The area of Payments is becoming increasingly important for the Indian banking sector. With the volatility in the interest rate regime, and the resulting uncertainty in Net Interest Income for banks, banks are increasingly looking at fee-based products for assured revenue sources. In the midst of this uncertainty, the revenues that banks earn from processing payment transactions stand out as a beacon of light. However, the revenues accruing from such transactions, as well as the underlying costs associated with processing these transactions, can be optimized if the banks start looking at payments as a core “business” of theirs, and mot merely as a panoply of service offerings.
As long as the payments business remains an “orphan”, fragmented into different Lines of Businesses with individual owners, with no enterprise perspective to the intricate dynamics between the different products and delivery channels, revenue optimization will remain a far fetched goal. Similarly, when the processing units for the variety of channels and products are distributed across different business units, with no underlying integration architecture, it will be difficult to achieve cost optimization as well.
Against this backdrop, CII Eastern Region came out with a study on Payment Business in Indian Banks.