Thinking the Unthinkable: Banks Relinquishing Control of Their Payments Infrastructure

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23 May 2013


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.