Payment Processing Engines and Implementation Models : A strategic decision for banks

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Banking industry has been witnessing technology led disruptions, driving banks and financial institutions at large to embrace, adapt and leverage on this technology focused new world order.  With the arrivals of Fintechs, to this already complex and competitive game of pocketing bigger slice of the money pie, the industry is experiencing a large scale transformation and vibrancy in the Payments space with the entire ecosystem including the Regulatory organisations, intermediaries, banks and financial institutions, technology solution providers and customers contributing and playing their part effectively.

For Banks to continue to compete in the payments business and improve the market and revenue share, selecting the right payments solution and its implementation model is of paramount importance; and this selection definitely is not based on a "one-size-fits-all" formula. 


The payment engine which is most suitable for a particular bank depends on multitude of factors:

(1) Organisation's vision and its strategy for the payments business - Does the bank want to grow the payments business and expand its footprint? Is it a decision driven by the board?

(2) Technology Vision and Strategy - Does the bank have a vision backed by a sound strategy to be technology driven?

(3) Maturity Orbit of the technology landscape - Is the bank already technologically advanced or is behind the curve?

(4) Capital and Operational Expenditure - How much is the investment appetite?

(5) Talent - Capacity and Skill - Does the bank have the number and required skill to support this transformation?

 

Considering the factors, banks and financial institutions deliberate on the potential solution options with an objective to deliver a healthy Return on Investment (Revenue Multiplier and Cost Competitive),  meets long term strategic goal of business expansion (expanded products, services, geographies, customer segments and partnerships), improved customer experience & retention, technologically stable & next generation and adherence to regulatory compliance. 

Typically, following are potential solution types / implementation models that banks have to decide on, with each one presenting its own advantages and challenges. Banks and financial institutions would need to assess carefully the following models for its tactical and strategic objectives.




Build

- Banks with strong capability to define, design, create and operate a greenfield solution, backed by a large in-house / captive technology and business enablement organisation 

- Requires long term vision and strategic commitment for the desired solution to be built and implemented

- Allows solution to be customised for each target market, leveraging the existing infrastructure or potentially look to standardise across all markets

 - Banks who have outlived the existing solution would need to assess this implementation model

- Protracted time to market in relative terms to other implementation models


Improve

- Banks with existing payment processing capability but aspiring to improve the capability in terms of product offerings, technology framework, regulatory commitments or increasing operational efficiency

- Requires clear definition of improvements and their mapping to cost and expected business value (ROI analysis)

- Allows focus on specific areas of solution building as per the business needs, market dynamics and technology landscape

- Faster time to market with an incremental solution implementation with no significant impact to the existing technology architecture


Off the Shelf

- Market ready "third party" solution brings speed to market and market ready capabilities but requires careful assessment of its "fitment", "degree of disruption" and "ease of integration across target markets" to the existing bank's architecture / technology landscape

- Provides organisations with ready regulatory solutions, clearing house specifications and adherence to industry standards out of the box

- Empowers business users with more configuration parameters enabling ease of operating the system as per business needs

- Rapid time to market, but requires careful Cost-Benefit analysis (ROI computation) and Degree of utilisation (business use of system features) 


Be-spoke

- Out of the box solution may not be fit for purpose for the organisation with respect to the business goals, operational structure, existing technology landscape and payment processing workflows. Business criticality of these gaps and the organisation's inertia to re-engineer the existing processes and architecture as per the "third party" solution will result into significant and sizable customised changes on the solution

- Solution vendor capability to support and implement these changes together with presence of an in-house technology organisation to define, design and enable this implementation

- Large banks / financial organisations with a strategic view will decide to choose this model with high cost impact, large implementation cycles and a near standardised solution across all its operating markets

 

Hybrid

- Organisations and large international banks operating in diverse markets across the globe, with varying levels of business interests, may not find a standardised global solution fit for purpose and suitable

- Solutions may vary for the local market as opposed to international, business segments, across regions and / or across different legal entities. Hybrid model provides an approach to implement payment solutions considering the business priorities and investment appetite

- Organisations may decide one or many models described above, post careful assessment of cost, business benefits and strategic business direction and objectives





Core engine to process payments and its alignment with latest technology stack is crucial for any bank to execute its strategic plans of improving its market share in the payments business and beat the competition.

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