TowerGroup Identifies 10 Top Imperatives for Building Payments Businesses in 2004

TowerGroup Issues First in a Series of Six �2004 Perspectives� Exploring Key Issues and Trends Across Financial Services Sector in the Coming Year

NEEDHAM, MA, November 3, 2003�While the payments processing arena remains a vital strategic asset for financial institutions, most bankers today drastically undervalue its worth and relegate it to the role of an expensive but necessary cost-center.

TowerGroup�s �2004 Perspective on Global Payments� finds that the payments franchise is often categorized as a commodity-level service with little competitive potential. This is despite the fact that payments underpins all other lines of banking business and represents the foundation of a bank�s relationship with its customers�whether those customers are consumers or major corporations.

To assist banks in rethinking the value of the payments arena, as well as in facing a daunting array of payments-related challenges, TowerGroup has issued its �Top 10� most critical technology and strategy imperatives for building payments businesses in 2004 (summarized below).

  1. Manage �payments� as a distinct line of banking business
  2. Confront payment-related compliance and regulation head-on
  3. Ensure payment system resilience
  4. Expunge paper and deal with the migration to electronic payments
  5. Aggressively manage payment-related fraud risk
  6. Upgrade in-bank payment systems, both domestic and international
  7. Build payments capabilities into online banking
  8. Support electronic payment standards and electronic commerce
  9. Manage payment-related messages and liquidity
  10. Contain operational costs
  11. �The reasons for rethinking the value of the payments processing franchise are myriad,� said David Medeiros, director of the Global Payments practice at TowerGroup and author of the research. �Payments processing is a key element of customer support and satisfaction. It drives the sale of other banking products and services, it generates an enormous amount of revenue, and it represents a crucial factor for competitive market differentiation.�

    Medeiros noted that forward-looking banks correctly recognize that this cornerstone business is at risk. �The danger comes not only from regulatory/compliance issues or internal perceptions of payments from a fragmented and tactical viewpoint, but also from external threats. External agents that position themselves as �supplementary� to banks� payment offerings � from aggregators to payment portals to corporate remittance networks � can represent threats as much as complimentary services,� he said.

    This is the first in a series of six �2004 Perspectives� that TowerGroup will issue in the fourth quarter. In each 2004 Perspective, TowerGroup will discuss the critical business and technology issues and trends impacting the financial services sector in the coming year. �Global Payments Perspective 2004: The Top 10 Most Critical Issues for Banks to Address in the Coming Year� is available for review by qualified members of the press.

    About TowerGroup: TowerGroup�now celebrating its 10th year�is the leading research and consulting firm focused on the global financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world�s largest financial services, technology and consulting firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in New York, London, and Kuala Lumpur, TowerGroup serves a global client base. Visit TowerGroup online at www.towergroup.com.