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Will transaction banking please step forward?

The provision of payments is a fundamental function of banking, practically as old as money itself. But since the introduction of cheques more than 350 years ago, the payments landscape has been evolving continually, due to changing customer requirements, competition, legislation and technology.

The speed of change has increased in recent decades, putting more and more pressure on the banks, but the function of making and receiving payments has never really had its time in the limelight. But now things are changing, with a renewed focus on payments and the revenues that can be generated from what is a stable and relatively predictable business line, with growing volumes. However, legislation such as SEPA is driving down the per-transaction revenue that can be generated, so to be successful and stand out from the crowd, banks need to apply their expertise on their customers and the market to create propositions that add value to basic payment processing. 

 

One key example of this is in the corporate payments world. For businesses, payments are of little interest in themselves, they are part of a bigger picture of transactions being completed, and also the wider liquidity position of the organization. Banks need to find ways to add value to their customers, for example by making payments easier to initiate and available at short notice; by providing real-time reporting and management information; and by offering a consistent payment experience globally – and many banks are looking externally for an experienced partner to help with this process. 

 

Anything that banks can do to add value to their corporate customers, and build a relationship that is more akin to a partnership than a customer/supplier, then the greater the opportunity for the bank to continue to run its payments function as a revenue generator.