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Payments Dynamics - Velocity vs Pressure

 

Fluid Dynamics has a lesson for Payments Industry.

When fluid velocity increases, fluid pressure decreases. This scientific principle - Bernoulli Prinicple - is foundational in Fluid Dynamics which lead to inventions and applications in later phases.

Since funds can flow, it is fluid. So Fluid Dynamics principles are equally applicable for Payments Dynamics.

We now talk about scaling up payment operations to maintain bottom line, increased automation for cost effectiveness, increased monitoring for risk management, manual processing of failed payments to enable four-eye check and increased investigations to assure due-diligence or enhanced diligence. So there are velocity multipliers and velocity attenuators here in the payments or funds flow.

Any velocity multiplier in payments flow - STP processes, STP accelerators, Automatic enrichments, automated batches, Rule based routing, Hybrid File Management will reduce payments' fluid pressure.When pressure drops, there is vulnerability from external systems to rationalize pressure by flow towards this automated system, which in turn implies attempt to reduce velocity. All intrusions, money laundering, privacy violations, frauds stem from the reduced presssure.

Such external flows, will prompt banks and systems to regulate velocity so that the pressure is maintained to prevent external intrusions. Such regulations are achieved through attenuators. All kind of filters, STP thresholds, exposure montoring, pattern analysis, position monitoring result in additional lags, performance issues and reduce velocity considerably there by increasing pressure. Increased pressure in payments flow reduce external intrusions.

Optimal balance of payments velocity and pressure could be an area of research to come out with mathematical equation implying that product of payments velocity and payments pressure is a constant. Moroever, optimal range of velocity and pressure considering volument and business and risk apetite of servicing institution could be another evolutionary research path.

 

 

 

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Rajeev Nair

Rajeev Nair

Managing Director- Accenture Technology - Banking

Accenture

Member since

26 Jun 2007

Location

Bangalore

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11

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This post is from a series of posts in the group:

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A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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