Banking Payment systems in the modern economy - Part 1

Payments being the core of banking capabilities, has been demanding the attention from the management, customers and the industry regulators at the same time. With the changes in global economic scene like the

• Slow shift of power from America to the Chinese dominance in economic influence,
• European Union (EU) integration and its influence on Payment models,
• Emerging economies playing key roles in commerce, driving need for multi-currency trade,
• Govenrments bringing more regulations to monitor fraud, balance competition, and monitor compliance,
• Technology advances creating innovative customer channels like the mobile payments, NFC etc..

The forces are acting silently and demanding changes in the banking business model. Banks are responding slowly to this challenge, but doesn't seem have effective strategy to align business model with IT capabilities. Key demands imposed on the banking systems are:

1. Need for new business processes to meet customer segment specific products
2. Need for Any-to-Any system integration to meet process needs
3. Managing information volumes and speed to the benefit of bank and its customers
4. Establish trusted partner relationship with partner banks globally,
5. Efficiently design channels to be lean and extensible,
6. Innovate continuously to reduce cost of operations.
7. Accelerate change to support new regulations and support new industry standards like SEPA,
8. Protecting businesses and customers from fraud and finacial crime threats,
9. Pressure to innovate and stay ahead in competition with efficient IT operations

How are banks responding to these demands and what are the challenges they are facing? Banks, large and small have some common challenges that are self created, and then there are unique challenges to large banks.

Large banks could be classified from IT perspective as Leaders, Challengers and Laggards. Banks that are global players with multi-country presence, supporting global corporates and transactions, and managing operations in distributed model.

Small banks are niche players, focusing on regional area, supporting SME customers and retail customers, but grow with better operational efficiency and service.

How are their IT operations performing and what challenges are they facing? It is worth looking at this scale of operations. Lets explore, give your coments and views...