ShareSetting Up Your Payments Hub Is Only The Beginning
Most banks have a 'silofied' approach to payments processing, ‘forcing’ each Customer Interaction Channel to connect to each Payment Execution System separately. Payments Hub turns a silo-based infrastructure into a nerve centre that provides more flexible end-to-end payments processing, thus reducing complexity and operating costs.
A Gtnews survey on corporates across the world shows that more than 62 per cent of companies have already centralized their payment processing and 72 per cent expect their levels of centralization to increase – and, why not?
Financial institutions are facing many a challenge that urges them to update their payments infrastructure so as to adapt to a rapidly changing environment. These include regulatory and security requirements, ageing technology, consolidation in corporate treasury, advent of electronic instruments, increased competition and customer demands, and the desire to enter new payments markets.
The best analogy for a payments hub could be the pivot of a wheel. The payments hub sits at the centre of the payments infrastructure, receiving transaction details from individual systems, performing a set of business steps based on pre-defined rules, and then formatting and routing enriched transaction details to any of the apposite systems for execution as per the transaction’s life cycle.
Today, banks are making huge investments in payments hub initiatives - to build infrastructure and to create interfaces. But even though payments hub addresses several operational issues, most of the corporate needs of the bank still remain unanswered.
For instance, a payments hub provides a single view of the customer across payment products and services. But, is that all the banks want? Can banks provide their customers with an integrated liquidity management product that includes payments as well as cash management products with this? If the answer is still an emphatic 'no', they have to think about how to leverage the huge investments to create revenue and have optimum return-on-investments.
A flexible and centralized pricing and billing mechanism that can co-exist with the payments hub and provide differential and customer relationship-based pricing is the definitive answer to all the questions haunting the banks.
The centralized pricing and billing process helps the banks to create innovative product bundles that include products from across business lines. For example, an integrated liquidity management product, which includes payments as well as cash management products can be offered. Banks can offer differentiated pricing based on various parameters in different stages of the transaction life cycle like the channel used, time of initiation, location of initiation, etc. This will also justify the huge investments the banks have made on these channels and settlement gateways.
However, keeping pricing and billing inside the payments hub confines its functionalities to payments products and restricts it from offering integrated products across business lines.
Capping the payments hub with a centralized pricing and billing function could be the best way out of this quagmire for futuristic banks. Such a model provides a complete view of the payment products from the payments hub - including cash management, trade finance, etc. - thus leading to a total view of the customers to the benefit of the banks. All these are added advantages over and above the possible benefits the banks can avail by centralizing their pricing and billing mechanism.
Armed with a payments hub and a centralized pricing and billing mechanism on top of it, banks can brave the toughest competition in the financial services arena and earn the edge over peers. Moreover, such a model promises high return on investments and as an icing on the cake - ensures customer satisfaction.