Banks face special challenges in ensuring that their payment systems comply with the spate of forthcoming European and financial regulations, because huge numbers of customers rely on those systems always being available, according to the chairman of Visa UK, Tony Surridge.
“Visa at its peak will handle 5,000 transactions a second globally,” said Surridge, who before becoming Visa UK’s chairman, was the Royal Bank of Scotland director responsible for maintaining its payment system - the third-largest in the world.
“When RBS bought Natwest, they asked how long you could sustain your platform being down and I said 10 seconds. It cost a vast sum of money to build over many years and you do not want to change that overnight.”
RBS used 42 different systems every time it processed a credit card transaction. The bank processed all its transactions in Europe on one datacentre, but it had another two spare datacentres. One was the back-up for the primary datacentre and the other was a secondary back-up if one of the two main datacentres had to be upgraded.
Every retail bank in Europe is preparing to comply with the Single European Payments Area (SEPA) regulations. The first deadline for a SEPA-compliant product in 2008 will create pressures that force some banks to merge with others, according to analysts.
Financial Insights’ analyst Rachel Hunt said, “A lot of larger institutions need to investigate the possibility of creating a platform across all payment types. For the tier three and four organisations, SEPA is about considering different business models, such as outsourcing.”
Hunt predicted that retail banks will spend £3.8bn by 2010 preparing their systems for SEPA.
She said, “We also found that the banks are going to have to make savings of 25% of their operational costs just to stay in the game.”
Banks will achieve the lower margins on SEPA products by processing other banks’ transactions on their payment systems or by outsourcing themselves.
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