Enterprise Payment Management: Banks Must Follow an Enterprise Approach to Payments to Compete and Lead

May 9, 2008

Abstract

San Francisco, CA, USA May 9, 2008

The catalysts for moving toward an enterprise approach to payments management and the industry's response to these catalysts will reshape the US banking industry. There will be a transformation in how payments are processed and distributed, how operations and organizations are managed, and the roles of providers.

Having survived the retail movement of deposits to the stock market, explosive mergers and acquisitions, Y2K, and the Internet bubble, payment operations seem invincible. The fact is that these systems were not designed for the rate of change they have seen, but have survived because of difficult decisions, brute force, and extreme effort. These aging systems and overly complex operations are not set to support banks' needs in the future.

It is imperative that banks reevaluate their payments strategy from an enterprise perspective and thoughtfully assess their ability to execute in order to maximize stakeholder value into the future. Although a great deal of effort has been put into the enterprise concept, the US is only at the beginning of what will be a great evolution in the banking and business community. A new report, , provides insights to motivate US bank executives to assess their existing payments strategy and operational capacity to seek opportunities before the market limits their options.

These insights are segmented into five areas.

  • Banks most susceptible to changes in the payments market
  • Trends shaping the future payments marketplace
  • Mega-themes supported by the next generation of payments franchises
  • The role of enterprise payment management
  • Preparing the payments organization for change

"The wise bank needs to reevaluate its operation. 'Don't fix it if it ain't broke' is a tempting argument until the bank realizes that a system incapable of supporting its future needs is 'broke' and, without the proper investment, could ultimately break the bank," says Edward Woods, senior analyst with Celent's banking group and author of the report.

The payments market is changing, and banks must have a plan that maximizes future potential. Having an enterprise plan for the payment franchise is an opportunity that no bank should miss. "It's a new world. The bank must change to survive and innovate to thrive. With an efficient, focused payment operation ready and able to respond to its needs, the bank will be in its best position to navigate the waters of both today and tomorrow," he adds.

This 44-page report contains 9 figures and 11 tables. A table of contents is available online.

Members of Celent's Retail Banking and Wholesale Banking research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

San Francisco, CA, USA May 9, 2008

Executive Summary 3
The Calm Before the Storm 7
  The Need for a Cohesive Payments Strategy Will Vary 7
  Taking a Weather Reading of the Payments Franchise 8
Signs of Bad Weather Ahead 11
  Growing Volume and Evolving Payment Mix Create Opportunities and Challenges 12
  Regulation's Impact on the Payments Franchise Will Drive Strategic Thinking 12
  Wholesale Discounts on Cross-Sell Expectations Require Closer Scrutiny 15
  Price Pressure and Increasing Quality Expectations Demand New Payments Strategy 16
  Pressures on Card Revenues Reinforce Banks' Need to Diversify 17
  Product Innovation Will Make and Break Industry Stakeholders 18
  Consolidation Creates Opportunity and Threat 19
  Globalization Will Change the Competitive Landscape Forever 20
  Merchants Frustrated and Stronger 22
The Perfect Storm 25
  Scale Even More Important 25
  Scale Players Set to Accelerate Competition 26
  Banks Without Scale Must Find New Ways to Differentiate 26
  All Banks Required to Increase Investments in Security 26
  The Changing Market Will Force Stakeholders to Rethink the Value of Payments Outsourcing 27
  The Storm Will Determine Future Market Participants 28
Weathering the Storm  30
  Enterprise Management Must Become the New Baseline 30
  Technology Must Drive Efficiency While Supporting the Flexibility to Lead 33
  Shared Services Are Key to Enterprise Philosophy 34
  Visions of Utopia Should Guide, Not Dissuade 36
Lessons Learned: Preparing for the Storms Ahead 38
  Address Business Governance and Fast Track a Path to Success 38
  Understand the Bank's Payment Business Before Making Changes 39
  Debate and Debate, But Agree on One Future 39
  Lay Out Vision and Strategies to the One Future Landscape 39
  Create an Achievable Execution Plan 39
  Monitor, Assess, and Adapt the Plan 40
  Develop a Payments P&L to Create Visibility 40
  Detail What Isn't Being Done to Avoid Scope Creep 40
  Contingency Plan 41
Conclusion 44

 

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