A recent article reported on the trend toward the development of Payment Service Hubs (PSHs), systems that depend on a routing engine to select the most efficient processing method and direct payments towards the best application. Having a PSH would enable a bank to take a centralized, holistic approach to payments and achieve a global view of its payment processes producing immediate benefits such as better cash flow reporting and more comprehensive risk assessments.

But it’s not just banks jumping on the centralization bandwagon. Similar trends toward payment operation consolidation are happening in the non-bank space as well. Banks could feel competitive pressures from third party service providers setting up “payment factories”. Additionally, with SEPA, corporates have taken strides to eliminate country-specific treasury operations and are establishing centralized global treasury departments thus becoming more sophisticated with their flows of payments. With such pressures squeezing revenues out of traditional payment operations, banks need to find ways to optimize flows and maximize profitability or risk being left behind by the very customers they aim to serve.

PSHs definitely offer banks a way to respond, but creating such a hub presents a whole new set of challenges. To develop a PSH, IT infrastructure would need to be evaluated, up-to-date payment routing data would need to be integrated, new payment formats (mobile payments, for example) would need to be considered for future service offerings and certain levels of standardization would need to be achieved across different business groups. All this aside, those financial institutions that respond quickly by breaking down siloed business groups and applying best practices across their IT landscape will have the opportunity for increased market share and profitability.

Headed to Sibos?
If so and you’re interested in this topic, check out Open Theatre B on Wednesday, September 17th at 11:45 where Robert McKay, Accuity’s Managing Director of Business Development, will be presenting “Payment Service Hubs and ‘Payment Factories’ Optimise Operational Profitability — What it Means to Financial Institutions and Corporates”.