Across the industry, there is an acceleration of the consolidation of payment systems in response to the numerous pressures on financial institutions.

Trends

• Regulation

  Measures such as Basel III are leading to an increased focus on risk and liquidity both for banks and their customers.

• Competition

  Banks are being squeezed. They are caught in the vice of increasing competition, rising customer expectation and more regulation on one side; and falling prices with changing volume patterns on the other.

• Fraud

  A new focus of fraudsters on wholesale banking transactions.

 

As a result, a new business model is emerging to meet the current challenges:

• SEPA means an increase in 'domestic' payments and thus lower revenues.

• Legacy systems many decades old need updating/replacing while integration costs continue to soar.

• There is a need to renew or upgrade payment capabilities with minimal interruption to 'business as usual' while maximizing long term ROI.

• Flexibility is sought to enter new markets and offer new products.

• Banks look to provide value-added services to differentiate their offering.

• The target of fraud is increasingly wire and ACH transactions.

 

Consolidation does open opportunities for financial institutions to be more intelligent and comprehensive with how they adapt to the ever-changing requirements and payments landscape. To meet these challenges, many banks are considering deployment of a payments hub, which can have many guises.

When deciding on a hub as your strategy, make sure you know where your hub will add benefits to your business. A front-office hub, sitting between the front-end channels and the traditional transaction platforms, will consolidate your channels, but needs to be able to pass back-office data and status information back to the channel. A middle-office hub, or orchestration hub, is a good place to consolidate your customer data, but it needs to know what is actually happening in the back office. A back-office hub will consolidate back-office operations and / or settlement gateways. The hub must be able to keep the rest of the banking environment informed of activity.

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There is no single best option. It all depends on the benefits the bank is seeking and its starting position. It's important to remember that installing a hub is a major, multi-year project. Most banks will need to deploy a payments hub in stages, creating an implementation roadmap that ensures true incremental benefits at each stage of deployment, while keeping the long-term vision firmly in sight. This is key in order to maximize the return on this sizeable investment.

 

ACI Worldwide has many customers around the globe either managing significant converged wholesale banking platforms or scoping the work to commence consolidation of their legacy systems.

 

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