Accenture Payment Services
Payments Transformation – Outsourcing The global context Across the global banking industry, the payments landscape is being transformed by rapid advances in technology, profound shifts in consumer demand, and increasing regulation. Banks are also facing growing pressure to become more cost-effective and transparent, at a time when many banks’ return on equity (RoE) has shrunk from double digits to low single digits. Even banks in Asia— buoyed by strong trade flows or national economic growth—are increasingly aware of the need to improve RoE. In response, major banks worldwide are reviewing how they source and manage payments, and more and more are considering outsourcing. Proven benefits include an improved focus on core competencies, clients and products, together with balance sheet improvements through reduced costs.
Three reasons why outsourcing should be a key part of your bank’s transformation—In general, outsourcing enables a bank to benefit from the outsourcer’s: • Economies of scale—meaning a multibank operation is desirable. • Economies of skill—tapping into proven, industry-leading specialist expertise and experience. • Roadmap and ability to invest—to keep up with regulation and the market, thus enabling the bank to avoid continual multi-year investments.
Key challenges When reassessing their operational models, banks’ options include optimizing existing internal processes, joining forces with other banks, and/ or sourcing capabilities from external providers. Outsourcing can be appropriate for small niche areas of the business, or act as an enabler for the transformation of an entire operational unit, branches and legacy technology. As Figure 1 shows, each of the various sourcing choices brings different implications for the bank’s payments value creation and business model, which may well evolve over time. In the short term, the focus might be on ensuring compliance with regulations such as SEPA. The next step may be to take out costs through centralization and optimization. Finally, the bank may target higher differentiation and revenue generation through tighter integration and deeper relationships with large customers.
Getting to grips with the different ‘flavors’ of payments outsourcing…
For a bank considering payments outsourcing, it is important to distinguish between application outsourcing (‘AO’—running IT systems), business process outsourcing (‘BPO’— running business processes), and infrastructure outsourcing (‘IO’—running data centers). Today we are seeing new and rising demand for AO in payment systems, which typically requires more specialist skills than AO in other areas of banking IT. Demand for IO in payments is also rising, as data center volumes rise and service levels and system stability become more critical. In many cases, large AO and IO programs tend to focus on outsourcing a bank’s existing applications and data center management to a third party, rather than migrating to a third party’s applications and infrastructure. However, softwareas-a-service is a major trend in IT and it will have an increasing role in payments, providing delivery, cost-ofownership, on-going compliance and
service stability benefits. While banks can gain significant benefits both through BPO and migrating to thirdparty applications and infrastructure (or the cloud), these steps demand a transformational approach to radically change the payments operating model.
…as a new operating model emerges
In the past, tweaking legacy systems has worked as a way to achieve compliance at low transaction levels. However, it doesn’t necessarily work for compliance at high transaction volumes, which may require either a re-platforming or outsourcing solution. In our experience, the levels of cost and complexity involved in linking an outsourcer’s systems to a bank’s channel and core banking systems are similar to those arising with in-house re-platforming—and banks tend to stick with the in-house choice. Therefore, we believe that operating model transformation is a more relevant driver for outsourcing than regulatory compliance. The table in Figure 2 summarizes these trends.
Figure 1. Higher Value
Revenue
Differentiation
Cost
Business Value Creation
Regulatory requirements
Compliance
As-is payment operations
Lower Value Low
2
Consolidation
Consolidated payment operations
“Industrialized” payment operations
External Integration 3. Revenue generation and value-adding services
2. Centralize & optimize processes
1. Regulatory compliance
Business Model Impact
High
Accenture’s approach Accenture’s core payments team uses our proven Business Operations Modeling framework to help banks devise new operating models for payments, and to guide them in their decisions over which processes to build/retain, and which to outsource to a third party. Our approach involves four steps: • Baselining the bank’s payments operating model and payment capabilities using our proprietary framework. • Short-listing the sourcing opportunities, based on internal assessment and market availability. • Gathering information from vendors. • Finalizing our assessment of the best-fit sourcing model. Where partial or total outsourcing of payments emerges as the best option, banks need a service provider that has proven experience and expertise, is a good cultural match, and is fully committed to adding incremental value through ongoing technology improvements. Accenture fits the bill on every count.
Payments outsourcing: some key questions • Have you considered outsourcing some or all of your payments processes—and if not, why not? • If you are executing a payments transformation, does it include any outsourcing or software-as-a-service? • What impact does maintaining your payments operation and technology across each of your operating markets have upon your bank’s balance sheet and ROE? • Are there specific non-core areas of payments—for example, direct debit processing—where outsourcing would be cost-effective? • Are there non-core markets where direct processing, clearing and settlement participation are not costeffective? • Have you considered removing your payments technology and operations from the balance sheet altogether? • Alternatively, does your bank have spare payments capacity that could be sold to generate revenues from insourcing?
Figure 2. Payment Outsourcing Trends Outsourcing Scope Assets
Outsourcing Model Outsourcer’s headcount, Bank assets Outsourcer’s headcount, Outsourcer’s assets
AO
IT applications/systems
Established, growing
IO
Data Centers, hardware and software
Recent trend, growing
BPO
Operations Centers
Little activity to date
Established in checks and cards, little activity but growing interest in core payments and in SaaS
3
About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 266,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become highperformance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www. accenture.com.
Accenture Payment Services Accenture Payment Services helps banks improve business strategy, technology and operational efficiency in five key areas: core payments, card payments, digital payments, transaction banking, and compliance, risk, and operations. Accenture and its more than 1,500 professionals dedicated to payment engagements can help banks simplify and integrate their payments systems and operations to reduce costs and improve productivity, meet new regulatory requirements, enable new mobile and digital offerings, and maintain payments as a revenue generator. More than 50 clients worldwide have engaged Accenture Payment Services to help them turn their payment operations into highperforming businesses.
For More Information To find out more about how Accenture can help your bank transform its payments strategy, operations and capabilities, please contact: Massimo Proverbio Global Managing Director Accenture Payment Services
[email protected] Jeremy Light Lead - Accenture Payment Services, Europe, Africa and Latin America
[email protected] Jim Bailey Lead - Accenture Payment Services, North America
[email protected] Matthew Friend Lead - Accenture Payment Services, North America
[email protected] Ian Hooper Lead - Accenture Payment Services, Asia-Pacific
[email protected] Or visit www.accenture.com/payments
Copyright © 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
13-3070
