Randle sees a broad and bold future for financial services firms, once they make IT a competitive advantage rather than merely a commodity. He said banks have a motivation to consolidate globally now, with risk as a driver to enterprise systems. The first thing banks need to do is change from a silo-based system to improve security and to streamline processes. "Banks are notorious for cannibalizing their own payment processes," Randle said. "They must understand total costs and revenues rather than treating each payment type separately." Gary Cawthorne, vice president and managing partner for Unisys Corp., said banking IT is currently organized into silos around the various payment systems they support. A bank might support wire transfers, remittance and lock boxes, credit cards, ACH, and the traditional paper checks. These information silos create redundancies in supporting applications, modes of reconciliation, customer service, sales channels, management, and technology and integration. Cawthorne cited the example of a UK-based bank that he saw had 403 different payment systemsand a lot of costly redundancy. These redundancies provide little value to customers and generate no revenue.Cawthorne estimated that payments provide banks with 35 percent of their revenues, so its important to understand the profitability of the various payment types. "How can a bank get a grip on profitability if the payments are buried within functional silos?" he asked. "Were moving to an age where its all about the information, not just the payment." Cawthorne believes that image quality and usability should be high on a banks priority list. Peter Winner, Oracles director of financial services, said payments are no longer about moving money, but about the information associated with the payment. "The industry must capture this information and move it across the enterprise," Winner said. The more a financial institution knows about a particular transaction, the more it can predict that clients behavior. "Technology improvements can make end-to-end integration possible," Winner asserted. Winner recommended that banks consolidate on a customer hub approach to take a leadership position in financial services. He envisions grid software that balances servers, which are built on open systems. A data hub can create standard business definitions, and with a shift of the business focus to customers and their behaviors, banks can analyze buying habits and anticipate customer needs. For example, a customer who is seen making expenditures on auto repair can be presented with the possibility of an auto loanto replace the junker that is costing so much money on repairs. "Check 21 will have a profound effect on how we look at data," Winner said. "Banks risk losing control of their payments business without making changes in their IT infrastructure." Check out eWEEK.coms for the latest news, views and analysis on financial applications and services for the enterprise and small businesses.
"We believe image transfer is a catalyst to begin implementing a payments architecture," Cawthorne said. Through this architecture, a bank can consolidate metrics from payments into a data mart, complete with business analytics, he said. Consolidation of payment types can provide improved research, fraud detection and regulatory reporting. It can also allow a bank to handle domestic and international account transfers, which is becoming an issue in Europe with cross-border payments.