April 25, 2008

Where Should Banks Start?

Much like other major IT projects, banks should approach the creation of an enterprise payments architecture, or payments hub, incrementally, experts advise. "Banks have to rationalize existing payments infrastructures," notes Bottomline's Campbell. "It's a matter of putting things into digestible phases."

But the motivation and starting point are not the same for all institutions. Some start with the goal of efficiency, while others choose quality of data and still others begin with customer service, TowerGroup's Kerr says.

SunTrust is in the thick of formulating its enterprise payments architecture strategy and choosing the enabling technology, according to the bank's Nygren. He says the bank is approaching the initiative as an integration issue. "As opposed to top-down, we are approaching it from integration up," Nygren says, adding that the project could be viewed as an electronic data interchange (EDI) issue. "We are looking to consolidate payments channels through investments in technology, which is fundamentally middleware."

Nygren recommends that other banks similarly focus on achievable components of an enterprise payments architecture project. "If there are building blocks you can plug together, it gets you farther down the road," he says.

According to Nygren, SunTrust has seven goals, or focus areas, for its enterprise payments architecture; the bank is using these goals to evaluate potential technology solutions. The first area of focus, Nygren explains, is data transformation, which is key because the bank wants to be able to translate payments to and from any format. That is a "key tenet customers will be asking for," he says.

The second area is achieving a canonical, or common, payments format that will provide "central payments representation regardless of source or destination," Nygren explains. The third goal, which utilizes the canonical format, is the ability to apply business logic and rules to the payments stream. Nygren notes that he hopes to leverage existing enterprise rules to attach canonical, rather than specific, formats to individual payments. To achieve this, he adds, the bank plans to broaden its SOA strategy to include payments components, which have proven more difficult to integrate.

The fourth element of SunTrust's enterprise payments architecture is a payments hub that integrates into the bank's existing environment, Nygren relates. That is the foundation of the next enterprise payments architecture goal: a complete payments database that would store the payments data regardless of its type. "The payments database would allow for tracking, aggregation and reporting across all payments channels," Nygren explains.

According to Nygren, SunTrust's sixth goal is to incorporate a user interface into its enterprise payments architecture that would include reporting, and transaction and event controls. The interface would allow end users to understand where a payment is in the system at any time, "potentially ... in real time," he says. The final goal, Nygren adds, is to ensure that strong security "permeates the whole model."

The distribution of noncash payments is shifting away from paper checks in favor of e-payments.