Banks Need to Unite Payment Silos, but Uncertain About Payments Hub

26 Aug 2008

The vast majority (85%) of bank executives responsible for managing payment systems agree that they are struggling to get information consistently out of multiple payment silos, according to Checkfree's survey of 60 of its customers at its user conference in July. Other payments processing concerns voiced by the respondents, in order of importance, included: international ACH transaction (IAT) compliance, rising electronic payment exception volume, cross-channel payment adjustments and exceptions, remote deposit capture, and changes in services offered by the Federal Reserve Bank.

Yet there was no consensus on when and how 'payments hub' technology will be ready to meet the challenge of managing and reporting on all payments across those different channels. Differing definitions of a payments hub also caused some confusion among the respondents.

Twenty-five percent of survey respondents agreed with the statement that a payments hub is "a solution whose time has come", while 15% viewed it as "an appealing idea, but the technology is not yet available". The largest group - 45% - said they wanted to learn more before commenting on the promise of payment hubs.

Over half (55%) of the respondents said they were familiar with the concept of a payments hub, and yet they disagreed on the definition: 60% of the bankers surveyed said it's a fully integrated common platform for managing all payments processes; 20% view a payments hub as a reporting tool that overlays existing payment systems; while 10% believe it entails using disparate technologies within one staffing centre. The remaining 15% had yet other definitions.

"One thing that is interesting about the 60% is they believe the payment hub is a 'fully integrated common platform for managing all payments processes'. We would take exception in that definition to the word 'all'. We define a payments hub as a tool that can solve the pain of pulling that information out of the different payment silos and allow the banks to manage those payments silos at least to some degree," said Bert Harkins, vice president, global strategic marketing at CheckFree, in an interview with gtnews.

"Some companies will talk about a payments hub in terms of a 'rip and replace' strategy - remove the different payments silos and replace all of those operating models with some gigantic payments hub. While that certainly solves the pain that the banks are reporting, there is a huge risk involved in taking such a dramatic step. A proper definition of a hub will certainly help manage some aspects of those payments silos holistically and centrally, but without that rip and replace strategy," he continued.

First published on www.gtnews.com