The area of Payments is becoming increasingly important for the Indian banking sector. With the volatility in the interest rate regime, and the resulting uncertainty in Net Interest Income for banks, banks are increasingly looking at fee-based products for assured revenue sources. In the midst of this uncertainty, the revenues that banks earn from processing payment transactions stand out as a beacon of light. However, the revenues accruing from such transactions, as well as the underlying costs associated with processing these transactions, can be optimized if the banks start looking at payments as a core “business” of theirs, and mot merely as a panoply of service offerings.
As long as the payments business remains an “orphan”, fragmented into different Lines of Businesses with individual owners, with no enterprise perspective to the intricate dynamics between the different products and delivery channels, revenue optimization will remain a far fetched goal. Similarly, when the processing units for the variety of channels and products are distributed across different business units, with no underlying integration architecture, it will be difficult to achieve cost optimization as well. Thus comes the concept of “Enterprise Payments”, derived from the need to view Payments business across lines of service, across product and channel and even customer group boundaries such as retail and wholesale payments. While the RBI has acted as the wise shepherd in terms of driving modern payments instruments and channels, and ensuring that low-cost, convenient payment instruments are not accessible only by the privileged few, banks also need to reorganize their own houses so that they can profitably meet the challenges thrown at them by the visionary actions of the RBI.
The results of our survey, which we believe is the first of its kind in the public domain, show Indian banks mostly trailing their global counterparts in terms of being organized to seize the opportunities afforded by looking holistically at the payments business.