With the emergence and practical adoption of new payment workstreams, it is time again for the topic of payments hubs to take center stage. Adoption over the last decade has not quite met expectations, which is understandable given the enormity of expense, time and resources that constitute a payments hub implementation project.  

However, now more than ever the need for banks to implement a solution is bubbling back to the surface. The stakes are high for financial institutions to understand the value and key benefits of this technology as well as its current adoption.  

Aite Group surveyed the 19 of the top 60 U.S. banks between December 2017 and January 2018 to better track the trend in adoption and implementation of payment hubs. The executives interviewed are responsible for forming and implementing the payments hub strategies at their organizations.  

New payment workstreams are being introduced in the U.S. for the first time in more than 40 years.  Aite Group found that bank clients are demanding greater visibility and reporting capabilities for investment, risk and forecasting decisions. They are also creating market trends that force banks to look for new ways to create efficiencies and eliminate redundancies in their current operational models. These banks recognize the need for a more fluid user experience that comes close to replicating the ease and clarity of consumer experiences. 

There are market implications to this surge of workstreams, including an aged infrastructure that does not easily accommodate these new payment workstreams. Banks are in the process of using a payments hub to evolve their product offerings by accessing the rich data made available, eliminate payment workstream redundancies and streamline functions such as regulatory compliance. Banks are focusing on providing a single view for all payments information and activity.  

Fintech companies such as ACI Worldwide, Bottomline Technologies, Finastra, FIS, Fiserv and IBM are considered market leaders and should be among the considered vendors when implementing a payments hub solution, according to Aite Group. 

 

Erika Baumann

Erika Baumann

Why Banks Should Implement a Payments Hub Solution 

A payments hub can help banks cut costs, enhance the client experience and provide an efficient foundation for new payment streams. 

Implementing a payments hub benefits both the bank internally and the bank’s clients. Of the top two benefits reported by banks, one benefit found in the survey focuses on the bank and one focuses on the end user. Ninety-five percent of banks report that an improved client experience is either very or extremely important when considering the benefits of a payments hub. Creating operational efficiencies and removing redundancies are also a top benefits of payments hubs, with 90 percent of banks reporting this as very or extremely important. 

When banks implement a payments hub, it may take many years and requires funding from multiple areas of the bank. According to their findings, Aite Group recommends that banks must also make key decisions around the technology approach, including choosing to interface legacy systems or replace legacy systems and choosing to engage a vendor or build in-house. They say banks must commit to a multiyear migration plan with identified resources. A payments hub is worth pursuing for any bank that has disparate payment platforms and workstreams, regardless of size. Long term, a payments hub can save significant costs, enhance the client experience and provide an efficient foundation for all new payment workstreams going forward.  

 

Erika Baumann is a senior research analyst for Aite Group’s wholesale banking and payments practice, focusing on payables and receivables technology and solutions. 

The Ins and Outs of Payments Hubs

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