Posted by Swati Dublish
Comments (4)
May 31st, 2011

Bank and Processor, card processing infrastructures have been built organically over the last 30 years. A handful of vendors account for 80% of the market share. Today, Payment solutions have reached a significant crossroads where existing infrastructure and requirements are under intense review.

Increase in the number of Payment Channels. A wide-spread increase in the use of electronic payment instruments, such as Prepaid Gift Cards, Contactless devices, Mobile Payments, etc over and above traditional credit and debit instruments, has triggered a need among Banks and Processors to augment their payment processing capabilities.

Increase operational efficiency& reduce risk. Banks currently have a delivery infrastructure that is one (or a mixture of) the following:

  • Built in-house using a selection of card software vendors’ products
  • Built in-house using home-grown, custom applications
  • Outsourced to a processor, whose infrastructure is built on one of the two options above

Banks are looking to improve operational efficiencies, while reducing risk, by consolidating multiple, similar payments types under their own single open infrastructure.

Recent surge in market activity and uncertainty driven from globalization, merger and acquisition, and technology upgrade. Debate and discussions amongst Banks and Processors is fuelled by unprecedented recent changes in the card acquiring software business including announcements of the intended “end of life” status on market leader’s flagship product, consolidation and convergence of other product vendors. As costs of maintaining these systems go up, Banks will look at replacement options.

Alternate channels as a way of growing business & controlling costs. In the current day competitive environment where customer expectation is growing & margins are shrinking, Banks are looking at the electronic channels of Payments (like ATMs, POS, Internet, IVR & Mobile) to not only reduce pressure on the traditional delivery channels (like Branches) and in the process reduce costs but also to acquire New-to-Bank Clients and cross sell & up sell other products & services to existing customers.

Comments (4)

Swati Dublish - June 13th, 2011

Hi Ramachandran, valid points, both... Risk Rating & Credit Scores find relevance at the qualification stage of credit limits (for loans, credit cards, etc). At an electronic payment processing stage elements on Risk Management relate to Access Management, Fraud Detection & Anti Money Laundering. Will share more information around these, in the coming weeks. The Payment Solutions model in its current state can be taken to any industry, apart from BFS, where there is a requirement of e-payments through multiple points & their consolidation at a central location. Infact many Product Vendors have deployed their products at varied enviornments like Railway Stations and Super Markets.

Swati Dublish - June 10th, 2011

Hi Jai, a very pertinent question… Business demand over the years has given rise to a niche group of specialist Payment Industry IT vendors. Following the developments in the industry, the existing players have re-aligned themselves and many new players are also making their presence felt. Some initiatives taken by the IT industry to meet these key challenges are: • Consultancy – In setting up the Product Selection process, Selection itself, on entire Project Duration – Implementation & Migration, for Banks & FIs looking at revamping. • Hubs - Readily built enterprise Payment Hub solution that enables FIs to consolidate infrastructure and transform payment operations. • Systems - Focus on future scalable, platform independent, Java; Oracle open systems. • Business Components – Bringing in Applications on Business Intelligence & Analytics, Risk Management, etc under a comprehensive Payments Solution suite. • Standards – Aligning the existing systems to support new payment standards. The IT industry is reinventing itself every day with the growing requirements of the Payments world.

Ramachandran Sundararaman - June 9th, 2011

Nice Article.. I have a couple of dimensions to add to this.. I have gone through your payment solution product page as well which mainly concentrates on credit / debit cards and payment facilitations. But in most countries payments are closely related to risk rating models and credit scores.. I don't find any reference to points related to them. Also the payment facilitation is needed in various other spectrums of businesses like insurance, home utilities, telecom sectors, energy domain, and various other corporate dealerships & sales.. So it will be nice if we have a generic model for all the business domains..

Jai Sharma - June 8th, 2011

Hi Swati ... valid points ... have a question though ... Is the IT industry prepared for these changes in the Payments industry & how do they plan to meet the key challenges?

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