Kristin Moyer

The financial crisis has already had far reaching impacts and consequences on consumers, financial institutions and the vendors that serve them.  Even before the crisis, payments was in flux due to regulatory change, account and transaction volume growth and the need to contain costs while leveraging payments to drive revenue and retain customers (see “Three Delivery Models for Card Processing” and “Banks’ Retail Payment Operations at a Tipping Point”).  Since the crisis began, the financial industry has been restructured as a result of significant merger and acquisition activity as well as government intervention.  Consumer spending habits have changed in many parts of the world, with consumers turning to debit cards (particularly in markets like the US, UK) in order to better control their spending (see “Banks Must Invest in Payment Systems to Win Back Customer Trust”.  The sunset of Base24 is driving significant change as well.

Because of these things and more, I believe that accelerated change is about to take place in all aspects of card payments operations.  Evidence is mounting to support this belief.  Many banks and processors have begun a process of re-evaluating all aspects of their card operations, including applications, processing centers, strategic sourcing and network brand choices.

Consolidating card-based applications and processing centers is a natural evolution to a transformational architecture:  the payment services hub.  Gartner has written much on the payment services hub (PSH) – what it is and why it is important (see “What’s in a Payment Services Hub: Building the Next Generation of Banks’ Payment Architecture” and others).  The value of the PSH will be its ability to act as a centralized, rule-based engine for all payments (including card-initiated transactions).  Selected card processes and services will become part of the PSH as payment-specific services (for example, regulatory compliance check, check account funding), some will be common enterprise services (for example, authentication, authorization, origination) and others will be card-specific services (for example, plastic management).

In short, the PSH eliminates the need for many of the functions of card management software.  The future of card management systems (particularly closed, end-to-end solutions that support large chunks of functionality like the “front-end,” “back-end”) therefore becomes dim.