Celent Model Bank 2017 Awards: The Payments Preview

Celent Model Bank 2017 Awards: The Payments Preview

This is the next instalment of our Model Banking preview blogs, and it’ll come as no surprise that I will focus on Payments.

Reading and evaluating the Model Bank entries is always fascinating. It’s also somewhat frustrating too at times – payments, covering so much territory, often ends up with the tricky task of comparing two very different projects, and trying to decide which is best. This year was no different, with the quality of entries high.

Until we announce all winners publicly on April 4 at our 2017 Innovation & Insight Day in Boston, we’re unable to say too much more – very frustrating! In addition to presenting the award to the winners, we will be discussing broader trends we’ve seen across all nominations and will share our perspectives why we chose those particular initiatives as winners. Unfortunately though, if you’ve not already registered, it’s too late. As with every year, it’s not only sold out, there is a growing wait list too!

So until April 4th, what can we take away from the Payment entries as a whole this year?

First, the entries this year reinforce how hard it is for any single bank to come up with a cutting edge product innovation in payments. As a result, we had a number of entries submitted jointly by multiple FIs describing their initiatives on blockchain, P2P infrastructures, and other collaborative efforts.

We also saw, particularly in the retail space, the adoption of innovations in one market, transposed from another. There were a number of these, particularly in wallets and P2P. Not bad, just not new and often with a very specific market context. For example, one technology had been in place in a different country for at least 5 years, yet the impact will be huge for the bank who submitted it, and is leading edge for their market.

This perhaps serves as a timely reminder that innovation isn’t always about cutting edge technology, but doing something different. Scanning other markets for what they do, and why, is a great source of new ideas, Given that these innovations are, by definition, tried, tested and live, it also has the benefit of being easier to adopt, from the likely business benefits to the actual technology used and lessons learnt.

The second theme is the continued payments back-office renovation story, particularly around the adoption of payment services hubs, which continue apace. Whilst we have defined what is or isn’t a hub, we have always been clear that no two hub projects are exactly the same, and the entries this year reinforce that.

A few things really stood out in particular about the entries. First, some clients still consider hubs to be mainly European, yet we had entries from right around the globe. Second, whilst the details may differ, common to all was the belief that the bank had to re-engineer payments, not just for the future, but to better respond to changes that were imminent. Given the change in the last 10 years, and the likely change in the next 10, perhaps the question for many banks is more about when than if they also undergo their own transformation.

Look out for the case studies being published on April 4th for more detail!

FIS To Acquire Clear2Pay

FIS To Acquire Clear2Pay
Rumours of this purchase have being down the rounds for months (I was discussing it in June at EBADay), although the acquirer has only been ever referred to as a “US Vendor”. In discussions with clients over the last few months, I’ve highlighted 5 potential suitors (including FIS), and of those, four for very similar reasons. All four have broad FS offerings, but have little or nothing in the core payments space, making Clear2Pay an obvious solution to plug a gap.(Clients – ping me for a discussion of who the vendors are). For FIS, there are some additional benefits to the gap filling, as in addition to their OPF hub, Clear2Pay have card assets (including one of the largest install bases in chargeback management systems) and testing capabilities.Testing is a huge part of payments, but one which often gets overlooked. For Clear2Pay the existing relationships that FIS has, particularly in the US, and the breadth of resources at their disposal, should have definite benefits. There are some obvious challenges ahead, not least the fact that few “big company subsumes smaller company” stories come without casualties in the smaller company. With Clear2Pay being a very entrepreneurial company, with some very visible and involved leaders, it’ll be even more important than ever to address this early on. More broadly for industry, it continues a trend of consolidation in payment vendors. Clear2Pay came close to being acquired a couple of years ago. That suitor, and the other three I highlighted in my conversations, now find themselves with both still with a gap, and now an arch-rival who has the largest and arguably most visible player in the market. One of the vendors I highlight has repeatedly approached one of the other payment hub vendors over the years. ACI, already a hub vendor, bought Distra, a payments framework, to strengthen their offerings. In short, this is a very important deal, signalling the coming of age of payment services hubs, and we very much doubt the last significant transaction in this space.

An update on Payment Services Hubs research

An update on Payment Services Hubs research
During my webinar on Taxonomy of Payments in September I mentioned that I have been conducting research on Payment Services Hubs (PSH). Since then I received a lot of interest from clients asking when the research findings would become available. I am pleased to announce that Celent will be publishing a series of reports on Payment Services Hubs very soon. One of my findings is that more work is to be done to get everyone to speak the same language and to agree the key definitions. Despite the fact that over the last few years, the PSH concept has been promoted by vendors and industry analysts as the leading approach to modernising banks’ payment infrastructures, there is plenty of confusion and lack of clarity. ‘Payment services hubs’, ‘payment engines’, ‘payment factories’ and other terms seem to be used interchangeably. The first report will be published this week and will propose Celent’s definition of key terminology related to payment services hubs. The second report will assess the capabilities of nine leading vendors and will name the XCelent award winners. Expect that report to be available before we all break for the holiday season. The third report will take a bank’s perspective and discuss the drivers for building a PSH and the key decisions a bank needs to make when embarking on a PSH project. It will also include a number of case studies describing different approaches various banks take to implement a payment services hub. Look out for Celent press releases announcing these reports formally. And please get back to me with your thoughts. For example, do you agree with my proposed definitions? What other alternative approaches do you see in the market?