There are three main challenges, often referred to as the "three C's," that are driving banks to reevaluate their operating models.
| #1 Compliance | #2 Competencies | #3 Client expectations |
| This challenge centres around the ever-evolving landscape of regulatory initiatives related to instant payments and other industry-driven compliance measures. While ISO 20022 is simplifying payment processes, there are still numerous local regulatory initiatives to navigate. | The second challenge pertains to the skills and competencies of the workforce. Many long-standing professionals in the industry are aging, and there is a need to bridge the competency gap, especially in managing payment systems. | As instant payments and cross-border e-commerce grow, customer expectations are rising. Banks are under pressure to enhance their payment offerings to meet these evolving demands. |
Strategies for reevaluating operating models
Banks are adopting two main strategies to address the challenges and reevaluate their operating models.
Some banks are strategically positioning themselves as Payments Banks. They consolidate payment flows from other banks and create dedicated, highly scalable, and cost-effective payment-focused businesses to handle high transaction volumes. However, this strategy may not be viable for all banks due to the need for substantial transaction volumes to be profitable.
Other banks choose to go with the Product Differentiation strategy to differentiate their payment services to cater to local clients or focus on customer intimacy. These banks also need to update and modernize their platforms.
The role of Payments as a Service and Payments as a Service Plus
PaaS traditionally refers to flexible payment processing engines offered by vendors. However, Tietoevry Banking provides a more comprehensive technology platform. Tietoevry PaaS offering includes payment processing capabilities, as well as pre-processing, reconciliation, and other technological capabilities for a full-spectrum solution. PaaS+ goes a step further by combining technology platforms with operational capabilities to address challenges in AML, FCP, KYC, and customer service aspects of payments.
The banking industry is navigating a complex landscape of compliance, competencies, and evolving customer expectations. To reevaluate their operating models, banks are adopting different strategies, including becoming payments banks, differentiating their services, and leveraging Payments as a Service (PaaS) solutions. These strategic choices will shape the future of banking as they strive to meet the demands of an ever-changing financial landscape.
