Nomenclature: Why a Payments Hub Isn’t Necessarily Payments Management

Byline: Maggie Scarborough, Managing Director
(c) 2010  FinServ Strategies. All rights reserved.

It’s a pet peeve I share with several people I know, the idea that a Payments Hub can truly effect business process change within an organization.  I believe you need something bigger, Payments Management.  So, I am going to split hairs –  there is a big difference.

A Payments Hub is Tactical, A Payments Management System is Strategic
There are a number of Payments Hub solutions out there that have a simple set of processes that allow some centralized control of amalgamated payments processing. It is operationally focused, system process-centric – more tactical in nature:

The Hub
Any payment or format in, any payment or format out (e.g, to the client)
Transformation and normalization on data and messaging layers
Logical routing; business logic for dynamic routing
Interfaces for distribution
The Database
A basic data model and management reporting
Administration and Permissions
Shared Services
Anti-Money Laundering, Terror and Fraud
Currency conversion

A Hub – Not bad, eh? But Payments Management is Strategic.  If you can perform this type of centralized processing, you will further reduce costs, but only to a point. The next step is strategic –  to execute better in the market from Risk, Liquidity/Credit, Business, and Market perspectives.  So what do you have to add?

Risk Analytics
Understanding attack vectors and solutions
Learning transaction patterns indicative of fraud

Liquidity  Analytics
Understanding  liquidity flows and solutions and settlement patterns
Knowing when and how your partners and customers are using liquidity

Business Process – Work Flow Centric, Not Simply System Process-Centric
Use f Analytics and work flow to detect payment issues in flight and cure them before they leave
Cure or resolve exceptions between all of the parties in process
Allow customer self service and reconciliation management

Business of Payments
Understanding processing concentrations and flows and normalizing customers and use
Learning where you make money or leak it.
Discovering intersections of customers and counterparties and leverage the relationships for services that are not only end-to-end for the initiator, but also across her business and partners

Management Console
Enables roles-based reporting and modeling, including process modeling

Stay tuned for more. Is this a realistic vision? We’d love to hear what you think?

–end, please comment

Maggie Scarborough, Managing Director, +1 410.685.2324


One response to “Nomenclature: Why a Payments Hub Isn’t Necessarily Payments Management

  1. Hi Maggie

    In many ways I agree with you. The strategy should be to make managing payments easier and cheaper, but I don’t agree that a payment hub is tactical. If you did not have the hub with these centralised processes and database that you so eloquently describe, you cannot, in any efficient cross-enterprise manner, add risk management, analytics, liquidity management and the other required processes to fully realise the potential of real payment management. So maybe we are splitting hairs, but a hub is certainly not tactical, it’s the first crucial phase – the building block – of strategic payment management.

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