A tough call: When should banks outsource their payments infrastructure?
Offloading payment infrastructure makes sense for some banks as customer demands become more sophisticated – but not for all.
For many smaller banks, the best way to futureproof their payments infrastructure is to offload the challenge entirely to other firms. Toine van Beusekom, director of strategy at payment solutions provider Icon Solutions, points out that smaller banks often don’t have the deep pockets needed to keep pace with technological advances.
“If you add indirect access to faster payments and correspondent banking to the equation, and realize that there are banking partners offering this today, interesting options emerge,” he says. “By allowing small banks to free up resources where it matters to compete (front end) and adding volume to the commodity processing of the large banks at the back end, effectively lowering the cost per transaction, the ecosystem as a whole will become more efficient.”
Obtaining direct access to clearing schemes can be a particular challenge for smaller banks due to the cost involved. Direct participation in the clearing house automated payment system (CHAPS) involves one-off set-up costs – such as developing and maintaining the necessary hardware, software and processes to connect to the system – as well as participation costs and the opportunity cost of providing collateral or holding liquid assets.