30
Transaction revenue to drive revenue growth in wholesale payments
to be processed at a date and time of their choice, a cross-border supply chain financing framework, combined with a 360-degree view to transactions on a real-time and an anytime-anywhere access to funds, and the value proposition from a customer’s standpoint can be quite significant. Service differentiation is key, and a prominent feature that scores is in providing the customer with the flexibility of a payments framework that is entirely rules and parameter based, for a self-service model without having to redefine everything from scratch.
• Interface | front, mid and back
The Payment hub, in itself, is somewhat loosely defined, as it can be the central junction that connects across the front office - digital and physical channels and the treasury desk with the back-office transaction platforms of ACH, Cheque processing platforms, RTGS and also with the middle office - risk and analytics platforms. The role of the hub also extends beyond connecting transaction platforms, to being an aggregator and distributor of all payment instructions across all platforms – core banking systems, cash management platforms, payment networks and risk management applications.
Payments hub technology
Establishing the right payment hub platform and configuring it with the right technology is a pre-requisite for a successful services model. While the choices are always split between specialized applications that offer depth versus suppliers with the ‘breadth’ of an application portfolio, there are a few elements that are critical when a payment hub is setup.
The scope of the platform – across the three building blocks of front, mid and back office features is a primary factor. Alignment to the industry norms, and emerging requirements – such as European SEPA or the US image based clearing model - is critical. The ability to define and innovate on product offerings and its life-cycle, building a parameterised self-service model for the customer, driving a flexible pricing engine and having a plug- and-play model that fits the size of operations of the bank, are all important factors.
The other key success factor is the agility of the platform to seamlessly replace or update its connectivity to legacy
applications, as and when they are replaced or upgraded. A good payment hub platform is one that is less expensive to operate and ready to adapt to new payment types, preferably using a Service Oriented Architecture (SOA). An easy to maintain transaction logic and an open architecture that lends itself to adaptability with changing needs is not only critical for the ease of maintenance, but also to assure
the longevity of the payment hub platform itself. Sequencing the modules of implementation, without having to have a big-bang replacement of all applications is a smart strategy, especially when it comes to payment hub technology.
Looking forward
Payments industry revenues are expected to reach $1.4tn in the next four years, with more than 69% of that driven by emerging markets. Interestingly, the wholesale payments contribute to 25% of the payment industry revenues. More than half of the revenues being driven through transaction services in mature
A good payment hub platform is less expensive to operate and ready to adapt to new payment types
“
markets, which is also the fastest growing revenue contributor for emerging markets. It would be quite hard for any bank to ignore this portfolio.
Delays are not acceptable
For a customer, who has been dealing with multiple payment file formats, multiple bank utilities to upload and download files and statements, limited visibility to all payments and liquidity status, delays in processing of payments and resultant costs - a consolidated payment hub offering from a bank which offers STP and enterprise level control, can be more than just a fresh breath of air!
Banking can easily be dumbed-down into just a commodities game and price-wars if it was not for the excitement of innovation and service differentiation. Concepts such as payment hubs are classic examples where the best have differentiated themselves from the rest. A final word before we conclude: payment hub is more of a concept, a framework and an operating model, and not just a technology platform. Retaining that perspective is important. The perennial mantras for any concept to thrive are simply two: Fit-to-requirement, and time-to-market!
www.ibsintelligence.com | © IBS Intelligence 2017
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