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Regulatory Pressure
14%
1
2
86%
3
4
5
Sourcing.
Technology.
Processes.
Sourcing
Increasing competition and cost pressures are
forcing Dutch banks to rethink their payments
sourcing strategy. Banks have been under
pressure to lower costs, focus on their core
business competencies and address the lack of
qualified resources in payments processing.
The respondents are apprehensive about outsourcing all aspects of the payments process.
While an overwhelming 72% of respondents
advocate managing payments in-house, 80% of
them believe that payments should be overhauled
and that costs need to be rationalized in the
current operating model. Loss of control has been
cited as a reason for not wanting to outsource
payment processes.
Around 86% of Dutch financial institutions either
already outsource or are open to the idea of outsourcing noncore payment processing activities
(see Figure 2). Noncore payment processing
activities include payments reconciliations,
format standardizations, payment validations and
payments investigations.
Outsourcing of Payments
50%
Selective Outsourcing
Shared Service Model
Managed Service Model
40%
30%
86%
20%
14%
10%
Outsourcing
No outsourcing
0%
1
1 - Highest preferecne
5 - Lowest preference
Figure 2
Only 14% of the respondents advocate keeping noncore payment process activities in-house and would
like to continue building internal capabilities around payments.
Opinions on Outsourcing
80%
In-House
Payment
Processing
Payments will not
be commoditized
Outsourcing
72%
20%
14%
14%
Rationalize costs
Same as today
Figure 3
43%
43%
Latest market
insights
Lower risk
14%
Cost efficiencies
0%
No benefit
Figure 4
Technology
Technology continues to be a key focus area for
Dutch banks. More than 90% of the banks we spoke
to are hobbled by aging IT applications in payments
processing. Of the respondents, 43% believed that
the technological challenges of inflexibility, nonadaptability and non-scalability were the biggest
hurdles to achieving stability in payments processing and greater client satisfaction.
40%
20%
0%
5 highest weightage
1 least weightage
Figure 5
A Customer-centric Payments
Operating Model
To offer a consistent customer experience across
all payment offerings and channels, we believe
Dutch banks must reassess their priorities and
restructure their operating models. One way
banks could achieve this is by taking a more
customer-centric approach. Customer-centricity
involves understanding customer needs holisti-
100%
80%
60%
40%
20%
0%
Internal
Dashboard
Tablet
Channel
Payment Hub
Solution
Social
Media
First preference
Second preference
Figure 6
Payment Hubs
& Platforms
Process
Optimization
Right
Governance
Models
Customer
Centric
Operating
Model
Talent
Management
Sourcing
Models
Figure 7
Achieving
Ensuring
Sourcing Models
As we have seen above, most Dutch banks
recognize the advantages of pursuing a selective
outsourcing strategy for payments. In order to
future-proof themselves against the rapid commoditization of payments, however, banks should
explore a shared services sourcing model in the
short term and transition to a complete managed
service model in the longer term.
Looking Ahead
Although there are several challenges that banks
face in their payments and transaction business
lines, our research indicates that Dutch banks
will continue to consider payments a strategic
business area in the medium term. Our research
also highlights the fact that most Dutch banks
realize the need to prioritize transformations and
changes to their payments operating models.
It is our view that such a transformation journey
is best started by adopting a customer-centric
approach. Given the growing focus on client-centricity and superior customer experience, a clearly
defined payments sourcing strategy, future-proof
payments platforms, robust governance models
and proactive efforts to manage and retain talent
will be key success imperatives for a bank to differentiate and gain competitive advantage.
References
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business
process outsourcing services, dedicated to helping the worlds leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction,
technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 75 development and delivery centers worldwide and
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