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?

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Maggie Scarborough, Managing Director, +1 410.685.2324


Mobile Payments on the Small Screen: NACHA Payments 2010 Followup

P2P transforms C2B and B2B on the Small Screen: NACHA Payments 2010 Follow Up

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

A curious thing happened at the recent NACHA’s Payments 2010 conference in Seattle – it was how quickly the person to person (P2P) payment conversation turned to mobile commerce, consumer to business (C2B) and business to business (B2B). Voila! Granted the remittance payment market is ultimately P2P, banks are becoming more comfortable with the use/risk cases and will finally move beyond A2A (account to account transfers) Mom paying Billy at State U to ecommerce, Mom paying the homeowners association and spa (you need a break), and may one day allow two Gen Y’ers to pay each other back for drinks with smart phones. If the bank doesn’t serve them, Twitter might.  The consumer is younger and more ready to pay businesses and each other from the small screen.  Slightly over 80% of the 18-29 age group use only wireless/mobile communications.  Bankers, these are your new consumer and business customers.

What will drive mobile ecommerce is the ubiquity of the small screen:  the mobile phone or device, an “app for that,” a dash of youth, some new tech-comfort, and a rising number of middle-aged people getting apps for everything. What will make mobile ecommerce work is collaboration, business intelligence, and risk management. Payments will soon be mobile on the laptops and the small screen. During the “Leap Into the Future of Transaction Banking” panel on Monday sponsored by Fundtech, Cindy Murray of Bank of America Merrill Lynch was talking about flexible, intelligent infrastructure – IMHO it’s the kernel to risk, profit and well…making transaction banking work.  Chris Ward of Capital One was driving at market aspects and focused on mobile, seriously spouting mobile statistics. Here’s why. In the US, according to Pew Research, 46% of adults own a laptop of them, 83% connect via WiFi and 28% via broadband. In addition, 55% of Americans connect to the Internet wirelessly of which surprisingly 83% have accessed the Internet via the phone.  When the iPhone first came out it took 74 days to sell 1 million, when the iPad came out, it took 28 days to sell 1 million.  Google, however, has taken a different approach and is letting anyone use its Android mobile operating system (phone operators, app developers, etc.) and is breaking through the Apple App Store stranglehold on mobile applications. This is synergy: infrastructure, end-user market, delivery, applications. Hello!

The idea that mobile ecommerce was a bigger fish than P2P was evident at Payments 2010. It began with Jan Estep, NACHA Executive Director, in a great opener about innovation, spoke of Javelin Strategy and Research’s 61% P2P growth projection. In another four sessions I attended, the discussion quickly moved from P2P to mobile commerce. The focus is on a business invoicing a consumer (or another business) and payment initiation on the spot at the point of presence even if it is your back yard. I heard the “pay the landscaper with your phone example” about five different times. User experience is a key to the vision.

Square did its pitch with Jack Dorsey, Twitter founder and CEO of Square, Inc., and Jim McKelvey, Artist (ahem… former IBMer) and Chairman and talked about invoicing and payment at the point of purchase, even a back yard,  Mobility, and user experience. Clearly Square, Inc. intends to socialize payments on the mobile laptop or tablet, mobile phone or things we haven’t yet ideated.   In another session, Fidelity National Information Services (FIS) spoke of their partnership with PayPal, which makes onboarding a merchant a breeze and can easily handle international payments. They spoke of a P2P portal into which they could drive invoices.  Aite, speaking of their small business survey results spoke about P2P and small businesses. Outside of the sessions and during briefings, it became very clear that there is a number of emerging mobile commerce solutions ranging on the bank friendly scale from threatening disintermediator to friendly partner (these don’t last long).

I’m an ex-banker yet I love PayPal because they helped my small business grow. They gave my fledgling company affordable and easy direct debit payments and merchant services, when my very large bank didn’t (despite a blue chip credit rating and considerable funds I offered to let them collar).  I like the wildcard mobile comer providers, too – that is more autonomous emerging mobile commerce solutions that let the bank benefit from the entire flow, not just a slice.  How many banks will be able to play? Or for that matter be willing to play early in the game.  The whole mobile commerce game didn’t work in 2000 because the user scale wasn’t right – a few banks got burnt. This time around, we’ll likely see bank-vendor-infrastructure partnerships until enough scale has been built for banks to take it back.  They will need help from their networks – where the ACH Network (among other) enters in. Another consideration will be the front end initiation capability so heavily relied on for the Web banking.  It will take real multichannel capability not many channeled capability to support, audit, and process this potential scale. Which all sounds swell, but we have never had this type of transaction volume before. There will be snags – it’s new ground.

P2P payments, now in the spotlight, will be quickly followed by mobile commerce. Bankers need to innovate with their networks and risk methodologies to serve all of the innovation outside of the industry and to insure that they are a part of it. Square will socialize its way into the payments business, PayPal is partnering with core banking infrastructure and other infrastructure and autonomous mobile commerce solutions are emerging. This will be interesting to watch and bigger than Web banking ever was.

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Maggie Scarborough, Managing Director, +1 410.685.2324

Payments 2010 Follow Up: Better Execution In Cash Management and Payments – Fiserv Style

Byline: Maggie Scarborough, Managing Director, April 29, 2010
(c) 2010  FinServ Strategies. All rights reserved.

Prior to the NACHA Payments 2010 Conference, I riffed on what was needed for better business execution in the industry (banks and vendors), especially on the cash management system front. A late 2009 conversation with Dan Nagy, then the very new SVP and GM at Fiserv Business Services, inspired my thinking. Among other projects, Dan is providing the leadership to pull together the various online banking solutions (BANKLINK, Premier eCorp, Voyager) into one cohesive offering  – no small task.  We had spoken about the need for reality and discipline (I say from both banks and vendors) in the execution of the cash management development plan as well as allowing the teams on both sides to experience success.  So when I spoke with Dan a couple of days ago, we talked about how they fared.

Thus far, Fiserv has executed on the migration plan to a consolidated business banking solution in a very compressed time frame.  The now cross-functional team has been executing on a plan of gap remediation among the 3 solutions, and then bringing them together with a SaaS platform build-out and a software-based solution. The team is leveraging the development strength of the Voyager platform along with its consumer and small business banking acumen, the detailed cash management capability of BANKLINK, and the durability offered from the core services processing center of the Premier eCorp team. Communicating with customers and delivering interim steps when promised along the consolidation migration have been key efforts in a relatively short time.  Fiserv indicates that customer feedback has been very positive.  Leveraging other Fiserv assets and delivering them through the new consolidate platform will provide the differentiation along with a dose of innovation. It is a plan that will continue through 2012. With the discipline of this team, I have no doubt they will succeed and with table stakes of a 1,500+ financial institution customers in this segment they need to.  Stay tuned.

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Maggie Scarborough, Managing Director, +1 410.685.2324

Payments and Cash Management: Get me one of those…From Blame Game to Better Execution

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

The NACHA Payments 2010 Conference is coming up quickly and it is time to decide where I will focus my research and advisory while attending. Improving business and technology execution is a good place.

Last year about this time, I had a conversation with a banking industry executive who said that the online cash management and payments part of the corporate banking business has poor business execution. I couldn’t agree more. In this blame game, all participants are included: the financial institution’s business side that vaguely defines feature requirements based on what they “think” customers need; the FI technology side that is not considering the business of the business, but rather the business of IT; fintech vendors that know banks poorly execute and aggregate up the costs of poor planning through unbelievably high overruns on professional services; core vendors that still believe that they can “not help” in order to maintain competitive advantage; and last but not least the new kids on the block, procurement, which often protract costly negotiations to meet their own unit’s goals rather than the business and compliance objectives of your own business unit.

What is needed are discipline and success. Fast following does not necessarily equal good execution. In the rush to follow leaders, banks often lose sight of execution quality. There are examples of deliberate and focused execution. For example, when Wells Fargo finally brought ACH origination to its Business Online Banking platform in 2006, it seemed like it took them much longer than some of their peers, many of which implemented packaged solutions. But, Wells Fargo took the time to understand customer needs, built the solution in an integrated way that allowed growth and stable support, and innovated to improve its business customers’ processes. Its Direct Pay ACH solution is integrated with Business Online platform capabilities such as alerts and service, plus it improves and simplifies ACH exception handling processes so its small business customers can more easily use it and use it more frequently. Plus the solution was and is STABLE. So, with that example in mind, here are some credos for better execution.

1) Align with the organization. Understand the reward and align business objectives with activities. By the way sell up, get buy in across the organizational silos, acculturate (big word), and report back. The organization itself may not be properly aligned to support the goals it has asked your unit to perform. Find a way to explicitly get the support (authorities, responsibilities, incentives, cross-organizational collaboration requirements).

2) Live in the moment, but know what CUSTOMERS want. Banks and financial institutions should clearly and reasonably define what they want based on knowledge of their customers’ needs and business processes. I can’t say “customer business process” enough.

3) Don’t passively rely on enterprise projects to provide the solution. Manage your own solution and migrate to the enterprise ideal over time. Enterprise projects always get pushed way out beyond the ideal delivery time and they tend to change in scope. Control your own unit’s technology including that enterprise that will supposedly get delivered in the future. Work toward the enterprise ideal, but have a plan B.

4) Partner with Fintech vendors that help you execute with customers more efficiently. Does the vendor have a platform that helps you easily develop new services to meet niche needs and market opportunities without long custom IT projects? Does it bring its own partners to you to help you expand services?

5) Does the vendor provide an efficient and sustainable platform? Stay away from vendors that are all about the enhancement queue.  Does the platform reduce reliance on expensive IT development and testing resources for frequent new releases? If the vendor does focus on queue management ask them for aging reports and understand how software can be customized without major releases or code branching.

6) Be realistic about supporting on-premise solutions. Mid size and large community banks need to be very realistic about supporting on-premise solutions. There are many hidden costs including security, as the threat environment increases in intensity and becomes even more dynamic.  Once you bring it inside, it will be years before you can outsource it.

(c) 2010 FinServ Strategies

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Maggie Scarborough, Managing Director, +1 410.685.2324

New Cloud Computing Report

New Research Report – Cloud Computing: Clearing the Air

“Cloud Computing: Clearing the Air,” Maggie Scarborough, April 2010, 11 pages, 2 figures, 3 tables

Feeling confused about cloud computing? Don’t feel alone. FinServ Strategies has a new report that provides insights and tools to clear the air. Written for product manager consumption, this in-depth report includes contributions from technologists from Intuit, Bottomline Technologies, and Online Banking Solutions, all of which use cloud computing.
Open the attached Report Abstract for more info. To purchase this report visit, register and browse the research store

or visit, email or call, http://www.,  +1410.685.2324

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Drinking the Cool-Aid: What I Like About Intuit Financial Services

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

Digital Insight changed its name to Intuit Financial Services on March 16, 2010, a sign of things to come. Intuit has an excellent chance of actually doing what we have been talking about for years in banking – delivering integrated financial services – banking integrated with business processes. Integrated financial services have eluded most financial institutions, except for highly customized services developed for the largest customers of the largest banks. But there is movement to delivering integrated financial services to small businesses. A recent example is Wells Fargo, which announced its Business Online Banking (BoB) invoicing service. What of the community banking market, however, that lacks the customer scale to invest in such services?

Intuit Financial Services intends to deliver integrated financial services to the small business market through its thousands of community bank customers, which lack the scale of “gigantor bank.”  From new and old bits, Intuit Financial Services is building its new Business Financial Solutions software as a service (SaaS) platform using new development while leveraging existing corporate banking and business banking solutions including Web and mobile channels, payments, accounting, tax, invoicing, and bill payment. Smartly, Intuit Financial Services created an upward migration path from micro-business all the way up to services suitable for sizable middle market companies.

The Business Financial Solutions platform is in version one and development will continue through 2012.  Intuit, however, has the ingredients to succeed. Visible progress in usability (the largest complaint) can be seen in a just-announced dashboard that give users one click access to major features and functions, including portlets that provide quick access to the most important activities and most common reports. It has also created familiar bill payment usability to its payments, which will help banks sell the solution and provide businesses easy use.  A plus is that the company won’t have to build everything from scratch. Intuit owns the more complex high-end cash management intellectual property, has a major concentration of business users of Quicken, QuickBooks, and Turbo Tax for Small Business and the new Tax Caster service, and the newly minted (no pun intended) Small Business FinanceWorks. The company does, however, lack its own proprietary bill payment.

Intuit’s development approach is sound. Rather than listen entirely to what banks think businesses want (no offense intended), Intuit uses the “Design for Delight” process, which  builds in real end user input to process requirements straight from the business’s offices, desks, and autos. This capture of native process is essential to success in today’s process-driven business model. Plus bank adoption barriers are low as Intuit is smart enough not to charge to existing bank customers and arm and a leg to move upward to the new platform capability.  It is an investment in the success of its 7,000 financial institution customers and leverage of 7 million business uses of its software.

It was time for the Digital Insight name to submerge. It doesn’t really reflect the depth of what Intuit Financial Services can do on its journey to integrated financial services for consumers and businesses.  Completing the Business Financial Solutions vision depends on commitment we don’t see wavering.  Intuit is a seasoned SaaS provider that is making significant investment in its infrastructure including Web services and cloud computing. The company sits at the junction of businesses, processes, and banking. A recession is the perfect moment for community institutions to compete with big banks in the small business market, but most are very inexperienced with cash management and business processes. This is why Intuit, which is experienced in directly supporting businesses, may be an excellent partner, providing they sustain their investment. Am I drinking the cool-aid, maybe, but with a healthy dose of Intuit’s business process experience as the sweetener.

(c) 2010 FinServ Strategies

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Maggie Scarborough, Managing Director, +1 410.685.2324