In recent years, it has become increasingly difficult for financial institutions to avoid or postpone the strategic investment required to meaningfully address the pressing challenges of payment processing modernization. Industry initiatives such as new instant payment services, or new ISO 20022 based clearing schemes, or new open API-initiated flows, all demand significant change. However, one factor that rarely receives attention is the structure of the institution itself and how that impacts the allocation of investments across the organization and thus the subsequent successful addressing of these challenges.
In particular, it is the demarcation that exists between the head office business, covering the main domestic market of the bank, and the network of international entities of the same institution, covering the non-domestic markets.
Rarely do the two parts of the organization receive the same levels of attention and investment.
In fact, the multi-entity international arms of financial institutions can often find themselves being regularly treated like second class citizens by their organizations, and this is against a background of them continually fighting a desperate race to stay compliant and competitive in payment service provision for the multiple, disparate markets they need to serve.
This minimized approach to multi-jurisdictional investment is a historic pattern faced by many institutions around the world. Whether that non-domestic market network is a small regional presence, or whether it is a global organization with major regional business units covering multiple in-country franchises, they tend to have evolved processing environments that consist of a variety of different, separate systems, on different technologies.
Unfortunately, the core domestic business gets the attention, the focus, and top priority when it comes to investment in technology.
Consequently, when big market changes take place, the reduced investment profile, leads to slower reactions, and a reduced ability to maintain compliance and offer competitive services.
In some ways, the international entities problems are bigger, more complex than head office. Multiple new clearing services must be supported, across a diverse environment with possibly higher levels of technical debt, with different approaches, different processing methodologies and cycles, and even different cultures.
It is a major problem that needs to be addressed, and so how does an organization break the mold to create a long-term sustainable solution that removes the threat of a continued demarcation with poorer outcomes for their international branch networks?
Find out more in our next blog.