Thinking the Unthinkable: Banks Relinquishing Control of Their Payments Infrastructure

by Gareth Lodge, May 23, 2013
Industry Trends
Global, EMEA, North America


Banks’ budgets continue to be constrained, yet more demands are being placed upon their spending. For a growing number of banks, a significant shift in how payments processing is delivered is needed.

The banking industry has weathered a tough period. The future, while brighter, will bring its own challenges, according to the report, Thinking the Unthinkable: Banks Relinquishing Control of their Payments Infrastructure.

Payments account for a significant proportion of banks’ costs, but they offer little opportunity for differentiation. Indeed, payments strive for standardization, to ensure high levels of straight-through processing. For some banks, the shift will have to be more than the traditional approach of “trying to do more with less.” Instead, they require a change that will be as much of a mind shift as a technological shift. Celent believes that this answer will be a form of outsourcing, with cloud computing offering the most scope for change. For payments, that will require a change in attitude.

Parts of the payments industry are already outsourcing, such as the cards business. At the same time, banks are already utilizing cloud computing in related areas. In core payments processing, outsourcing is rarely considered. Yet without a more radical approach, banks are unlikely to achieve more than incremental changes.

“Payments have traditionally focused on operational efficiency, yet if everyone focuses on the same thing, it is even harder to differentiate,” says Gareth Lodge, Senior Analyst with Celent’s Banking Group and author of the report. “Focusing on a different value discipline may give a bank an edge over other banks.”

This report studies how shifting focus to what banks wish to achieve, rather than starting with preconceived ideas of what are acceptable options, can create significant opportunities for differentiation. It looks at how cloud computing may help banks find that area for differentiation.

This 29-page report contains six figures and two tables.

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 part of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary


The Forces of Change


Standardization to Create a Business


Beyond Retooling


Outsourcing in Payments


Moving from Outsourcing to Best Sourcing


Introducing Cloud Payments to Payments


The Opportunities for Cloud in Payments






Commercializing Payments



Supplying Peak Capacity



Variable Pricing to Control Volume Flow



Insight and Analytics


Challenges to Wider Adoption of Cloud Computing


An Action Plan for Banks Considering Outsourcing



Step 1: Choose a Strategic or a Tactical Response



Step 2: Build the Right Team



Step 3; Decide on the Form of Outsourcing



Step 4: Build the Business Case



Step 5: Choose the Partner


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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