Do you ever dream the many payment types and methodologies we deal with on a daily basis could be validated, collected and reported through a single platform or process? It’s not the first time the topic has been broached. In fact, for the past three decades some companies have made this their mantra and have had varied degrees of success. However, there has been a lot of discussion in recent times around the subject of payment convergence to facilitate Straight Through Processing (STP).
The goal for many, vendors and their clients, has been to move towards the use of common platforms and processes for many payment types. It’s always been a struggle to determine how to take an ACH transaction, Debit/Credit Card, Check or other payment instrument and utilize common methodologies to take advantage of perceived operational efficiencies of a single platform while accurately deflecting risk of error and fraud from both the business and consumer. The rapid push to adaptation of mobile payments, in all its forms, has made the discussion of strategic platform and process integration even more necessary.
It should also be noted that convergence is not a concern just for payments processing in the US, as initiatives have been proposed or are underway in other parts of the globe, including Europe, India and other markets.
The difficulty has been the unwillingness, in many ways justified, of organizations to go through the trauma of system conversion when replacing longstanding legacy platforms. Although siloed, many of these systems just “run”. Having been applied for years, there is often undocumented code and business rules that are not easily ported to more current systems and technology. Additionally, each payment type has it’s own, often dissimilar regulatory structure which these platforms must address. Care must be taken to ensure compliance during any conversion from one payment type to another.
The expense and risk of impact to valuable customers forces many to shy away from the scope of analysis and change required to modify systems and process which would allow multiple payment methodologies to co-exist.
There are companies that profess to offer systems that seamlessly process multiple types of payments. Often this process is only cosmetic, backfilled by silos of legacy applications, integrated at key process points. That’s not to say this is the wrong approach, but at times the implementation accomplishes a tactical goal and can make longer term strategic payments initiatives even more expensive and complex if not done properly. However, a well thought transition from legacy to updated platforms does reduce risk to the customer and can be less expensive in the short term. This is where a Product Manager earns their keep, managing a difficult and complex rollout of required features to meet both the tactical and strategic goals of customer and provider.
Although not applying to all payment types, there are vendors that offer platforms to address multiple, similar instruments. Recent offerings by PayPal (PayPal Here and In Store Payment) and Square demonstrate the willingness of providers to pursue this convergence, especially when they are well positioned with a solid footing. Other vendors in the traditional payments world, have offered solutions that combine multiple payment types in one form or another. These innovative approaches have met with varied success, but deserve a look before you build, to avoid reinventing the wheel.
In short, some are gravitating to an approach that gives consideration to multiple payment types to address some of the operational difficulties and risk associated with combined platforms. Firstly, this requires much in-depth analysis by a partnership of experts from within each payment methodology to ensure a well designed platform that maintains low risk for the end consumer and applies all the varied regulatory and reporting constructs.
Are combined platforms a necessity? Probably not, but the appealing vision of reduced operational costs and quick to market product changes that apply to a broad spectrum of the payments market deserves some study.
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Excellent overview of the dialogue taking place in multiple payment quarters. From my perspective, a critical step to success – and the first “task” that must be focused on – is the documented, in-depth analysis of what the issue realistically is coupled with what the business requirement need to be. Once documented, forums (internal / external) could be utilized to discuss, critique, remedy, $ quantify, and validate the proposed solution(s). While this will take time, effort, and intellectual capital, it is a series of steps that can start now without a long term committment of significant investment $.