Banks Need 'Payments Czars' To Centralize Units
US banks will lose ôUSD 900 million in revenues as a result of electronic payments and check conversionö in the next five years, according to Celent, and should appoint a ôpayments czarö to take remedial action. Banks ôderive USD 4.2 billion in annual fees from consumer checksö, according to the report, ôBanksÆ Payments-Driven Revenues: Why Banks Need Payments Czarsö, but this will drop as checks are digitized at the lockbox, and non-sufficient funds fees are eliminated. ôThe lack of integration across payment units [also] makes it very difficult for banks to à preserve and enhance payments revenuesö, the report states.ôAs consumers choose e-payments over checks, banks are missing out on revenuesö, comments Celent analyst, Gwenn Bezard. ôThis trend will persist over the next few years as the check goes away, because US banks [make significant money] from non-sufficient funds fees à and some e-payment alternatives, such as PIN-debit and bank-supplied online bill payment, are NSF foesö. Celent accordingly ôurges banks to appoint a payment czar with profit & loss responsibility for all payments services now scattered across various business unitsö, as Wachiova recently did when undertaking to centralize its payments business.
Celent also expects core systems replacement to be a major focus for IT spending through 2005, with 10 to 20 of the top 100 global financial institutions likely to replace their core systems each year for the next three years. ôBanks have been slow to undertake these projects, as they continue to be haunted by past failures, fears of complexity, and the prospect of alienating customers", Celent asserts. However, ôlegacy systems [are] no longer flexible enough to handle [the] new applications necessary to meet the growing requirements of the marketplaceö, such as optimization for e-payments, says analyst, Christine Barry. Related Links:
Wachiova Now Centralizing Its Payment Business
BCG: 'Banks Must Reform, Or Lose Revenues'
Banks 'Need To Profit From Back-End Systems'
