Payments and Settlements: From Common to Custom

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Payments and Settlements From Common to
Custom (Mass Customisation)
A GLOBAL LEADER IN CORRESPONDENT BANKING
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Payment and Settlement Issues

• Payment systems and settlement infrastructures
  are in a constant state of evolution
• SEPA
• Check21
• Unprecedented regulatory impact
• Payment products and settlement services are
  predominantly commoditized among few providers
• Emergence of new settlement models and new
  competitors
• Local clearing
• Debit Cards
• PayPal
• Customer driven interaction between banks and
  their clients is now critical

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Payment and Settlement IssuesThe Implications Are

• The business of making and settling payments is
  characterized by intense competition, margin
  compression and innovation
• While technology has lowered some barriers to
  entry the cost of compliance has marginalized
  second tier competitors
• Example is the decline in CHIPS members over the
  past two decades.
• To overcome the impact of commoditization
  innovation is a bank-by-bank process but
  successful capabilities are quickly copied
• New structures for settling and netting payments
  are coming on-line driving innovation and
  managing risk
• Confluence of these implications drives the need
  for Mass Customisation

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Payment and Settlement IssuesThe Product
Perspective

• Mass Customisation
• "A strategy that creates value by some form of
  company to customer interaction at the processing
  or assembly stage of the Operation to create
  customised products with production cost similar
  to those of mass-produced products". Kaplan,
  A.M., Haenlein, M.(2006)
• Driven by customers demand for Flexibility -
  Control - Transparency
• Strengthens the value proposition for a commodity
  product
• Allows for a more strategic approach to
  delivering and charging for the product
• Gives banks the ability to segment their
  customers and meet the unique needs of each
  segment
• Allows for transparency in the assessment and
  allocation of fees

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Payment and Settlement IssuesThe Product
Perspective

• The vision
• The need for mass customisation of payments
  will support evolution in the way payments are
  produced and delivered
• Customer co-design
• Banks will integrate their customers deeper in
  the payment process by providing the ability to
  actively
• Define the terms or conditions of a payment
• Modify, configure or match payments and
  settlements to the needs of the customers
  customer
• Customisation will provide a foundation for new
  differentiation strategies
• Added value could drive price flexibility
• The utility gained from flexibility and
  transparency can create premium pricing scenarios
  

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Payment and Settlement IssuesThe Product
Perspective

• The future is now examples of customer driven
  banking products
• Consumer Banking Customised credit cards allow
  for users to select various combinations of
  reward rates, reward types, interest rates and
  card fees based upon usage patterns.
• Investment Banking Investment Bankers pool loans
  to create customised portfolios to meet the
  specific cash flow, yield and volatility
  requirements of their customers.
• Corporate Banking Custom cash management
  solutions that tailor the payment, investment,
  reporting and customer service solutions to the
  unique needs of each corporate customer.
• Correspondent Banking Customised Payments
  Platform
• Intelligent payments processing that determines
  the appropriate fee and deduction matrix, routing
  and settlement based on the unique
  characteristics of each payment.

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A GLOBAL LEADER IN CORRESPONDENT BANKING