Although it’s become a familiar term, the marketplace remains confused about precisely what a payments services hub is. Analysts like Zilvinas Bareisis at Celent are trying to shed some light on definitions and types of offerings in the market. But there still seems to be scope for interpretation and lots of latitude.

As I see it, a payment services hub is the centralisation of payments services within a bank to support processing all types of payments through all payment mechanisms globally. Nothing more, nothing less.

What does a payments services hub offer a bank?

First of all, it allows a bank to consolidate disparate payments processes into a single standardised and coordinated operation. This lowers the cost of ownership and reduces maintenance costs and risk.

A payments services hub also enables supervision and control of liquidity, allowing for better cash management, which is a primary objective for both the bank and the bank’s customers.

Most importantly, a well designed, multi-entity payments services hub is the most effective way the bank can support insourcing of white label business and offer personalised services to its customers – both retail and corporate – across the globe.

Never ageing technology

Another important characteristic of a well designed payment services hub is an open architecture, which is easy to update. Transaction processing logic and rules are maintained as meta-data. This means that the system never becomes legacy because it allows the bank to replace parts as they retire, and to upgrade the supporting technology as necessary. A payment services hub should offer a high degree of flexibility and agility, so it can serve the business users and easily adapt and change according to the bank’s strategic objectives.

Looking ahead

I emphasise that a payments services hub is more than just a framework and it should not be a purely technology-driven decision. Banks should be clear on their strategic intent before they modernize their payments systems and business processes. However, payments service hubs provide a way for banks to cost effectively support customised services and thereby stay competitive in the market.