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IBM Seeks to Coach Banks On Payments

New Payments Center of Competence will provide subject matter experts to advise on hardware, software, services and strategy.

As IBM launched a Payments Center of Competence last week, we spoke with James Wallis, vice president of global payments at IBM, and James Methe, Center of Competency lead, about the new group, the resources it will have and what it will be able to do for banks.

IBM has been in the payments industry since its inception, Wallis says. Its sales of traditional software, hardware and services to payment-related bank divisions, card companies, payment processors, and telcos generates close to $8 billion of revenue per year, he says. IBM also has specialized payment products such as IBM Payments Director, a check image and clearing system that clears 85% of U.S. checks, and partnerships with payment vendors including Fundtech and ACI. At the 2006 SIBOS, IBM announced a Payments Framework. "What we've done over the last four years is evolve it into what we call the Banking Industry Framework, which is a series of IBM tools and performance labs to provide the end-to-end framework into which we incorporate our partners' systems," Methe says.

Methe observes that large banks have been working to build consolidated payment hubs for their customers' use for a decade, starting with Citi in 2001 and the trend continuing to include HSBC, Barclays, and most recently Bank of America. "The real global trend is around consolidation and standardization within their payments environment," Methe says. "Everybody is struggling with standardization, squeezing costs out of the business, providing visibility to regulators, and offering better and equal services around the globe for customers. We're integrating all those." This global group will help banks create road maps that align business, IT and operations, leveraging the global Centers of Competency it has already set up. "We're also bringing global services into those centers in Silicon Valley, Dallas, Poughkeepsie, Sao Paolo, Dublin, La Gaude, Montpelier, Barcelona, Beijing and Seoul," Methe says.

The Center currently has a staff of 20 subject matter experts that can be deployed globally; IBM expects to have 300 consultants in the Center by the end of next year, according to Methe. IBM recently developed an end-to-end wholesale payments processing and a Mobile Payment Cloud that will be part of the Center of Competency.

"Mobile is absolutely in our crosshairs," Wallis notes. "In the mature markets, mobile is an alternative channel that the banks, telcos and merchants are trying to figure out how to leverage. In emerging markets like Asia and South America, mobile is a play around financial inclusion of the unbanked, getting mobile technologies to replace cash. Both are in our scope." IBM will offer clients a full suite of services, including strategy, architecture design and information delivery, Wallis says. Banks with which IBM has already worked on banking/payment transformation projects include Bank of Tokyo Mitsubishi, Rabobank International, Royal Bank of Canada and State Bank of India. "The whole benefit of having this organized as a global capability is that we can support global banks as they grow and regional banks that are looking to become more international," Wallis says.

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