Banks have realized for some time that payments are becoming something of a commodity. Technology, in large part, has made the space more accessible to players of all sizes, both banks and nonbanks, and the increased competition is cutting into profit margins. Further, the introduction of regulations (think: Single Euro Payments Area) threatens to squeeze more money from financial institutions' coffers as they race to implement compliant technologies and procedures.
Consequently, banks are faced with a dilemma around the extent to which they should remain in the payments business. Is it worth all the hassle of revamping their long-lived payments systems that have worked quite well for so many years? The quandary is especially evident in the corporate payments area, where clients' dealings cross the borders of nations and continents. Multinational companies are growing tired of being locked into the proprietary payments processing systems of their banks and have become vocal about their desires to simplify things.
Clearly, standards will assist the industry in meeting the growing demands of their corporate clients while also helping to streamline banks' operations. However, there is a fear among some financial institutions that standards will commoditize payments further, leaving individual banks with few options to differentiate themselves. Additionally, the debate about the best approach to standardizing global payments processes continues.
Financial services companies compete in a global business environment in which speed and differentiation must be achieved while constantly driving costs down.
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