The payment hub concept might be unfamiliar to most people. However, as the payments sector is evolving, it’s making a major shift in the industry, enabling a centralized, standardized, and coordinated model for business-to-business, person-to-person, micro, commercial, and treasury payments.
The need for instant payments is growing from both a consumer and business perspective, with settlement anticipated to occur in real-time.
This is where payment hub platforms come into the picture. If you’re wondering what is payment hub, it’s a flexible solution allowing financial institutions to raise their payments services that can mesh together with various systems and channels and bring them together. Payment hubs significantly facilitate things for institutions to integrate with dynamic digital channels like mobile, internet, and social media.
Below, we discuss the things you should look for in a payment hub platform before embarking on such a journey.
Don’t Just Look At the Problem’s Context
You should start with an inclusive perspective to get a bigger picture of the necessity of using a payments hub platform. In such a manner, the bank can pinpoint the business lines that the payment hub is expected to cover and the services it intends to offer, the average cost of maintenance, the expectations of various user groups, and the expected palpable business benefits.
Identify the Right Type of Payment Hub Platform That Meets Your Needs
Unfortunately, there is no all-encompassing solution for payment hub platforms. However, one should have in mind the following three available choices:
Front-End
The front-end is the best option when the institution’s goal is to bring together all channels. This means when trying to integrate internet banking, mobile banking, social media, corporate portals, and so on., through a single layer of integration. The dexterity of providing up-to-date services across multiple channels is another strong and important aspect to consider.
Back-End
The back-end design is implemented when financial institutions aim to aggregate data from several internal systems and direct the same data to the correct payment networks. Those networks are, for instance, Automated Clearing House (ACH) and Real-time Gross Settlement Systems (RTGS). Something one should also think of is aggregating data and feeding the same data into analytics or so-called cross-sale systems.
End-to-End
The end-to-end option could be described as the most progressive and evolved payments hub design. It combines the characteristics of the front-end and back-end hub which involved creating a fresh payments processing system to substitute the already existing legacy platform. This has been a huge reason why it’s embraced by banks that want to completely overhaul their existing payment system. Another consideration is backing a new payment system environment.
Compile a List of Business Components With Which the Payment Hubs Should Interact
This refers to individual business segments like exception handling, routing, file-parsing, regulatory considerations, and settlements.
Suiting Business Components to the Payment Hub
One should not undermine the importance of correctly classifying each business component that makes up the payment hub. This is because central, regional, and context-specific components correspondingly create placeholders for each of these components in the plan of delivery.
The Proper Integration Layers
Remember that payments hubs are not fully complete without selecting the right integrations standards like ISO 20022 and ESB. When you look for a scalable, responsive, and flexible integration layer, you will get the best outcome.
Big-Bang or Incremental Approach
Both of these approaches have their advantages and disadvantages. Even though the big-bang approach shortens the implementation time, provides a faster return on investment, and trims down the transition requirements in hub implementation, the threat of operational breakdown is still very high.
Large financial institutions usually opt for the incremental or evolutionary approach, starting with a pilot, which reduces the likelihood of an operational breakdown. Institutions choosing an incremental approach use a service-based payment services design that over a period of time would continually evolve.
The great challenge here is to build a feasible migration plan that yields real benefits at each incremental phase. However, one must stay aware of the fact that the transitory requirements can build up in an incremental approach, which might increase the implementation expenses.
Stakeholder Buy-in and Hub Detailed Map
Stakeholders and sponsors must be persuaded that payment hub platforms create long-lasting value and project a well-planned transformation path to be able to get there. This involves splitting the transition into logical parts to create a multi-generational program.
Last but not least, following the implementation stage, the key performance indicators should be monitored at all times for good results and future improvement.
Final Words
Even though payment hubs have predominately been deployed within banks and payment service providers and networks, if you’re running an organization that has a highly complex payments environment, you might be looking for a payment hub platform to deal with data and financial transactions.
To help you navigate a fairly complex transition cycle, this article can help you figure out what to look for in a payment hub platform.
