Forget the current, siloed nature of payment processing. Retail payment hubs that manage all payment types from one platform are the future, and they’re coming soon. Best of all, they represent a much brighter future for financial institutions and consumers alike.
Current Inefficiencies are Obstacles to Meeting Consumer Demand
The current environment of separate platforms for credit, debit, prepaid and ATMs doesn’t allow for a holistic view of payment types across channels. This creates operational efficiencies. For instance, if a bank wants to add Apple Pay, it has to program it to work on all of its payment platforms – credit, debit, prepaid and ATMs. That extra work makes it more expensive and time consuming to add new payments products.
Think about how many integration points to other providers exist in the transaction supply chain today. These points of integration keep multiplying as payments become more complex and add innovations such as real-time payments, mobile wallets, tokenization and self-service fraud prevention tools.
As consumers demand more from payments – immediacy, mobility, security, and all of these things now – costs to achieve innovation climb. Financial institutions must transform their businesses to in order to keep up.
Cue the next generation payments hub.
What Will the Future Look Like?
Next generation payment hubs will combine existing and emerging payments technologies into a cohesive platform that provides financial institutions with visibility into payments operations across all channels and business lines. In addition, they will have a robust integration layer for consolidating front- and back-end components that handle all payment types. You also will find a single consumer information layer, in addition to ancillary services – e.g., fraud, loyalty, reporting, analytics – that perform horizontally. This will enable the bank to have a holistic view across all payment types.
What Are the Benefits for Banks and Consumers?
Financial institutions will be able to reap huge benefits from being able to examine payment data collectively:
- Reduction of false positives and quick determination of fraud occurrences: Modeling and decisioning will be based on all payment product transactions and data, providing better fraud detection. The result will be increased consumer satisfaction and improved profitability as fraud losses decline.
- Stronger analytics: Financial institutions will have better business intelligence to examine their customer bases’ transaction histories, evaluate how they perform against norms and adjust marketing programs accordingly.
- More targeted marketing: Financial institutions will be able to see all their usage and can tell if total transactions performed each month meet industry standards and take appropriate action if below average or reward more if above average.
- Easier and more accurate analysis of profitability: Easy access to consolidated payment transaction data will enable analysis of profitability across payment types.
- Simplification of back office processing: Financial institutions will be able to do settlement and reconciliation, chargebacks and disputes consistently, across various card products.
- Faster payments innovation: A singular platform will significantly reduce time-to-market for new product offers.
- Standardization of communication: This will standardize how banks talk to third parties, helping speed to market and governance.
Consumers, meanwhile, will have a more consistent, omni-channel experience. They will be able to go to one location on a financial institution’s website to view all of their card transactions, regardless of card type; they’ll be able to make changes, such as address, authorization limits or parameters; they’ll even be able to order new cards, report lost or stolen cards, request card reissues, enable mobile wallets, file a dispute, etc.
Consumers will also benefit from better security since fraud protection decisioning will be based on transactions across card types – credit, debit and prepaid. When fraud is detected, processing can be stopped across all card types, not just the one where fraud is initially discovered.
What’s Next for Next Generation Payment Hubs?
Expect to see next generation payment hubs emerge within the next 18-24 months. At FIS, we realize it’s a disruptive, transformational and difficult process. But, we believe the benefits for financial institutions are too numerous and the payoff too attractive for this to be anything other than positive.
It’s time to rise to the challenge of making payments leaner, nimbler and more adaptable.