Debate Down Under

In the world of payments, it's the proverbial best and worst (or, at least, most challenging) of times.

In the world of payments, it's the proverbial best and worst (or, at least, most challenging) of times. That's the impression I brought back from SWIFT's Sibos event in Sydney, Australia, which I attended earlier this month. Although it seemed at times that there was more talk of travel schedules and personal sleep patterns than of banking matters, there also was discussion about transformation of the banking industry. Depending on who was speaking (banker, vendor, regulator, SWIFT, etc.), this transformation is good, unwanted, unavoidable, costly, arbitrary or all of the above.

As Microsoft's Sheida Hadji-Ashrafi, industry manager, payments, financial services group, summed it up, among the most-significant challenges (or opportunities) facing the industry are the following: "Consolidation of payments infrastructures; how banks [can] create new payments products; margin compression; and the threat of new entrants, which is driving innovation."

Is that all? Clearly, there will be winners and losers in the new, less-bordered, and more regulated and integrated payments world. It's a question of who or what (big banks? niche players? nonbank competitors?) will come out on top, and which capabilities and resources will give the winners the competitive advantage.

Amid the talk of change and challenge, some big themes emerged:

The financial supply chain is getting a lot of attention -- it's "where the money is," said June Felix, general manager, global banking solutions, financial services sector, IBM. However, as Citigroup's Francesco Vanni d'Archirafi, CEO, global transaction services, EMEA, noted in a panel discussion on payments transformation, today's customers expect "convenience, mobility, control, straight-through processing [and] paperless workflows. This is putting enormous pressure on us to standardize and integrate. But customers can move goods more quickly than we can move payments."

Profitability is a big concern. As payments have become more commoditized -- and more efficient -- they also have become, if not a loss leader, certainly not a money maker for many banks. "Banks are not making money in payments, but they have to invest in it," according to Simon Bailey, director, payments, global financial services, LogicaCMG. That's the question: How do banks reap returns on those investments? Stay tuned.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio