Finance Incorporated Limited attended the MIA Biennial Conference 2023: Rethink and Reform: A Blueprint for Malta’s Competitiveness in Financial Services and CEO Cenk Kahraman participated in a discussion about the future of payments infrastructures in Malta. 

Mr Kahraman said that FIL is attending to showcase the capabilities of the brand in the context of a national gathering that is specific to the future of payments.  

FIL has addressed the need to create a national payments infrastructure system and discussed why it is needed and what the benefits will be. The reason that this was a public discussion is that audiences in general should be more aware of the importance of having a national payments structure for Malta, and for Europe in general. 

Why does Malta need a national payments infrastructure?

We’re a small island nation and we need third party banks and institutions to connect us to the rest of the world, and this dependency has proven to be an Achilles heel. When we went through greylisting and the degradation of Malta’s credibility, Malta saw an exodus of foreign banks and Malta’s financial sector was removed from the rest of the world, leading to several issues. This is not in line with the strategic plans that the government has for Malta. To regain control and independence, we need a national payments infrastructure.

That is also one aspect of the national payments infrastructure: control will be easier for players in Malta. This will also help the allegations of fraud and corruption and will create a system which will treat everybody to the same checks and balances.

Do we not already have SEPA?

SEPA does work quite well. It provides certain technical and specific solutions, but we need to go beyond SEPA. We are talking about a national payments infrastructure that extends beyond banks and includes other financial institutions. This will have to take the form of a national transaction monitoring system and a national document management and identity management system: things that were discussed before but not implemented. In some countries of the EU, the national payment infrastructure system already exists, so it’s really a matter of when, not if.

The next generation of national infrastructure is interlinking Real-Time Gross Settlement (RTGS) systems between them, so you can send money from here to Singapore, for example, and it will go directly through. This has already started, but Malta needs to catch that train now. We are in the right station at the moment to make these changes, and so it’s time to talk about how we can catch that train.

How would this work between financial institutions? 

We need to act as a financial sector together: there is no big or small. There is us as a whole, and everyone has to contribute to the national infrastructure. The biggest is BOV and the smallest is small payment companies, and the gap between them is enormous, but the ability to reach basic functionality should be the same. Some will say ‘but this will level the playing field so any competition will be eliminated’ and this is both true and false: if you’re a bank and you have already invested a lot of money for a payment system and you join a national payment infrastructure there are two things you can take – your payment cost will be reduced and the access to knowledge will be much greater. 

The recent study from PWC globally shows that 90% of valuable data client data is coming from payments. We are sitting on a goldmine of data but we don’t know how to extract it, and a payment infrastructure will change that.

Creating that will not put Malta anywhere special, but integrating payments with a more open financial system will create value for everyone.

Are there existing factors to keep in mind?

From our perspectives, we are bound by EU regulations. Even if we created the best system, it has to be in line with EU regulations. We have a higher authority that designs the rules. However, this is a global phenomenon: the rules of the games are changing because of technology. The speedier connections, the digitisation of value, easy access to cash around the world, blockchain technology: these are all incorporated and a lot of new things are coming out. It’s not just cryptocurrencies, which is the most common use of blockchain technology, but also central bank digital currency, digital euro, and converting digital currencies to other digital currencies by interlinking systems. 

What does the future of payments look like? 

In the future, it’s likely there will be one global payment interlinked method: it doesn’t matter what you earn, you can send money all around the world instantly without transferring it.

Banking has changed a lot in the last twenty years, but the bigger change is still to come. This trend will continue growing and we will be seeing a much easier future that is not that uncontrolled. It will be easier to do transactions and payments, but they will still be controlled with all the necessary payments and regulations, which will be quite important.