Keeping Payments Relevant

In his 23 years at Pittsburgh-based PNC Financial Services Group ($93 billion in assets), SVP Thomas Kunz relates, the pace of change has never been as rapid as it is today -- not even when he was in charge of the bank's e-business initiatives during the Internet boom. As SVP and director of payments strategies, Kunz says it is his responsibility to deliver relevant technology solutions to customers in that rapidly changing environment.

BS&T: What is your role at PNC Financial Services? What is the reporting structure?

Kunz: We call it director of payments strategies. The other top 20 banks have created similar positions. But we're all wrestling with how to be effective in these roles and make a difference for our institutions. I report to our CIO, Timothy Shack, and I also have dotted-line responsibility to PNC's president, Joseph Guyaux. I have a small centralized staff that reports to me. In my e-business role, the online channel reports through me.

BS&T: What are the key payments challenges facing PNC?

Kunz: We're all challenged to stay relevant for our customers in a rapidly evolving technology environment. We're also seeing increased competition from new entrants using innovation to find a way into the payments business or into the banking space through payments. Understanding the pace of change and investing in the right technologies and delivering those to the customer are challenges.

BS&T: Do these new entrants present a real threat?

Kunz: We're well positioned in our role as trusted provider, and if we continue to stay relevant for our customers, we'll be fine. I can go industry by industry and name the top players encroaching on a piece of the payments business. Some of these players are encroaching deliberately, and sometimes they are just supporting their core businesses, such as Wal-Mart [Bentonville, Ark.] and PayPal [San Jose, Calif.]. But also having an impact is the convergence of healthcare and financial services, and the convergence of mobile telecom capabilities and financial services.

While there is no one entity that keeps us awake at night, it's the collective impact of all these players that will make a difference. As the incumbent, we have to both protect and grow our franchise, and that can mean making changes in how we do business.

BS&T: What impact will the healthcare convergence have on payments?

Kunz: As consumer-directed healthcare continues to evolve in the U.S., we've got to make the payments piece more real time and enable customers to save for their healthcare. Roughly 15 percent of healthcare costs are in administration, claims and payments processes. Consumer-directed healthcare means deposits will be up for grabs as consumers take deposits out of their retail accounts or employee-funded plans. We're a large enabler of that change among health insurance providers and large hospitals and healthcare providers.

BS&T: What are some of the key technology initiatives at PNC that will keep the institution relevant for its customers?

Kunz: PNC recently reentered the credit card business, and we view that as a vital component of our customers' payments relationship. To support our business customers that need to accept plastic, we've restructured our merchant services business with First Data Corp. [Denver].

The bridge between paper and electronic in the check world is image. We've been investing in imaging, including image exchange, online statements and remote deposit capture (RDC) for our business customers. We view RDC as a disruptive technology in the small-business market.

Customers moving from paper to electronic often are increasingly willing to do more and more online, so we have very large initiatives around authentication and increasing self-service capabilities in the online space.

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