Next Generation Payments Viewed as a Competitive Opportunity

U.S. financial institutions see moving toward a next generation payments system, including a payments hub (framework of common, reusable services), as important to remaining competitive according to a recent analysis conducted by the Global Payments Solutions division of Fiserv. Larger banks seem to be moving faster than smaller banks on this, as smaller banks wait to see what vendor packages come to the marketplace, say Fiserv payments analysts.

"From our analysis, financial institutions are looking to converge middle office processes through the deployment of a payments hub to achieve operating efficiencies," said Mike Ringuette, general manager, Global Payments Solutions, Fiserv. "Most are expecting that they can compete better in existing commercial markets and expand into new ones with a next generation payments solution."

Fiserv's analysis of customer priorities revealed that larger financial institutions expect to have re-architected payments systems up and running within the next 18 months. This short timetable appears to be driven primarily by corporate bank customers who use multiple payment channels and are demanding faster, more seamless payment streams, as well as a single view of payment activity. While traditionally thought to be the purview of smaller financial institutions; nearly all tiers of banks are researching outsourcing and server-based application options.

The analysis also indicated that next generation payments systems will need to more effectively address both processing efficiency and risk mitigation across payments channels. "Banks continue to feel pressure to reduce costs in their payments operations," said Ringuette. "Yet, there's also a strong demand to better ascertain risk exposure across all payment channels - ideally through a single-monitoring function. At Fiserv, we are looking to extend and enhance our current processing capabilities to financial institutions of all sizes to meet those needs."

"With the payment environment substantially reshaping, the traditional payment silos in banks are slowly giving way to a more pragmatic approach to payment processing," said Susan Feinberg, senior research director of Wholesale Banking, TowerGroup. "To achieve these more holistic client-facing payment services, banks will prioritize service-oriented architecture (SOA) and workflow projects allowing them to offer unified payment services, even when the payments processing and settlement continue to be siloed."