Comments on: Card Management Software is on a Path to Extinction http://blogs.gartner.com/kristin_moyer/2009/06/22/card-management-software-is-on-a-path-to-extinction/ A member of the Gartner Blog Network Sat, 21 Jan 2012 07:44:58 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: Wynand http://blogs.gartner.com/kristin_moyer/2009/06/22/card-management-software-is-on-a-path-to-extinction/comment-page-1/#comment-9534 Wynand Wed, 24 Feb 2010 15:37:51 +0000 http://blogs.gartner.com/kristin_moyer/?p=790#comment-9534 I agree that more and more banks are outsourcing their card processing, and in many cases we see lost opportunity due to this trend, however I would not go so far to say Card Management Software is on the road to extinction. Even though card business is being outsourced, doesn't mean that cards stop being managed. In the long term this trend may simply lead to a shift in customer demographics for Card Management Systems, thus possibly less banks, and more PSH service providers... That being said, innovative and leading banks may not easily move away from their own processing services, as cost reduction is not the only dimension to success in the card business. Strategy, time to market and differentiation must not be under estimated. While PSH certainly have their place and do provide good value, you get what you pay for, the lowest common denominator. The services provided by a PSH are mainstream and nearly identical for every party making use of that PSH. Thus say goodbye to strategic advantages, and brace yourself to compete only with price, branding and marketing. PHS is a good model for some segments of the markets, just as McDonalds is a good restaurant model, however in the end one McDonalds is the same as the next - having identical strengths and weaknesses, and offering the same products. Put two identical businesses offering exactly the same services next to each other, and in order to compete they will be forced to a price/marketing war (or merger/acquisition), and in the end there will only be one... The other challenge with PSH service providers is lock-in; while this may or may not be designed into the PSH business model, it is part of the nature of the business, since essentially you outsource your entire cards business operations, and your business processes will naturally align to you PSH, which may be operating completely different from the next PSH. If you ever tried switching payment processors, or tried upgrading or replacing a core banking system, consider what is involved when trying to switch between PSH service providers, it may just be easier to sell the business and start a new one. Selecting a PSH service provider is a marriage, and if you are not happy at any point down the line, it's going to cost you to get out. Wynand Vermeulen Manager Finance Solutions Bell Identification www.bellid.com PS: Bell Identification is the market leader in Smart Card Management Systems I agree that more and more banks are outsourcing their card processing, and in many cases we see lost opportunity due to this trend, however I would not go so far to say Card Management Software is on the road to extinction.

Even though card business is being outsourced, doesn’t mean that cards stop being managed. In the long term this trend may simply lead to a shift in customer demographics for Card Management Systems, thus possibly less banks, and more PSH service providers…

That being said, innovative and leading banks may not easily move away from their own processing services, as cost reduction is not the only dimension to success in the card business. Strategy, time to market and differentiation must not be under estimated.

While PSH certainly have their place and do provide good value, you get what you pay for, the lowest common denominator. The services provided by a PSH are mainstream and nearly identical for every party making use of that PSH. Thus say goodbye to strategic advantages, and brace yourself to compete only with price, branding and marketing.

PHS is a good model for some segments of the markets, just as McDonalds is a good restaurant model, however in the end one McDonalds is the same as the next – having identical strengths and weaknesses, and offering the same products.

Put two identical businesses offering exactly the same services next to each other, and in order to compete they will be forced to a price/marketing war (or merger/acquisition), and in the end there will only be one…

The other challenge with PSH service providers is lock-in; while this may or may not be designed into the PSH business model, it is part of the nature of the business, since essentially you outsource your entire cards business operations, and your business processes will naturally align to you PSH, which may be operating completely different from the next PSH.

If you ever tried switching payment processors, or tried upgrading or replacing a core banking system, consider what is involved when trying to switch between PSH service providers, it may just be easier to sell the business and start a new one. Selecting a PSH service provider is a marriage, and if you are not happy at any point down the line, it’s going to cost you to get out.

Wynand Vermeulen
Manager Finance Solutions
Bell Identification
http://www.bellid.com

PS: Bell Identification is the market leader in Smart Card Management Systems

]]> By: Rajeev http://blogs.gartner.com/kristin_moyer/2009/06/22/card-management-software-is-on-a-path-to-extinction/comment-page-1/#comment-5235 Rajeev Thu, 13 Aug 2009 06:24:36 +0000 http://blogs.gartner.com/kristin_moyer/?p=790#comment-5235 Well said article. I also believe that there are quite regional matters to address which may impact the overall card infrastrucutre and processing decisions. Add to it, the convergence in the finance/telco/transport is altogether another dimension that will make this space interesting. So, blessed are we living in the interesting times! Rajeev Well said article. I also believe that there are quite regional matters to address which may impact the overall card infrastrucutre and processing decisions. Add to it, the convergence in the finance/telco/transport is altogether another dimension that will make this space interesting. So, blessed are we living in the interesting times!

Rajeev

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