As payment choices become increasingly diverse, many banks are looking to revamp their payment infrastructures and take a consolidated, or hub, approach to payments. Frankly, they are not a moment too soon. Current payment infrastructures – the result of proliferating payment options, and mergers and acquisitions (M&A) – are largely a mess. They are fraught with systems redundancies that lead to higher costs. They can even delay strategic actions due to the complexity of changing or updating systems and the difficulties in viewing and acting on data across siloed systems and different departments.
Payments hubs and payments infrastructure integration offer banks a way out by enabling improvements in payments processing that result in major cost reductions and significant revenue opportunities. Moreover, they help banks to provide customers with a consistent payments experience and interface, regardless of how their payments are being made, now or in the future. To understand how to craft an optimal solution, we first need to understand the finer details of the problem.
Payment options, of course, are at the root of the challenge and opportunities exist around payment consolidation. It wasn’t too long ago that payments could only be made in person or through the postal service. Today there are multiple payment channels ranging from internet banking and kiosks to phone payments, wire transfers, computer-to-computer, and electronic bill payment. The latest wrinkle is mobile payments, which promises to be a major revenue opportunity. Naturally, with the proliferation of payment channels has come a proliferation of systems and problems.
Rationalising the Payments ‘Hairball’
Banks generally maintain a different system and client interface for each payment type. That in itself is challenging enough, but successive waves of bank M&A activity has added new interfaces and redundant systems to contend with as well. And these redundant systems tend to linger around long after the merger. Then there are the business functions that surround payment processing including fraud prevention and risk management. Very often, the systems that support these functions are also redundant.
In addition, it is not unusual for banks to have separate repositories of payments data for each payment type. These siloed repositories make it extremely difficult for a bank to achieve a holistic view of a customer’s activities.
Finally, there is the issue of standards and data types, and there is nothing standard about either. There are industry payment standards and, frequently, legacy and proprietary standards to deal with. Meanwhile, data pertaining to payments can be structured, semi-structured or even unstructured, which from a payments hub perspective means that a lot of data transformation is required.
So what hope does a payments hub provide? The definition of a payments hub continues to evolve. In the main, a payments hub should enable complete consolidation of payments processing for all payment types and channels and all bank customers, offering visibility, integration and management of all payment and related data transactions. That’s a tall order, given the diversity and fragmentation of payment systems, standards and data. That is why effective payments infrastructure integration is critical to the success of payment hubs.
Payments Infrastructure Integration: Essential Functionality
Leveraging enterprise data integration, data quality, data flow management, and data transformation and exchange technologies, payments infrastructure integration ties together all the pieces that enable a hub approach to payments.
Key functionality for payments infrastructure integration includes the ability to:
Transform data across all payment channels and payment types in real time or near-real time
Inclusivity is the name of the game. Effective payments infrastructure integration supports all current payment types and future payment types, with real-time data transformation and exchange, and no costly hand-coding of interfaces.
Support all standards-based transformations out-of-the-box
This includes supporting multiple versions of existing standards (SEPA, SWIFT, NACHA, etc.), future standards, proprietary formats and also unstructured data such as Excel files.
Interoperate with legacy systems
Universal interoperability is essential for integrating new payments hubs with a bank’s legacy systems.
Transform and integrate massive volumes of data
Performance and scalability are crucial to payments infrastructure integration, enabling banks to cost-effectively accommodate any number of new clients and support new high-volume payment channels, such as mobile payments, as they emerge.
Leverage integrated identity resolution capabilities
High performance identity resolution enables banks to quickly find identity matches across payments data, regardless of format, structure, language, location, errors or omissions. Supports compliance, anti-fraud and anti-money laundering and single customer view activities.
Leverage integrated data quality capabilities
Data quality support starts with data profiling to exposure data quality issues, data cleansing, and the ability to monitor data quality across the entire payments environment.
Accelerate time-to-market and customer on-boarding
Prebuilt data transformations, available out-of-the-box and broadly reusable across projects, accelerate initial solution implementation, speed time-to-market of new payments options and services, and streamline the customer on-boarding process.
Payment Integration Payoffs
The payoffs from payments infrastructure integration are enormous. For example, banks that have completed integration have been able to accelerate customer on-boarding by as much as 80%, leading to an 8% increase in revenue. Some have indicated an up to 50% cost reduction in their integration efforts and in their efforts to maintain compliance with global payment standards.
Time and cost saving aside, payments infrastructure integration helps power real-time views of payments, customers and cash positions across the enterprise. These views are invaluable to improving business decision making, and to driving competitive advantage through identifying opportunities for new products and services around payments.
Coming full circle, payments infrastructure integration helps provide the agility that banks need to quickly and efficiently launch those new payment products and services, leading some banks to experience substantial revenue increases within very short time periods.
Banks pursuing payments consolidation need to make payments infrastructure integration a priority as it is the bedrock of a successful payment hub. As mobile payments increase in popularity, as newer payment options emerge, and as M&A activity continues to reshape the banking landscape, the cost efficiencies, business visibility and agility enabled by payments infrastructure integration will prove an invaluable driver of competitiveness and profitability.
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