaction may happen in close to real time, the investment platform will only know about it when they next check their account statement, which can take hours or a day.

Open Banking

Open Banking transforms the way customers can access and interact with their banking data and service providers. The most significant aspect for investment platforms is Open Banking Payments which will allow investors to make payments from their bank account directly into the investment platform’s account without leaving the investment platform website (similar to the way debit card details are captured). This combines the convenience of card payments with the speed and cost effectiveness of Faster Payments. An investor can initiate and authorise a payment from their bank account without leaving the investment platform web application. 

Electronic Money

Electronic money (e-money) is a European directive that allows Payment Service Providers to hold funds for a customer either in physical form (eg a pre-paid gift card) or in an online account. 

These providers can provide some efficiency gains to investment platforms as they often offer a high degree of technical integration. This means investment platforms can get real-time updates on investor deposits and initiate payment transactions electronically without waiting to check a bank statement.

Whilst this offers a significant improvement over the capabilities offered by many banks as platforms can now control transactions in real-time electronically, e-money does not have the same regulatory status as Client Money (CASS) and HMRC have confirmed that e-money cannot be used to hold ISA funds. 

The rise of challenger banks

The recent wave of new banks entering the retail banking market has changed the experience many consumers now expect from their bank. Now consumers can conduct all their banking on their phone in real time. 

Additionally some of the new banks are focussing on making their infrastructure available to technology companies. This new access to core banking and payments infrastructure offers investment platforms a new opportunity to create integrated systems that can automate the reconciliation of investor deposits and deployment of invested funds.

Putting it together

It’s clear that recent developments in payment infrastructure means that investment managers have more opportunity than ever to provide fast, efficient and secure payment flows both to investors and internal stakeholders.

At Goji we are building the investment platform that pulls together all the advancements in payments technology into one place allowing investment managers to leverage our regulated capability. 

The Goji Platform gives you the regulated payments infrastructure you need:

  • Unique account numbers per investor
  • Funds held under Client Money (CASS) regime 
  • Funds held under the eMoney regime for ancillary payments
  • Support for general, ISA,SIPP, SSAS and Corporate accounts (Ltd, trusts, LLPs)
  • Multiple payment methods 
  • Overseas payments and investor onboarding
  • Control payments via API
  • View investor transaction data via Goji admin portal

Get in touch to find out more about how we can help you.