Kristin Moyer » payments

PayPal as a Friend Rather than a Foe (Good Idea)

Kristin Moyer — Fri, 06 Nov 2009 17:07:20 +0000

Some IT vendors and banks are starting to think of PayPal and other non-bank providers as a friend rather than a foe. This is a good idea, and one which we have proposed 2 years now in our research (Gartner client access only):

• PayPal and Google Checkout Show the Way for Banks’ Payment Operations

• Nonbank Payment Institutions: A Threat and an Opportunity for Banks

• Banks’ Retail Payment Operations at a Tipping Point

Banks need to stop looking at non-bank payment providers as foes. When consumers work with PayPal outside of a banking relationship, the bank completely looses visibility of the customer relationship – and the customer isn’t thinking of the bank either. True, PayPal and others have hijacked Internet payments revenue away from banks. But the real danger for banks is that they loose relevance in the customer relationship and the financial supply chain.

The industry would do well to partner with PayPal and other non-bank payment providers, both to meet the needs of their customers (who want to work with PayPal, too) and to maintain the relationship with their customers (rather than losing site of what happens with payments outside their walls).

From Orlando to Cannes: Banking in Video and Audio

Kristin Moyer — Mon, 26 Oct 2009 12:10:04 +0000

From Peter Redshaw. I’m just back from the hugely successful Gartner Symposium in Orlando, USA, so now I have only the one week to help make final preparations for its sister event in Cannes, France! Orlando provided lots of evidence that confidence in the IT industry is starting to grow again and the banking and investment services team there was delighted that we got such a fantastic turnout for the banking workshops at the industries’ “Super Sunday” event.

If you are already booked for Cannes, then I wish you safe travels and look forward to seeing you there — if not, it’s an open event and not invitation only – see here to book your place. In the meantime, why not have a quick look at the very concise podcast and videocast we have prepared for Financial Services.

The podcast looks at the wider FS agenda for the week at Cannes while the videocast focuses on the “Six Killers” presentation that will kick off the FS sessions on Monday morning. You can find them here:

Podcast

Videocast

There are presentations, forums, workshops, analyst-user roundtables and networking events throughout the week. Some of these are “by registration only” sessions, so it is worth having a look at the event website and using the Agenda Builder to add these sessions to your calendar, and where necessary register your attendance. A quick summary is:

1. Six Things That Could Kill Your Financial Services Firm in 24 Months

09:30-10:30, Monday, 02 November 2009 (Location: Palais des Festivals – Ambassadeurs 2)

2. Financial Services Workshop: ‘Cost Optimization Best Practices’ and ‘Banking on Recovery’

11:00-13:30, Monday, 02 November 2009 (Location: Palais des Festivals – Ambassadeurs 1)

3. Gartner Analyst/User Roundtable: BPO for Banking/Investment Services

15:45-16:45, Monday, 02 November 2009 Speaker: Peter Redshaw

4. Gartner Analyst/User Roundtable: Collaborating With Regulators in the ‘New’ Financial Services Industry

17:00-18:00, Monday, 02 November 2009 Speaker: Alistair Newton

5. Workshop: How Will You Survive the Six Killers of the Retail Banking Sector?

08:00-09:30, Tuesday, 03 November 2009 Speakers: Alistair Newton and Peter Redshaw

6. Gartner Analyst/User Roundtable: Offshoring for Banking/Investment Services

15:45-16:45, Tuesday, 03 November 2009 Speaker: Peter Redshaw

7. Gartner Analyst/User Roundtable: Development of End-Customer-Oriented IT in Financial Services

14:30-15:30, Tuesday, 03 November 2009 Speaker: Alistair Newton

8. Executive Roundtable: The Future of European Insurance

14:30-15:30, Wednesday, 04 November 2009 Speaker: Juergen Weiss

9. Gartner Analyst/User Roundtable: To Cloud or Not to Cloud — How Applicable is Cloud Computing and SaaS for the Insurance Industry?

16:00-17:00, Wednesday, 04 November 2009 Speaker: Juergen Weiss

10. Gartner Analyst/User Roundtable: Pan-European Insurance Platforms – Dream or Reality?

09:45-10:45, Thursday, 05 November 2009 Speaker: Juergen Weiss

11. Insurance Networking Lunch (please note that this lunch requires pre-registration and is limited to 80 attendees)

13:15-14:30, Tuesday, 03 November 2009 Speaker: Juergen Weiss

OFFICIAL projections on H1N1 for the US

Kristin Moyer — Thu, 27 Aug 2009 12:16:31 +0000

Rick DeLotto here… I was surprised this morning to find how few knew about the August 7, 2009, “REPORT TO THE PRESIDENT ON U.S. PREPARATIONS FOR 2009-H1N1 INFLUENZA” by the President’s Council of Advisors on Science and Technology. EVERYONE with responsilbity for business continuity should download and take a look at it.

http://www.whitehouse.gov/assets/documents/PCAST_H1N1_Report.pdf

Let me quote an important part:

“While the precise impact of the fall resurgence of 2009-H1N1 influenza is impossible to predict, a plausible scenario is that the epidemic could:

produce infection of 30–50% of the U.S. population this fall and winter, with symptoms in approximately 20–40% of the population (60–120 million people), more than half of whom would seek medical attention.
lead to as many as 1.8 million U.S. hospital admissions during the epidemic, with up to 300,000 patients requiring care in intensive care units (ICUs). Importantly, these very ill patients could occupy 50–100 percent of all ICU beds in affected regions of the country at the peak of the epidemic and could place enormous stress on ICU units, which normally operate close to capacity.
cause between 30,000 and 90,000 deaths in the United States, concentrated among children and young adults. In contrast, the 30,000–40,000 annual deaths typically associated with seasonal flu in the United States occur mainly among people over 65. As a result, 2009-H1N1 would lead to many more years of life lost.
pose especially high risks for individuals with certain pre-existing conditions, including pregnant women and patients with neurological disorders or respiratory impairment, diabetes, or severe obesity and possibly for certain populations, such as Native Americans.

There is an important issue with respect to timing:

The fall resurgence may well occur as early as September, with the beginning of the school term, and the peak infection may occur in mid-October.
But significant availability of the 2009-H1N1 vaccine is currently projected to begin only in mid-October, with several additional weeks required until vaccinated individuals develop protective immunity.”

Pandemic planning is not a “print, distribute and forget” event– make sure your precautions are up to date, and constantly monitor your local health situation. What did you test today?

Hype Cycle for Financial Services Payment Systems, 2009

Kristin Moyer — Tue, 25 Aug 2009 17:14:13 +0000

Christophe Uzureau and Kristin Moyer here. Our “Hype Cycle for Financial Services Payment Systems, 2009” is now published (and available to Gartner clients).

Due to the current economic environment, there’s no shortage of pessimism, and it’s mostly for the right reasons. However, this doesn’t mean that banks should stop innovating and bringing new payment instruments and services to market. Quite the opposite. The tough economic situation has put banks’ payment systems in the spotlight.

Transaction banking is back in fashion. Payment operations and related services (such as cash management and trade finance), which weren’t very attractive during the age of investment banking, are part of the “back to basics” strategy of many financial services institutions. Emerging technologies have a key role to play in this area.

Regarding retail payments, to respond to the current economic situation, consumers want to gain more control over their spending activities. As a result, product development is crucial for banks. Successful banks will be able to introduce innovations to build a strong portfolio of payment instruments and services. However, similar to corporate payments, emerging technologies are critical to helping banks achieve this.

This Hype Cycle will assist banks in navigating the hype surrounding the payment industry, and ensuring that their payment systems support the immediate and long-term requirements of their clients.

Three Things to Evaluate at the Process Level When Making Card Processing Sourcing Decisions

Kristin Moyer — Tue, 11 Aug 2009 13:34:17 +0000

Yesterday I wrote that many of our clients are making substantial changes to their payment operations, and as part of this are re-evaluating their card processing sourcing strategy as well. To determine which processes to outsource, banks should evaluate each payment process against three criteria:

Differentiation: To what extent does your bank differentiate with each process?
Customization: How differently does your bank execute this process from other banking organizations? Can a processor support this from a customization standpoint? If so, at what cost? Can our in-house software support this? If so, at what cost?
Total cost of ownership (TCO): What is your bank’s TCO for a given process or set of processes relative to industry peers?

This has strong implications for banks’ payment processors and how banks will work with them (see Banks Must Invest in Payment Systems to Win Back Customer Trust for more details). Banks will increasingly ask their processors how their processing platform supports architecture modernization while supporting differentiation, customization and lower TCO.

Seven Things to Consider When Making Card Processing Sourcing Decisions

Kristin Moyer — Mon, 10 Aug 2009 22:39:16 +0000

Our banking clients around the world are in the process of making substantial changes to their payment systems (see a few of our previous posts, such as: Use the Sunset of Base24 as an Opportunity to Innovate, Investment in Card Management Software on the Rise and At Last – Delivery Model Flexibility in Card Processing). As part of this, they are also re-evaluating their delivery models for card processing. Some banks are looking to bring portions of their card processing operations back inhouse, while others are looking to strategically outsource various aspects of their operations. We believe strategic sourcing is an important part of profitable card operations.

Here are seven things banks should consider when making sourcing decisions:

Availability of IT resources to support in-house operations
Desire to control IT vs. focus on core competencies
Geographic expansion plans (and ability of in-house software or third party to support)
Degree to which agility is important (and ability of in-house software or third party to support)
Current and future account and transaction volume
Degree to which skills retention is important
Ability to leverage customer payment data for value added purposes (and ability of in-house software or third party to support).

Tomorrow I’ll post on three things banks should evaluate at the process level when making sourcing decisions.

Retail Payments Portfolio Management

Kristin Moyer — Mon, 27 Jul 2009 21:45:30 +0000

Our clients often ask, “What’s hot when it comes to new technology?” In lending, we’ve discussed the emergence of loan portfolio management. Retail payments portfolio management is also an emerging technology – so emerging that there are few solutions today that support it.

Retail payments portfolio management solutions are applications that provide analytics and modeling across payment types. This includes analysis at the portfolio and individual customer levels, such as:

Trend diagnostics
Dashboard across payment types
Stress testing – retention, default
Profitability
Optimization (such as price optimization and lifetime value analysis)

Retail payments portfolio management technologies enable a deeper analysis of banks’ payment solutions to identify gaps in offerings as well as opportunities to drive new revenue and customer retention. They can be licensed or leveraged as part of an outsourcing or third-party payment processing relationship.

Retail payments portfolio management is sorely lacking in many banks. The reason for low adoption is mostly due to a lack of vendor solutions. Retail payments vendors generally haven’t built out true portfolio management capabilities (as is the case with card management software solutions, for example). Portfolio management solutions that are available tend to be focused on narrow areas within payments, such as cards or card renewals. Most banks end up building custom reports with Crystal Reports software or other tools for high-level trend diagnostics. However, by themselves, reporting tools don’t adequately support portfolio management because they lack analytics, modeling, and optimization capabilities. In addition, banks (and vendors providing these solutions) must have the ability to analyze across payment instruments and non-bank payment collaborative schemes, as well as the ability to support relationship rewards while measuring their impact.

Retail payments portfolio management is a critical capability recognized by banks as they attempt to offer a more-complex portfolio of payment instruments, and use payments more strategically as a way to drive revenue and customer retention. Banks need to identify changing consumer payment habits (at the portfolio level and the individual level) as they occur to provide the right incentives and payment instruments. This could create a technical/analytical challenge (for example, the need for more-mature retail payments portfolio management solutions), but it will also accelerate banks’ demand for these solutions.

Retail payments portfolio management will enable banks to react to changes in consumer spending habits to provide the right mix of products, services, and incentives. It provides banks with the opportunity to optimize their payment portfolios and individual customer relationships to maximize customer retention, profitability, and revenue generation.

SWIFT Representation on XBRL International Board Bodes Well for Maturity

Kristin Moyer — Wed, 24 Jun 2009 21:01:19 +0000

Mary Knox here. Today Business Wire reported that Ms Jamie Shay, Head of Standards for SWIFT, is one of three new members appointed to the XBRL International Board of Directors. This follows the March 2009 announcement that Chris Church, SWIFT CEO of Americas and Global Head of Securities, joined the XBRL US board.

I think this appointment bolsters Gartner’s recent rating of XBRL’s maturity. SWIFT, an international consortium of over 8,000 financial services firms, industry utilities, and their commercial customers stretching across more than 200 countries, brings significant expertise and long-term experience in standards development, implementation and migration. They also bring their relationship with ISO and the development of ISO 20022, which seeks to bring harmonization across different standards initiatives. SWIFT’s skills complement the skills demonstrated by the XBRL organization in driving rapid standards development and adoption, and the development of unique functionality that increases the usefulness of the XBRL standard.

The close working relationship which appears to be developing between SWIFT and XBRL gives added hope that XBRL will take on the needed additional discipline around taxonomy interoperability, certifications, and tempered change. And SWIFT can learn from XBRL as well, bringing some of the dynamic XBRL approach to SWIFT MT, 15022 and 20022 standards.

Pay careful attention to the proposals, but hold on to your wallet.

Kristin Moyer — Tue, 23 Jun 2009 19:54:27 +0000

On 17 June 2009, in a report titled “A New Foundation: Rebuilding Financial Supervision and Regulation,” U.S. President Barack Obama called for “a sweeping overhaul of the financial regulatory system.” (see http://www.ustreas.gov/news/index1.html). Under the proposal, the federal government will assume a new role as a systemic risk regulator, with increased authority over a wide range of institutions. This will have a major long term impact on bank technology ,especially as an enabler of regulatory reporting and enhanced managerial control.

With a few minor exceptions, it is far too early to tell what the results of these proposals will be. This is but one of a series of sweeping reforms facing a legislature already overwhelmed by economic and political circumstances, both domestic and worldwide as well as lawmakers already engaged for a hotly-contested mid-term election cycle involving the entire House of Representatives and slightly over a third of the US Senate. Media hype will be high, but actual regulations remain in the indefinite future. It deliberately takes a long, complicated process for an idea to eventually become an actual regulation: these proposals might stall, only to reappear as Executive Orders if banks, long deemed part of the nation’s critical infrastructure, are deemed to be in peril.

Whatever the outcome, banks should expect to face increased demands from their stakeholders for better visibility and accountability. Some long-lead technology-related time items should be started now, as they will be useful even if the need for new regulations diminishes.

Evaluate technology solutions that add speed, transparency, improved analytics and reporting, and worldwide compatibility to risk management and compliance efforts, such as enterprise governance, risk and compliance (GRC) platforms, spreadsheet controls, continuous controls monitoring (CCM), incident management, and policy training and certification. Demand for this is not going to go away, as it comes in equal part from investors, partners and governments.
Lower your level of trust: review your partner ecosystem – and map the linkages and potential impacts of technological and partner failure. Explicitly risk rate each link or critical dependency, and set up a periodic framework for reassessment.
If you do not have public-policy monitoring capabilities add them now. If you do, expand them: expect other governments to come up with similar proposals requiring tracking. Volunteer your enterprise’s skilled staff as expert witnesses, media commentator and information sources. Participate fully in the commentary process.

We are tracking the technology impacts of the proposals as they develop– keep an eye on the blog for details.

Card Management Software is on a Path to Extinction

Kristin Moyer — Mon, 22 Jun 2009 20:33:15 +0000

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.