Tag Archives: FinServ Strategies. NACHA

New Date – NACHA Webinar on Cloud and Payments Aug 9 at 1:30

Join Maggie Scarborough, FinServ Strategies; Julie Elberfeld, Capital One; and Mary Ann Francis, WIPRO Banking & Financial Services; Vinay Prabhakar,
Bottomline Technologies

Register Now

As mobile burns a billion dollar trail through the technology sector riding on cloud computing, many financial institutions are unprepared for customers  in the CLOUD transacting business.  FI’s must keep customer information private and safe. For this reason, every institution should have a CLOUD strategy regardless of the level of direct involvement.
Join us for this exciting NACHA Webinar. Click here:

SPEAKERS:
Mary Ann Francis, Senior Consultant – Payments, WIPRO Banking & Financial Services
Julie Elberfeld, Senior Vice President, Commercial IT, Capital One Bank
Vinay Prabhakar, Director Global Solutions Consulting, Bottomline Technologies
MODERATOR & SPEAKER:
Maggie Scarborough,
Managing Director, FinServ Strategies

 Register Now

Clear the Fog About CLOUD and Payments, NACHA Payments 2011, Session 204PB, Tuesday April 5, 8:00-9:15 am

See 3 Experts  Face-Off about Cloud Computing and Payments at NACHA Payments 2011, Austin, Texas
CLOUD & Payments: Let’s Talk Business
Tuesday, April 5, 2011
8:00 a.m. – 9:15 a.m.; Room 17A
Maggie Scarborough,
Managing Director, FinServ StrategiesJulie Elberfeld, SVP, Commercial IT, Capital One Bank
Mary Ann Francis, Sr Consultant, Payments, WIPRO Banking & Fin’l Svcs
Vinay Prabhakar, Director, Global Solutions Consulting, Bottomline Technologies, Inc.
Why does cloud computing remain a mystery? It uses technology to create a business advantage. Cloud computing technologies not only enable efficiency but allow for the extension of services outside the institution’s firewalls and across nontraditional service boundaries and providers. Attendees gain an understanding of the cloud concept and learn about its players, deployment in payments and cash management, risks, audit/regulatory concerns, and business line, as well as customer issues and benefits. Attendees learn potential business benefits, competitive risks, and face-off with a banking strategy consultant, payments expert, vendor, and bank in this exciting presentation-panel combo.


The $64 Thousand Interface

Justifying Payments Management Investment:
The $64 Thousand Interface
– Maggie Scarborough

In banking, significant investment in new centralized payments capability known as hubs or payments management has begun at the largest financial institutions. These new centralized payments systems can provide better competitive execution as well as cost reduction through the elimination of many redundant systems and processes across the siloed payments infrastructure.  The common wisdom is that only the big financial institutions have the scale to invest in sophisticated payments hub and management systems. This isn’t a true assumption. Consider the invisible costs of an existing custom application program interface, $64 thousand a year.

You have to see it to save it. To make the business case for investment, most bankers want to use a direct cost elimination model – it’s easier to sell to senior management than a “squishy” new product sales model. That’s why scale is important. But even mid-tier banks have more scale than they realize, especially in the custom interface department. The reason the business line doesn’t see or understand integration costs and maintenance? – IT maintains custom APIs and doesn’t usually bill the business unit except during the implementation of a new system, where it is expensed as implementation costs.  Poof! Costs gone? Not really, the costs continue as the custom API must be maintained and changed as the IT infrastructure changes. There are also continued (“squishy”) opportunity costs as it becomes too expensive and time consuming to change the interface in order to advance product and services capability to keep and attract customers.

The $64 thousand interface. For illustration purposes (not that you would really do this), if you amortized the costs of a custom API over 3 years, just like a software license fee, and spread upfront outlays and ongoing maintenance fees, IT development costs, vendor charges, and change control and testing costs, the cost of a simple wire interface would be $107 thousand/year over 3 years or $64 thousand/year over 5 years.  Therefore, reducing costs by eliminating the $64 thousand interface can be significant, especially for payments where there are anywhere from 40-100 custom interfaces to/from wire transfer, ACH, check processing, card.  To be conservative – let’s say we only eliminate half of the 40 interfaces $64 thousand X 20 = $1.28 million in savings for a mid-tier regional bank. That amount would make a significant contribution to investment in centralized payments capability.

How do you know which way you’re going, if you don’t know which way you’re facing? The opportunity to reduce cost and gain better market execution requires “visibility” of IT costs combined with business line costs and a team approach that includes the business line, IT, finance, and procurement and vendor partners, so that the right cost benefit picture can be derived. There are banks doing this, now. Encouraging cost visibility and allocation can be a scary situation, I know, I experienced it while working for an institution with a fully loaded cost accounting model. It worked because of leadership that encouraged collaboration. But if you can’t see your cost and revenue structure, it’s difficult to know which way you are going, or even if you have had any success.  It might be worthwhile to ask some questions. How are your IT costs allocated to your business line? E-mail Maggie@FinservStrategies.com

IBM to Buy Sterling Commerce: Good News – Good News

IBM Plans to Acquire Sterling Commerce for $1.4 Bn: Good News – Good News

Byline: Maggie Scarborough, FinServ Strategies
May 25, 2010

In a good news-good news announcement on May 24, IBM announced its plans to acquire Sterling Commerce from AT&T in a deal valued at $1.4 billion. Former and new parents will remain friends. Sterling Commerce will benefit from new parent, IBM, keenly focused on B2B and banking spaces and in need of applications. IBM, with a ready cloud computing model, gets much needed business applications from Sterling Commerce that extend  across all major industry verticals including financial services.

Big deals don’t always have a big impact in financial services, but in this case the potential is large. The proposed IBM acquisition of Sterling Commerce from AT&T has a lot of good news in it for IBM, Sterling Commerce, and financial services.  Instead of a prior mis-aligned and fruitless partnership deal with ACI to get into the payments business, this time, IBM is betting on cloud computing, business process management, and applications to put smack dab in the middle of B2B commerce, including banks, which are in the middle of the business relationships – the virtuous 4-corner model, with IBM in the cloudlike middle enabling all. Sterling Commerce has a combination of tools including a budding bank payments hub system and well established B2B commerce transactions software and services that will allow them to extend services further into the business processes of the customers, partners, and institutions.

In the bigger competition between IBM, Oracle, and HP, this acquisition gives IBM an advantage over Oracle, which has been spinning in the core market of financial services, and gives the company added application power when competing with (or facilitating) with newly extended services of companies like SAP, which recently announced its $5.8 bn acquisition of Sybase, which hinged on mobile applications.

Why buying Sterling is a good deal for IBM:

1)     Gets IBM lift across all industry segments, not just banking. Sterling’s foundational supply chain and B2B commerce business reaches 18,000 customers across the globe in financial services, retail, manufacturing, communications, and distribution.

2)     IBM also gets a direct connection into global payments through Sterling Commerce’ SWIFT solutions and MEFG.

3)     IBM has a cloud foundation ready to go and recently tested with SAP.

4)     IBM’s Global Services needs both cloud and integrated business applications to better sustain growth.  In the age of an “app for that,” IBM needs applications for its cloud and Sterling has plenty of core B2B applications that need a cloud facelift – something IBM can do and better do if it’s their own assets they can control.

5)     IBM can leverage Websphere’s business process management and middleware assets including orchestration, and analytics capability with Sterling Commerce’ trading partner network and B2B supply chain capabilities to build collaborative cross channel applications.

Why this deal is good for Sterling Commerce:

1)     Although AT&T has been a good parent for Sterling Commerce, its new parent better understands and is closer to the business process management and collaboration needs of the Sterling customer base.

2)     IBM will provide sustained investment in Sterling’s product and network portfolio needed to complete its modernization of B2B commerce applications and network products.

3)     Sterling Commerce’ B2B network will ultimately have a home in the cloud, which should enable the firm to more quickly execute in the marketplace and extend applications into the mobile cloud. IBM has a cloud foundation ready to go and recently tested with SAP.

This deal between IBM and Sterling in Commerce makes sense. IBM will help bring Sterling Commerce into the bank at the highest strategic levels and Sterling will help bring IBM into the applications market in a cloud market where there is an “app for that”. At the deals center, though, is the idea of cross collaboration (B2B), bank to B, B to bank) is a critical need for institutions wishing to keep their largest corporate customers happy and the mid-market stickier, and the small business market more engaged and a source of new revenues. We have been talking about the integrated financial supply chain for years, this combo may work.  But like everything, the devil is in the execution.

—end of document

Please comment

Maggie Scarborough, Managing Director
Maggie@FinServStrategies.com, +1 410.685.2324

www.FinServStrategies.com
Read  the blog at   http://FinServStrategies.wordpress.com
www.Twitter.com/Finserv

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.

–end, please comment

Maggie Scarborough, Managing Director
Maggie@FinServStrategies.com, +1 410.685.2324

www.FinServStrategies.com

http://FinServStrategies.wordpress.com

http://www.Twitter.com/Finserv

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.

— end, please comment

Maggie Scarborough, Managing Director
Maggie@FinServStrategies.com, +1 410.685.2324

www.FinServStrategies.com

http://FinServStrategies.wordpress.com

http://www.Twitter.com/Finserv



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

–end, please comment
http://www.FinServStrategies.com
Maggie Scarborough, Managing Director
Maggie@FinServStrategies.com, +1 410.685.2324