Journal Detail

Journal 12 – Payments

December 2004

This issue highlights the fact that it takes more than smart technologies and goodwill from financial institutions to make a new payment mechanism work. Why, despite the fact that payments are of tremendous importance to financial institutions, do they remain so far below the radar of top management and strategists?

It is quite remarkable how payments, be they instruments or mechanisms, are generally viewed, even by financial institutions, as nothing more than a means to an end. A service that needs to exist in order to make sure individuals and institutions are able to pay for the goods and services they purchase from one another. It is, if you will, the not so exciting part of the business. The bit that happens when all the other exciting events have taken place. Consequently, payments service providers, be they banks or other third-party institutions, have all to lose and not much to gain. If the transactions are settled smoothly then the mechanisms have done their job, but if there is any delay or problems, they have failed in this simple task. But, how simple is this task?

Based on the articles in this issue, it is no mean task to make sure individuals and organizations who know little about each other can make payments to one another. The articles in this issue also highlight the fact that it takes more than smart technologies and goodwill from financial institutions to make a new payment mechanism work. We will find out why individual and institutional behaviors can make or break new payments instruments or mechanisms. And, more interestingly, why despite the fact that payments are of tremendous importance to financial institutions, in terms of costs and revenues, they remain so far below the radar of top management and strategists.

In section one, we focus on the topic of emerging payments models. Here we look at the new payment instruments and mechanisms that have been introduced and discuss why some have been more successful than others. The authors describe how new payment methods, such as debit, credit and, smart cards, are aiming to help individuals improve the way they manage their finances and make the whole process of payments more efficient. They also explain how card payments technologies are not only providing us with guidance on how to make our current payment methods more efficient, but how they can be essential when creating a whole new banking system for a war-torn country, such as Iraq.

Section two discusses how payment systems have evolved in recent years. The authors look at the challenges faced by the banking sector in improving the efficiency of payments processes and explain how they were able to overcome them. This section also covers how simulation tools can help test new payment mechanisms without bringing the whole payments system under the risk of failure. Section three looks at the future of payments, including new payments tools and methodologies. The articles examine the potential benefits of focusing on those areas in which banks have specific core competencies and how outsourcing to other banks or third-party providers can help in that effort. The long list of new regulations introduced has dramatically increased the cost of being in this space, and the papers in this section look at what options are open to banks facing them.

Comments

Ya, it's about perception.
Regards
Rahul Gandhi
http://pressbrief.blog.co.uk/