October 4, 2007
The Payments Market
The banking payment management system market is going through stormy times. There is the fast amount of regulatory changes happening in Europe and the US, requiring faster and more real-time payment processing. Competition is increasing by innovative payment offerings and new modes of business models, while clients are asking for reduced costs and strict SLA compliance. These trends are forcing specialization by means of global transaction banks and consolidation of execution by using outsourcing, in-sourcing and white labeling.
Why a single Payment Architecture?
In many banks, payments were always perceived as a necessary extension of a primarily lender-oriented client relationship. This has changed, and many corporate clients are nowadays measuring a bank’s performance on its payment management system capabilities. Offering clients real-time and scheduled payments execution with advanced cash and liquidity management capabilities will be an important differentiator. The reality is often different. Current payment infrastructures are often composed of many components with weak point-to-point interfaces, a duplication of functionality and a silodriven approach. For instance, if a payment misses its cut-off time for a certain payment channel, there is no automatic functionality to re-route this payment to another channel, hence an unhappy customer.
Case: Faster Payments in the UK New regulatory requirements as e.g. Faster Payments in the UK require a fundamental re-think of the payment management system architecture. Target date for Faster Payments is November 2007 with May 2007 as date for inter-bank testing. The new payment system will allow clients to execute electronic transfers in real-time (with 15 seconds round-trip). This will replace a large amount of the current standing orders currently executed within the 3 days BACS cycle,where banks are making money by debiting the payer's account on day 1and crediting the beneficiary account on day 3.
