Discover A Greener Future
A Payments Perspective
Facing The Challenge
Many financial services companies are operating on technology stacks that aren’t up to the challenge of today’s market. Incredibly, some banks are operationally dependent on technology that was installed in the ’70s or ’80s. Global growth and the opening up of economies are helping the payments sector thrive again, but it’s only those with the right infrastructure in place who will be able to leverage these opportunities.
Part of the challenge surrounding legacy infrastructure is that creating and buying payment systems is a big decision – it’s the engine room of your bank’s operations. That can make it all too easy to stick your head in the sand and leave changing it as a decision for another day.
However, that only creates bigger problems down the road. Eventually, your current infrastructure will meet a challenge it can’t handle – and you’ll end up with bad headlines and an appointment with the regulator.
Financial institutions need to figure out how they can appeal to new consumer expectations and turn them into sustainable revenue streams. With more trust being placed in the internet, digital-only offerings have flourished. The secret to success is to harness the changing expectations of a new generation of end-users.
The Challenge of Change
A former colleague once posited that the organisational structure is really just a convenience construct born of the accounts department. I have come to appreciate that this insight goes far deeper than pure semantics imply. In my experience, departmental boundaries have often reached levels where synergistic dialogue is just not possible.
For example, consider this hypothetical conversation around the board table;
CMO: We need to be more competitive, we are losing customers and our revenue is shrinking almost daily!
CIO: I appreciate the tough spot that we are in, but changing our payments system is just too expensive, and too risky! Besides, everyone is extremely busy right now.
CEO: But this is urgent, how quickly can we get our payments system competitive again?
CIO: Perhaps we can start planning the change next year. If all goes well then we should have something new in production in around two years. But the real problem is
that perhaps it is our Payments Strategy that is failing and not the Payments System.
CMO: This sounds like semantics – what do you mean?
CIO: Well, do you want to do what we are doing now only faster, or do you want something different? Being more competitive, winning customers, and growing revenue is not a question of technology, it is a question of our overall payments strategy underpinned by S.M.A.R.T business requirements.
CFO: Has anyone spoken to Lusis Payments about this problem? I met a great guy Steve at the football. He told me they have used TANGO from Lusis for years. He reckons that it is brilliant! It has also cut their fraud down considerably. Why not engage them?
All: … mutter … mutter … mutter.
Admittedly this is a hypothetical illustration but I am sure that we have all heard these conversations firsthand. Probably far too often. During my 25 years in Retail Payments, I have repeatedly witnessed just what a gnarly, knot organisational silos have become.
Of course, corporations need an accurate accounting of labour costs and expenditures and departments are a convenient way to structure their financial data. However, the eroding weakness is the ‘turf war walls’ that spring directly from this edict. All too often restricted inter-departmental dialogue strangles the life out of any growth like an ever-constricting vine.
Somehow, some IT departments have crafted their own fiefdoms, whereby they exist somewhat independently of the business’ revenue needs and urgency. Regrettably, it is the nature of some organisations that the decision-making journey is akin to a fragile wheel on a very bumpy, and very twisty, road. It is a journey of perceptions and politics more than it is about the reality of need.
Using the ‘wheel metaphor’ we can usefully assign the individual spokes to each of the major stakeholders, the people with budget and decision-making power. For brevity, we shall assume that our wheel has only 5 spokes, i.e. the Corporate Board, the Chief Executive Officer (CEO), the Chief Revenue Officer (CRO), the Chief Information Officer (CIO), and the Chief Financial Officer (CFO).
In this context, the wheel’s outer rim represents the myriad of ideas, opinions, and competing goals relating to a specific investment decision. It comprises both the corporation’s staff and the ensemble of vendors, each with their respective motivations and values.
It has become routine for the world’s press to publish articles highlighting the continual closure of bank branches. Sometimes, it is high-profile systems failures that denied consumers access to their cash and payments services.
Surely for the CROs, dreaming and begging for change just won’t cut it anymore. What is needed is a complete paradigm shift.
A Common Failing
Too often, decisions about migrating off a legacy payments platform fall to the very people responsible for its maintenance. Cunningly concealed as a due diligence process, carefully compiled feature lists assume the centre stage, and the primary focus becomes doing the same things as before but with newer equipment.
- This is not Transformational Innovation, this is Upgrader Innovation. Ultimately it will eventually lead you into a very awkward cul-de-sac of diminishing returns.
Were I responsible for leading a migration decision, I would start by qualifying what we actually want to have, rather than quantifying what we currently have. To my mind, this research is best performed by a young, energetic technical expert under the direction of business stakeholders. Ideally the CRO themselves.
A fast desktop computer can run an unbelievably powerful suite of leading edge, open source software, including Ubuntu Linux, Kubernetes, MySQL, Kafka, H2O, Apache Spark, Grafana, Kibana, and Prometheus. All of this software is open source and has been crafted by some of the world’s greatest minds. Importantly, all the software is free which is a major plus for a research study of this kind.
Another step I would take is to install an evaluation copy of TANGO from Lusis Payments.
TANGO is the world’s most powerful Retail Payments software and is used by 40% of the world’s top ten banks. When combined with the aforementioned open source software you really have a research platform second to none.
My third step would be to focus on the content and interaction with the managerial dashboards. Improved operational efficiency is fundamentally dependent on timely actionable intelligence. Just as you cannot fly a modern jet plane without a sophisticated cockpit, you cannot optimally fly a company without crisp visibility and agile maintenance.
Go Cloud … but Which Cloud?
While the functional research is going on, work can also begin on the production deployment decisions. If you are looking for a “safety in numbers” approach to a Cloud Services Provider then the strong candidates are Amazon’s AWS, Google’s GCP, and Microsoft’s Azure. These are the leading cloud service providers and are used by many banks worldwide.
However, I suggest that you also take a serious look at HPE’s GreenLake for Payments. Their business proposition is a very interesting and powerful paradigm shift.
Many organisations struggle with the funding, planning, and execution of a major cloud migration. It’s hard. Significantly, Amazon, Microsoft, and Google won’t help you with the heavy lifting involved in getting a new payments platform into production. HPE will.
HPE’s GreenLake for Payments offers all the advantages of a consumption model for computing resources, just as the other cloud service providers do. However, one significant advantage of the GreenLake proposition is that the entire solution is wrapped in a Professional Services bundle that removes risks and progress obstacles. Any organisation, large or small, can take advantage of HPE’s decades of experience in deploying, and operating, the world’s most advanced enterprise solutions.
In large organisations, building consensus across multiple departments and stakeholders is always a challenging task. When the stakes involve the strategic investment into a Payments platform that must last for decades, these challenges can often be overwhelming.
However, the GreenLake for Payments migration roadmap takes care of all of this. HPE, together with its strategic partner, Lusis Payments, expertly facilitates the entire migration process. Discovery workshops are used to generate clear, 90-day action plans that deliver demonstrable results. By choosing GreenLake, organisations can focus on their core businesses while HPE deploys and operates their new Payments solution in accordance with the agreed governance and service level agreements.
Furthermore, organisations using HPE GreenLake typically only require limited resources for ongoing planning and administration. These resources work with HPE customer success managers to plan their HPE GreenLake usage and target new ways to recognise additional organizational benefits.
GreenLake At A Glance
|Why do customers benefit from a consumption model?||Why HPE GreenLake?|
2023 – The Year for Change
Retail payments are a route to profitability for banks and payments service providers. It is also a route to new customers and greater market share.
FinTechs have one main advantage in the market – flexibility. They have been able to move quickly to develop new features and roll them out before traditional banks could. However, we now see traditional banks rolling out those same features. FinTechs will lose some of their competitive advantage if they can’t maintain the same level of innovation as before while scaling up for business growth.
The challenge for traditional banks is that it’s taken them a long time to get here – they simply couldn’t respond to the challenge as soon as it happened. The traditional bank carries with it a certain amount of baggage, but most of that baggage is good baggage – its stability, security, and market knowledge.
Focusing these factors on the consumer experience will be a winning combination. This is an area where banks already excel. Data, customers, and capital to fund payments projects are already there, whereas FinTechs have to build from the ground up.
The FinTech battle is far from over – it’s barely started. Whether your strategy as a financial institution is to be proactive and beat the FinTechs at their own game, or whether you are reactive and want to move second, there’s still a lot of time left on the clock.
Continuing to depend on rigid payments infrastructure leaves banks vulnerable in the long term, and unable to react to changing market
conditions. Of course, banks could just carry on another year, and another year, and another year, or leave the migration challenge for a successor in their role. The pressures on banks to change seldom feel immediate – until there’s a crisis. And then it is often too late.
The stark reality is that legacy thinking is a far great evil than legacy technology. As Sean Connery famously quipped in the Untouchables, “Don’t bring a knife to a gunfight”. Don’t leave change so long that you regret it.