Tuesday, September 8, 2009
Payments are increasingly being viewed as the staple diet for many banks, as financial institutions turn their backs on years of developing exotic products and go back to basics. Yet, a number of obstacles stand in the way for banks looking to generate further revenues from payments. Old business models and legacy systems are likely to need an overhaul if payments are to be transformed into a greater source of revenue for banks.
Top of the priority list for banks looking to make the most from their payments infrastructure is the need to reduce costs. Cost reduction is always on the agenda but it is particularly pressing at the moment as a result of the economic climate, the downward pressure on revenues and the rise in M&A activity. Even those banks which have recently announced a rise in first half profits have looked to the more successful parts of their business to ‘absorb the consequences of the economic downturn’, according to Barclays chief executive, John Varley. Cost reduction will remain on the agenda for the foreseeable future.
What’s more, as new players enter the payments business with newer architectures and systems with lower costs, traditional financial institutions are further feeling the pressure to become more efficient. This drive towards cost reduction goes hand-in-hand with a general need to simplify the process of handling payments. Payment silos remain a barrier to efficiency and good customer service. Greater industry consolidation is also exacerbating this problem.
I believe that these dual challenges of cost reduction and a siloed payment infrastructure will act as principal drivers for a revolution in payments which is needed to develop a simpler and more efficient payments processing infrastructure.
Head of Business Services (Wholesale)