Outsourcing payments transaction processing in a SEPA environment

Götz Möller

Journal of Payments Strategy & Systems, 2006, vol. 1, issue 1, 71-86

Abstract: Intensifying market and price pressure forces banks to evaluate all options to reduce costs while at the same time extending their services and improving their service levels. To achieve these objectives, the outsourcing of back-office activities to industrial full-service providers is an important strategic option. In the area of payment transaction processing, the introduction of the single euro payments area (SEPA) is a trigger point forcing banks to take a decision soon about outsourcing — or make significant investments in order to upgrade their existing infrastructure. Owing to European standardisation in the context of SEPA, payment transaction processing will be the first back-office activity in banking with a largely standardised European market. After reviewing the current situation and trends in payments processing, this paper argues that this will lead to the emergence of an efficient European payment transaction processing market, in which banks can freely choose suppliers for their payment transaction processing based on market prices as well as having clear alternatives in the market. Critical traditional objections to outsourcing will thus, in the medium term, no longer apply to payment transaction processing, so that banks can reap the benefits of outsourcing with clearly limited risks.

Keywords: payments; payment transaction processing; payments processing; outsourcing; single euro payments area; SEPA; full-service provider (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2006
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