The idea of a payments services hub has been bandied about for several years in the banking industry. Though many people differ in what exactly constitutes a payments hub, a simple definition we can use is that it is a centralized hub designed to process all types of payments that come from every payment mechanism.
So far, the general consensus on payments services hubs seems to be that implementing one can provide long-term efficiencies and cost savings, but many financial institutions are leery of making the initial large investment for various reasons. At least that's the sense I get from speaking with analysts, vendors and banks for a story on this subject for Bank Systems & Technology's "Future of Payments" November digital issue.
Among those we reached out to on the topic was Microsoft Corporation, and Colin Kerr, who serves as Industry Solutions Manager of Worldwide Financial Services for the tech giant, had some interesting comments.
He says despite the interest in what hubs can do for banks, widespread implementation has been slow. He believes this is due to several reasons, including that they are complicated and the requirements for processing take time to define. This in turn means that implementations are complex with many moving parts, Kerr notes, adding that hubs will need to interface with a mixture of batch and real-time systems, with proprietary and standard interfaces.
Kerr also says that hubs can be very expensive to implement, especially if the bank does not replace another system. If the intent is to pass all payments through the same hub, he says, the licensing cost can be extremely high and be an addition to the overall cost.
"For this reason we also see banks thinking about 'logical hubs;' trying to gain the benefit of a hub without adding in a complete new payments system," says Kerr. "This approach focuses on streamlined integration flows and the reuse of some shared payments functions -- such as compliance screening -- and with the addition of a business intelligence layer."
For more insight on this issue, be sure to check out BS&T's November digital issue.