IDC Financial Insights characterizes a payment processing hub as a platform that processes all incoming and outgoing payment types at a bank. With this definition, each payment hub would be unique, depending on the types of payment a bank offers. The commonality would be the overarching nature of the hub. It would also exclude a platform that processes multiple but not all payment types, or a situation in which a bank has two platforms, each processing multiple types (for instance, one for domestic and one for international payments).
A typical payment hub implementation would aim to migrate each payment instrument onto the hub. As each migration is completed, the legacy can be switched off, so the bank can decrease the number of payment systems from many down to one. The order of migrations will be determined by the bank's priorities and appetite for risk versus reward.
This IDC PlanScape sets out the reasons why a bank might want to consider implementing a strategic payments hub: the areas to focus on during implementation; the state of the payments hub market; and some of the downstream benefits that banks can use to build a business case. "The need for a payment hub will become more acute as legacy systems age, servicing contracts end or become more expensive, payment types proliferate, and volumes increase. But third-party solutions available are becoming more mature and viable as well, as vendors build their experience and functionality for different payment schemes, and system integrators' capabilities have grown," said Lawrence Freeborn, research manager, at IDC Financial Insights.