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Let's hear it for the payments big boys

Since the financial crisis, supervisors across the world have been trying to work out ways of dealing with banks deemed to be ‘too big to fail'. The most obvious solution (and the most simplistic) is to chop them up into manageable bits so none are too big or interconnected to be allowed to fail, because the current received wisdom seems to be that banks that are smaller and more modular are less of a risk.

But from a payments perspective, there are two counter-arguments to this approach.

Firstly, the big banks that operate, and offer payment services, internationally are actually made safer by their geographical spread - there is no concentration of risk on any one particular economy. And that's an important element in terms of regaining customers' trust.

And the second point is that the banks that operate and provide payment services internationally offer clients something that others cannot:

  • A consistent level of service across all points of contact,
  • The benefits of payments' best practice from their widespread experience,
  • Better management of their clients' cash across borders.

So there are good and sound reasons to applaud the big banks' revival of interest in the unglamorous business of taking deposits and processing payments. We need big banks to do this. Mind you, they'd better have the right systems in place to do it properly...


Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 May, 2011, 13:52Be the first to give this comment the thumbs up 0 likes

@Paul S: 

Great point!

According to this recent FORTUNE magazine story titled "Problem banks list hits 888", FDIC has taken over and  merged 800+ banks with healthy ones since March 2008. They weren't all "too big to fail", were they? Why weren't they allowed to fail?

In actual practice, every failing bank seems to be getting rescued - it's just that some of them cause a major PR disaster for the government when they go down, whereas others are quietly folded into healthier banks over a single weekend through a well-oiled "secretive process that has all the makings of a heist flick", according to another FORTUNE article titled "How the FDIC takes over a failed bank that uses a nice comic strip to illustrate the process. 

PS: Not sure if hyperlinks to third-party content are allowed, but you should be able to find these two articles with a Google Search of their titles.