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New Research Reveals the ‘Payment Processing as a Business’ Opportunity for Banks

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Survey of leading banks identifies approaches to move account-based payments from cost-centre to revenue stream

Independent research conducted by Celent on behalf of Icon Solutions has revealed that, in response to commercial pressures and changing scheme and regulatory requirements, payments processing is transforming from a commodity to a business, creating compelling new value opportunities for banks.

The survey, launched today at Sibos, found that the current payments processing model for account-to-account (A2A) payments is unsustainable, with 86% of Tier 1 banks finding margins on payments challenging to maintain – up from 59% in 2021. In response, banks are increasingly turning to vendors and third parties for payments processing, enabling focus to remain on other strategic priorities. According to the report, 57% of tier 2 and 3 banks currently partner with vendors in order to dedicate internal resources on business innovation initiatives.

This market dynamic presents a sizeable opportunity for banks to adopt Payments Processing as a Business (PPaaB) strategies. Although many banks already provide payment and banking services to other banks through existing correspondent banking models, there is significant potential to expand these opportunities further. The data indicates that 22% of tier 2 and 3 banks would now consider another bank as their full strategic payments sourcing partner. This comes as 87% of tier 1 banks have actively considered spinning out payments as a separate business.

“The payment processing landscape is highly dynamic, but any bank wishing to enter this space has the potential to bring new value to the market”, comments Kieran Hines, Principal Analyst at Celent. “As regulated entities, banks are uniquely positioned to offer something closer to an end-to-end service to other banks, potentially including services around compliance, customer care, liquidity, and settlement. This would be a compelling proposition for mid-sized banks to consume and represents a clear opportunity for larger institutions to grow revenue, increase processing scale, and accelerate the pace of their own payment systems modernisation plans.”

Despite the importance of easing margin pressures, the survey also found that PPaaB strategies must go further and be focused on supporting the delivery of value-added services that deliver innovative offerings to customers. Banks attempting to enter this market will need to invest in new capabilities as well as adopting the mindset of a vendor or fintech, with regards to service delivery and improvement.

Toine van Beusekom, Strategy Director at Icon, explains: “Emerging requirements are creating new value opportunities. For example, open banking regulation is driving significant increases in the adoption of A2A payments as a cheaper, faster alternative to card-based payments. But as competition around A2A payments intensifies, banks will come under pressure from fintech players and big tech. This affords banks the opportunity to leverage their unique technological and regulatory assets to deliver the value-added services, such as credit, dispute handling and insurance, needed for A2A payments to truly match card products and not cede ground to new market entrants.”

The report notes that capitalising on the transformation of payments processing will require banks to undergo a payments transformation of their own. To succeed, banks will have to modernise and adopt a cloud-based, elastic and connectivity-focused approach. Investment in skills and new capabilities will also be crucial.

Beusekom adds: “Bringing a competitive PPaaB offering to market and running payments as a profit centre is not straightforward. It demands a clear strategy that is built on sustainability, resilience and independence, underpinned by technology solutions that put banks back in control and allow them to grow their offering at their own pace to meet new requirements. And for banks on the journey to choosing a PPaaB provider, it is imperative the demand side is effectively planned and prepared to ensure a smooth vendor selection process.”

Icon will be discussing payments processing strategies in more depth at Sibos. Find the team at Dis36 to learn how Icon’s expertise, solutions and pedigree can support banks in defining and executing a ‘greenhouse approach’ to payments processing for sustainable control.

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Tata Motors partners with IndusInd Bank to offer exclusive Electric Vehicle Dealer Financing

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Key Highlights:  

  • One-of-its kind Electric Vehicle Inventory Financing program for Tata Motors’ dealers 
  • Limits extended towards EVs will be over and above regular dealer finance limits for Internal Combustion Engines (ICE) 
  • Attractive special pricing  
  • Additional limit to cater in peak seasons, can be extended 2 times in a year 

In its effort towards increasing EV adoption in the country, Tata Motors, India’s leading automotive manufacturer, today announced that it has joined hands with IndusInd Bank to offer an exclusive Electric Vehicle Dealer Financing solution to its authorized passenger EV dealers. Under this scheme, IndusInd Bank will provide additional inventory funding with attractive pricing to authorized passenger EV dealers of Tata Motors. This additional inventory funding would be over and above the ICE finance limit of the dealers. Repayment tenure will range from 60 to 75 days. Furthermore, IndusInd Bank will also offer additional limit to cater to high demand phases, which will be available to dealers 2 times in a year.

The MoU for this partnership was signed by Mr. Aasif Malbari, Chief Financial Officer, Tata Passenger Electric Mobility Ltd. and Director, Tata Motors Passenger Vehicles Ltd. and Mr. Sanjeev Anand, Head – Corporate, Commercial, Rural & Inclusive Banking, IndusInd Bank Ltd.

Commenting on the rollout of this offer, Mr. Aasif Malbari, Chief Financial Officer, Tata Passenger Electric Mobility Ltd. and Director, Tata Motors Passenger Vehicles Ltd. said“As we move along towards our aim of electrification and green mobility, we are ecstatic to partner with IndusInd Bank to assist our authorized electric passenger vehicle dealer partners with an exclusive financing program. Our dealer network is one of our core support pillars and through their constant efforts we have been able to ride the electrification wave in India. We are positive that through this tie-up, we will make EVs more accessible and the EV buying process, a seamless and a memorable experience for our customers.” 

Speaking of this partnership, Mr. Sanjeev Anand, Head – Corporate, Commercial, Rural & Inclusive Banking, IndusInd Bank Ltd., said, “As a bank with sustainability at our core, we are extremely delighted to partner with Tata Motors, one of India’s leading automotive brands, to offer an exclusive electric vehicle dealer financing program for authorized passenger EV dealers of Tata Motors. We are proud to partner with the segment leader in the journey toward a sustainable future. Through this tie-up, we are also looking forward to expanding our base into new consumer segments and be a bank of choice providing solutions to meet all banking requirements of the customers.” 

Tata Motors has been pioneering the Indian automotive market with its groundbreaking efforts, and is currently leading the e-mobility wave in India with a commanding market share of 89%, with over 50,000 EVs produced till date in personal and fleet segments.

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astrantiaPay Selects SaaScada to Enrich Swiss Landscape of Business Payments and Fill Market Gap

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Swiss financial firm, astrantiaPay, to use SaaScada’s cloud-native core banking engine to simplify cross-border payments for SMEs and facilitate international trade and services across the old and new economies

 Cloud-native core banking engine, SaaScada, today announced it was selected by astrantiaPay to launch a Swiss point of contact for international businesses looking to open and run corporate bank accounts in Switzerland. Once regulatory approval is in place, astrantiaPay will provide mission-critical payment services to sophisticated Swiss, European, and global companies.

“Promoting SMEs is high on the agenda of policymakers, but the reality is very different when dealing directly with banks. In fact, financial institutions often show little or no appetite for low-margin, labour-intensive company accounts with regular cross-border payments”, explains Lukas Wissner, CEO of astrantiaPay. “As a result, opening and maintaining corporate bank accounts can become a complex and costly procedure, posing a real challenge for Swiss and European start-ups and established businesses. This can hinder growth, and sometimes even threaten a company’s existence. Ultimately, corporate bank accounts with a foreign nexus are an underserved niche segment in the Swiss financial ecosystem which is historically dominated by asset managers and private banking.”

SaaScada is an industry-proven core banking system that unlocks trapped customer value, mitigates risk, and drives real-time data insights. It was founded from a desire to provide first-class financial services capabilities for everyone. SaaScada’s configurable product features and transactional ledgers can be connected to any payment scheme, gateway, channel, or FX provider. Its event-driven architecture will provide astrantiaPay with a real-time stream of events for each company account.

“SaaScada’s experience and deep understanding of how to execute a bank in the Swiss financial and regulatory landscape convinced us,” concludes Lukas Wissner. “Looking back, SaaScada was the right starting point on our integration journey, as its experienced team of programmers readily enable open API connections to virtually any data source and endpoint; be it software tools for onboarding, client relationship management (CRM) and transaction monitoring (TM), or accounting systems, payment aggregators and international correspondent banks. Leveraging SaaScada’s proficiency and infrastructure has helped us create an organic whole.”

“Lukas Wissner and the team at astrantiaPay have a distinct vision to make bank account opening simpler for international SMEs,” explains Nelson Wootton, Co-Founder and CEO at SaaScada. “SaaScada is delighted to support astrantiaPay in driving financial inclusivity for its customers, solving complex compliance challenges, and enabling SMEs to thrive.”

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