Payments

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Sonny Singh
Sonny Singh
Commentary
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How Banks Can Keep Pace with the New Ways to Pay

The key is being flexible, customer-centric and entrepreneurial

The payments environment is changing rapidly with non-traditional and highly competitive parties entering the market and challenging banks’ long-held leadership in the payments business.  Banks, which long dominated the billing and payments domain, must find new ways to distinguish themselves in an increasingly agile market – and they must get there quickly. 

Systems like PayPal and service or mobile purchasing and account management are providing new, flexible, and convenient options that are re-facing the billing and payments landscape.  Customers not only expect, but now demand new and different ways to manage payment transactions – actively seeking out new paths of payment that provide them with additional functionality, extra security, and even rewards for their business.  While customers are demanding a bespoke, unique experience, opposing market conditions and developments are working to force further standardization and commoditization in the payments environment.  

In response, banks are looking to pursue an integrated payments business focused on proactive client-centricity.  To achieve this goal, however, they need to be able to think and act entrepreneurially to diversify their offerings and support complex client organizational relationships, client-specific pricing and calculation schemes, and more, all the way through the billing and settlement processes.  Banks not only need to make this transformation, they need to do so quickly and ensure the ability to keep pace as the payments space continues to transform.  Many are taking a critical look at their legacy billing solutions, with an eye to new approaches, including the cloud.

To effectively achieve the entrepreneurial and customer-centric approach that today’s financial services environment demands, firms must lay a foundation, including an integrated revenue management and billing environment, which supports:

·       Flexibility to respond quickly to a dynamic marketplace – firms need to be lean and to have processes in place for quick identification, testing, and execution of opportunities.  For example, payment network providers are expected to augment their incentive and other affinity capabilities to entice acquirers to route payment decisions onto their individual network infrastructures.  In addition, network providers, especially outside the United States, will be adopting vertical integration strategies whereby they will become the issuers, the network providers, and the processors.  As payments methods change, billing solutions – and more specifically, pricing and charging schemes within billing systems – need to be flexible enough to support them.  Banks also look to take advantage of new technologies quickly; as such, many are looking to cloud-based solutions for rapid deployment and greater ability to focus on their core business.

·       Incentives, such as affinity programs, that provide an important way for companies to route business in the payments network to their organization.  To do this, billing solutions must support complex organizational hierarchies, client-specific pricing, and calculation schemes, for any level.  This capability enables firms to configure incentives, as well as products, services, charging, and credit offerings on a client-by-client basis.

·       Reliability through stable systems that are easy to work with and are never down unexpectedly. Given the importance of reliability, firms should be looking across the payments value chain for ways to reduce systemic-risk and improve control.  Billing and payments is a 24/7 business with no tolerance for downtime.  Firms require extreme availability, but understand the challenges and costs associated with ensuring it.  As such, firms are increasingly looking to cloud-based solutions, which free internal resources for other strategic projects and deliver reliability, scalability, and predictable costs.

·       Scalability as the electronic payments volume is expected to continue to grow exponentially.  Enterprise billing systems must scale linearly with hardware and have the ability to support millions of invoices in a short processing window with user response time being just fractions of a second.  They also need to be able to create ad hoc invoices regardless of the date of data entry or batch run schedule.  Cloud-based solutions give firms added scalability options without the need for onsite investment.

·       Standardization, which at first glance, might seem to be a direct contradiction to client-centric specialization.  While many think these two focuses are contradictory, firms that want to be able to provide many options for clients that better suit their needs must first look to standardize their interfaces, structure, and processes around options for clients.  Smart firms avoid custom processes and interfaces for each specialization they provide a client.  Instead, they design and preselect a set of options that they can handle consistently and operationally that still give clients the variability they require.  Solutions that separate the business rules from the application logic enable firms to make changes quickly and without costly, time-consuming modification of the source code.

·       Transparency, which is critical to being able to provide a sustainable client-centric offering.  A firm must clearly understand the value they are providing to their clients and the related cost of their offerings.  They also require a complete customer view, including billing data for services handled by a variety of systems, such as automated clearing house (ACH) and real-time gross settlement (RTGS).  This insight will drive decisions about business development targets, pricing changes, and more.  Related to transparency, traceability is also essential in today’s economic and regulatory landscape.  Firms require the ability to rapidly trace back charge and fee histories, and the data associated with them, to respond effectively to customer and regulator inquiries.

·       Connectivity to enterprise applications to effectively match charges, fees, and payments between revenue management and billing systems and core accounting. 

As the payments industry continues to evolve, one thing is certain – financial institutions must continue to focus their efforts on key business initiatives while remaining client centric and entrepreneurial in approach.  And, as payments methods change, billing solutions need to be flexible enough to support them.  To enable this, institutions must employ global, flexible, and scalable applications that can support the products, services, and charging schemes for the payments industry, today and in the future.  

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Sonny Singh is Senior Vice President and General Manager of the Financial Services Global Business Unit at Oracle. His organization's responsibilities include sales, consulting, engineering, and support of Oracle products that focus on banking, insurance, and capital ... View Full Bio

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Sadie!
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Sadie!,
User Rank: Apprentice
9/19/2014 | 5:40:46 PM
Re: Fraud & security
I imagine those fears will only get worse.  There will likely be more data breaches so more headlines to come.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
9/18/2014 | 2:46:51 PM
Re: Fraud & security
That is definitely true. We keep seeing in consumer surveys that concerns over security are the biggest barrier to adoption of mobile payments. So I wonder if those fears will increase as a result of all the headlines around cyber security and data breaches lately.
keitha0000
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keitha0000,
User Rank: Apprentice
9/18/2014 | 1:02:49 PM
Fraud & security
I think that a major component of future offerings must be an increase in fraud prevention. While talking about extra security is fine, one of the things keeping banks (and many customers) from investing more seriously in new payment methods is the fear of how fraud will be managed. Current payment methods are fraught with fradulent misuse- more and newer payment methods can be seen as not only new opportunities for increased business, but also new opportunities for increased risk...
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