The model used by most banks for processing account-to-account payments is under strain. Despite payment services being mission critical, a bank’s payment operations are largely seen as a cost centre. Crucially, margins are being squeezed from all sides, making current approaches increasingly unsustainable.
Engaging a third-party processor or taking a PaaS proposition from a vendor are two options that are gaining traction and offer clear alternatives to managing this internally. However, this shift is also a commercial opportunity for those banks prepared to enter the market.
One question in the market today is whether the BaaS approach can be applied to payment processing. In other words, is there an opportunity in for banks themselves to extend beyond the current models of correspondent banking and scheme access services to offer more comprehensive payment processing services to other financial institutions? For banks, this would be an opportunity to move payment processing from a cost centre into becoming a commercial activity bringing in a new revenue stream.
To investigate this, we have sought opinions and insights from a broad base of financial institutions across Europe. A key input to this process is a substantial program of primary research run through June and July 2022: the Celent Payment Processing Survey. Through this, we have canvassed the opinions of senior executives at 92 banks.
Key findings from this research include the following: