Is the key driver for your organisations payment strategy for the next 12 months cost reduction?
How is your organisation planning to improve its payments total cost of ownership through
What is your organisations key driver for the coming 12 months
There are many factors influencing the strategies of financial institutions, however given the current financial climate it comes as no surprise that the resounding response from our poll respondents shows that cost reduction is currently the key driver behind their payments strategies.
While this is understandable it is also concerning that none of the respondents to our poll indicated that their strategy was focussed towards enabling new channels and markets or improving time-to-market for new and differentiated products, service or functions. Yet research tells us customers are increasingly treating payments as commodities. They are becoming more promiscuous and in turn more powerful, demanding new and improved services with ever more emphasis on convenience and simplicity.
It is important for organisations to look to make cost savings across a wide range of areas however consolidation seems to be the major factor a strategy which is not easy to achieve with legacy technologies so many currently operate.
It was suggested by some that they planned to reduce TCO by reducing the costs of hardware. This seems like an easy area to target however it is a little short sighted as year on year hardware costs have reduced, while the functionality, flexibility and reliability they offer has increased; the exact opposite has happened in the software space with the cost of purchasing and maintaining a legacy retail payments system.
The harsh reality is that financial institutions cannot respond to this challenge. While the legacy systems they operate were good systems for their purpose for many years, they are no longer able to meet the adapting pressures of the market place they operate in. They were designed in the 70’s, using 70’s technology, addressing the market challenges of the 70’s and the near future of the 80’s. Since this time technology has moved on in all aspects of our lives and customer demands and expectations of retail banking and payments have moved on correspondingly. However, in this same timeframe, payments systems have changed very little to address these needs. In short, the legacy systems are not fit for purpose to address the challenges and expectations of the modern retail payments world.
If financial institutions were looking to develop a brand new retail payments system today they would not design the systems that they are currently running and yet they are happy to continue to use these systems. They seem to be comfortable spending more and more on the maintenance of these creaking systems on an on-going basis and therefore taking funds away from developing new and innovative customer-focussed (and demanded) services.
If these institutions don’t demonstrate the ability to provide new services reliably, flexibly and cheaply, then their customers will move to other institutions who have made the conscious decision to embrace change and are in a position to address the payments challenges of the 21st Century with the available modern technology.