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08 February 2011 | 14324 views | 0
Global payments revenues - which typically constitute a third to a half of most banks' total revenues - fell at a compound annual rate of seven per cent from the end of 2008 through 2010, according to...
The report from Boston Consulting Group reinforces the anecdotal evidence that we are hearing from banks all around the world – payments are an essential service, but revenue per transaction is decreasing. In order to maintain overall profitability, financial
institutions must take a two-pronged approach – growing transaction volumes and reducing their processing cost per transaction.
It seems from the BCG report that transactions volumes are set to increase all around the world, with some areas experiencing just a moderate growth over the next 10 years, and some areas seeing a massive increase in the number of transactions. Banks now
need to plan for these changes – ensuring that their payment systems can process transactions efficiently, as well as being scalable to handle the predicted growth levels.
Efficiency and scalability also impact the bank’s cost per transaction. Out dated, siloed legacy systems are simply going to fall further and further behind, and as each month and year passes, with transaction volumes growing around them and transaction
revenue decreasing, old payment systems are going to become more and more untenable for financial institutions to maintain.
We have seen many organisations start to replace or update old payment systems in the past five years, and more and more are getting on the band wagon, but there are still some who are reluctant to take the first step. I can’t deny it is difficult – the
analogy that, to me, best sums up replacing a legacy payment system is of a surgeon performing a heart bypass while the patient is walking around. But it’s clear to see that it won’t be long before those institutions left behind risk being held back by systems
that simply can’t keep up with the changing needs of their customers.