IBS Journal October 2017
29
2. Mid office / compliance and risk governance: As STP became commonplace in the banking industry, increasing volumes of real-time payments also evolved, making it very critical to have a centralized governance framework to validate data, run necessary ÜAE Ïslamic banks renewing their focus analytics – specifically related to compliance and AML / Fraud, and provide a confirmation of adherence to regulatory norms. This was also necessitated by respective geographies of the origination and destination of the payments being processed.
Payment hubs connect customer channels, processing applications and payment destinations • Integration | across channels
3. Back office / central processing hubs: Payment hubs have also been coined as Payment factories, primarily for the active back-office functions that it provides now. The ability to service through a centralised and automated payments over an integrated, interfaced infrastructure across both internal and external applications, physical and electronic channels, and also through the financial clearing networks, has allowed banks to set-up a series of flexible offerings to their customers. They drive product innovation. Quite naturally, this helps in building a differentiated fee model, driving revenues and enhancing profitability.
The key to all of this, of course, is a robust system infrastructure, that enables connectivity across both legacy systems and new age applications, based on configured business rules and flexible component-based architecture. The core proposition is to allow a faster service to the customer, even while ensuring it is cost- effective, independent of whether they constitute low-volume / high-value corporate payments, or low-value / high-volume consumer payments.
Emerging trends: 4-I principle
The advent of payment factories across geographies and the appeal that it has with international customers – both commercial and retail alike have driven both mid-size and large banks to pursue this as an area of emerging focus. However, the key differentiator between the successful ones and others is in their ability to address the 4-I’s, which summarises the essence of the emerging trends in payments:
Provision of real-time views and instant payments is dependent on having accurate information
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Payments cut across channels – both physical and electronic. Having an integrated platform to offer and build services around P2P transfers, B2B transfers, Micro payments, fund transfers over the mobile and the internet, new age payment needs driven through the social media and also being able to maneuver through the myriad of both internal and external systems is a pre-requisite for a successful service model. The customer is looking to develop a holistic perspective across all payments data – including domestic and international, both from a current and historical standpoint with insightful analytics. Providing such an integrated view calls for a superior integrated technology framework. The ability of the bank to seamlessly transact across instruments, formats, clearing houses and payment types across any channel is the hallmark of a customer friendly payment hub!
• Immediacy | real-time services
Provision of real-time views and instant payments is dependent on having accurate information, and the ability to integrate data from multiple sources on a real-time basis. This is necessitated not only from a marketing perspective but also because customers have commitments made to their principals on the back of this service level. The sweep in and sweep out facilities to have funds pushed or pulled on a real-time basis not only reduces the cost of funds for a corporate treasurer, but the elimination of the settlement lag can also mitigate liquidity and credit exposure levels for the corporate. B2B transactions are priced by providing for the elimination of such credit and liquidity exposures, and the reduced processing time also implies higher floats and lower cost of funds for the bank.
• Innovation | services & pricing
A payment service that is faster, with reduced risk, higher control on frauds and minimal errors by itself deserves a better pricing. Add in an element of the flexibility of 24x7 timelines for payments
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