Payments outsourcing – pros, cons & considerations that should be on your radar

Introduction

The European Central Bank launched TIPS (TARGET Instant Payments outsourcing Settlement) in November 2018, with a very aggressive pricing strategy. All this has forced banks to have a close look at their future strategy when it comes to Payments outsourcing processing. Accenture found that “many banks and payment service providers are contemplating or have already begun overhauling their payments infrastructure.” As we briefly discussed in part I of our series, banks are considering Payments outsourcing to rise up to this challenge.

Outsourcing allows them to focus on their key differentiators and provide outstanding service to customers, at a time when they are facing increased regulation and competition from tech companies. In this second installment of our series, we explore the pros and cons of payments outsourcing and provide guidelines for banking institutions to consider when choosing a vendor. Let’s first take a look at the industry landscape.

The promise of Instant Payments

Undeniably, Instant Payments hold a lot of promise. It means finally moving away from 9-to-5 batch-based, fire-and-forget processing to 24/7, real-time processing with track and trace capabilities. Think of this as a type of “WhatsApp” experience, where the delivery of payment gets confirmed to the sender. For businesses and governments, the ability to connect goods and services to real-time payments anywhere and at any time is hugely transformative, as it reduces friction in supply chains and global trade. But this poses challenges for banks, who are struggling to keep up with increasing requirements while trying to lower costs. How are they adapting?

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