Leveraged Services Utility Payment Model
Summary of Results and Findings
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Banks face a dilemma. The cost of dealing with an accelerating cycle of change in the payments industry is making it increasingly difficult for many banks to retain a fully proprietary, end-to-end payments function in-house. At the same time, banks can’t afford to lose this essential link to their customers. The big, global payments players typically have the available capital, and the payment volumes to justify the investment needed to deal with this changing environment and to continue to offer a broad range of payment services. Many of her banks do not.
Eventually, certain tier-one banks and many tier-two and tier-three banks will have to face a choice: Do they absorb the cost of continuing to run payyments in-house? Or, do they partner with third-party service providers to buy “white-label” services from larger global players and rebrand them as their own?
Banks faced the same challenge more than a decade ago. The custody market changed almost overnight into one dominated by only a handful of firms with the scale, technology and processes to deliver efficiency. But, payments are different to custody. Payments are at the core of virtually every customer relationship. To lose control of the payments function is to lose control over the customer.
It doesn’t have to be that way. A consortium of banks and a business and technology services provider can create a leveraged services utility payment business. One that enables banks to retain control over the payment relationship with their customers, while benefiting from technology investments made by other entities, and building scale and processes with the greatest quality and efficiency.