In this webinar, ACI looks at the way legacy systems constrain business and the challenges and opportunities this presents to issuers and acquirers.
Hello and good morning. Thank you for joining today's webinar. This will be the second in a short series of four webinars looking at the key issues that affect card issuers and acquirers. Today we're going to look at the way legacy systems constrain business and the challenges and opportunities this presents to issuers and acquirers.
Your presenter today is Paul Love. I'm a consultant at ACI Worldwide with responsibilities for the issuing and acquiring business within our retail payments practice. I recently attended EFMA in Paris where innovations in growing new business through new products and channels were a major theme of those three days. Let me now introduce ACI.
As you may be aware, ACI is a global payments company with over 750 customers around 90 countries. Our software underpins electronic payments throughout the retail and wholesale banking all the time without fail.
In the EMEA we have over 230 customers with offices in many of the major financial centres throughout the region, a knowledgeable staff who understands their local markets. ACI has a 35-year track record in the payments business and is best known for its BASE24 product which is installed in many of the world's leading banks.
During that time ACI has also acquired new products and grown into new vertical markets such as risk management and wholesale banking payments. In EMEA, ACI has had a card management solution for the last 15 years which is currently in use at over 20 customers throughout the region.
Traditionally, ACI is well known for its strength in the network interface domain with the BASE24 and PRM. However, the acquirer and issuer products fit in the customer and merchant management domain. They offer solutions for managing the relationships with merchants and cardholders, their cards and accounts.
The primary focus is to support the revenue generation activities of the acquirers and issuers. ACI interchange adds a clearing and settlement solution to the network interface domain. With these new capabilities ACI is now able to offer a full end to end solution as part of an integrated retail payment solution.
In today's webinar we are focusing on one area where these new solutions enable ACI to bring to new value to card issuers and acquirers. Let's now look at how the legacy systems constrain issuers and acquirers' cards businesses and the challenges and opportunities it presents.
Most issuers and acquirers have multiple legacy systems whether these are their card systems or other core banking and accounting systems. While they're often working to specifications that perform their functions as they were defined when they were first built. They cause problems for organizations for which the business has since transformed beyond recognition. We will look more closely at the main stress factors from legacy systems as listed here over the next few slides.
An important point to make here is that living and operating with legacy systems is not in itself a bad thing. In fact, it is the status quo in the vast majority of major banks. However, for those banks that have multiple legacy systems and are experiencing the stress points listed above running a business in this way is like keeping plates spinning in the air.
The solution is unsustainable in the longer term as at some point in the future either the banks will not want to pay the cost of keeping all the plates spinning or they will want to add other plates into the mix but they will find that they do not have sufficient plate spinning skills to keep them all in the air at the same time.
One of the legacies facing many larger banks is that as they have developed their business and launched new products new and separate systems have been created to meet the new requirements and to support these products. Over time these banks now have many separate and isolated systems with teams of people usually performing similar functions but for different products or segments of the card portfolios.
For issuers, examples include separate debit systems which have grown so adding cards to the current account, credit systems which were often set up as standalone business units, corporate card systems, again another separate business unit for dealing with corporate clients rather than retail clients.
Loans, which have also been regarded as a separate line of the credit business and recently pre-paid which has added other new systems to reflect a new card type.
Craig Ramsey of ACI Worldwide provides insight in to the development of the largest payments hub in Europe. ACIWorldwide.com
Banks need to listen to their customers, they need to gain the trust, back, of their customers. It's being diminished over the last few years. They need to offer the services that the customers want, and the banks have spotted that. I've seen conferences where the banks have actually have turn around and said, "I got this great idea on how we can do more business." We are going to listen to our customers. This shouldn't be rocket science, this is basic business trends, basic business demands.
One of the biggest banks in Europe, and they were recognized leaders in the payments space. Banks were desperate to be able to match their capabilities. And, it was a very simple solution that they had. They gave the customers what they wanted. They met their customers' demands. And, one of the things that they did when they embarked on their MTS project with us, was they said, "We have a great solution, but the solution that we offer, the big corporate in one country isn't the same as they are seeing in another country. We want to be able to offer global products in this global market." And, that's what they needed, they needed to be able to offer a global solution while still keeping regional feel, regional care and attention that the customers were needing. So, it's just about delivering what the customer needs.
A big changing in the way that they had to do business across Europe, then they were left without a solution for payments generally. MTS stepped up it gave them everything they needed, it gave them a new payments hub for all of their client projects. And, they've embarked on some clever use of the MTS technology, that we, together with them, have now delivered on, and customers are seeing real benefit of that application. So, instead of using MTS just for cross-border payments, they needed to redesign the entire scope of how they were going to use MTS. MTS is strong enough to be able to have done that. It offered not just a single clearing, which is what they were going to do, but now it does eight different clearing systems, all across Europe. It is a single hub for corporate payments. The single Euro SEPA hub, only ACI and only MTS could have stepped up to that.
They recognized that it had technology, it had capability, way beyond what they were originally intending to use it for. Together, we designed an entire solution for their European payments processing hub. And, now they have that in production. They are delighted with it. It does everything they hoped it would do. They are seeing real benefit. Their client managers, their customers, their entire processes, their straight through rates have all benefited, not just from ACI saying, "Look what you can do."
But, the bank realizing what they can do as well. The bank seeing the vision, and realizing it and delivering on it. They are in-sourcing payments from other banks. They are doing SEPA processing, not just for themselves, but about 20 banks around Europe, now. They are a true hub. Not just for their own payments, but other banks' payments. The corporates are seeing benefits, and, it's beginning to now turn a profit.
We are talking about SEPA as the nirvana for payments processing. It's where we are going to get to certainly. For too long, there has been legacy ACH systems. Those are now going to be retired. People can start to see the light at the very long tunnel, and the light's getting brighter at ?. We will start to see SEPA payments being adopted through choice, not through regulation. Corporates will start to see benefits of them. So, certainly in Europe, we are going to see more and more use of SEPA, more and more standardization of payments processing. With that comes some downsizing of the bank, they lose further revenues. So, what's going to happen is they are going to add value to the payments. They can't offer the same SEPA processing that the bank next door is offering. They have to add value beyond that, whether it be better liquidity for the customers, better reporting, value added services. They will use those services in MTS that we have traditionally used for complex payments processing, in a simple payments for SEPA. Standards will be adopted throughout the world for SEPA is used, to get to this stage in the market.
Traditionally, wholesale payments have been processed on trust. The payments have arrived and it's now your customer, they have been authorized by the bank's mainframe, we've processed them through. But, faster payments changed that. Faster payments was a scheme where banks wanted to do real-time, suspicious activity checking, on their payments.
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ACI Worldwide software powers electronic transactions for financial institutions, processors and retailers around the world - all the time, without fail. aciworldwide.com/