Achieving a Unified Payments Landscape with Payments Hub

A unified payments system: Payments Hub Platform

The payments eco-system has been struggling with the challenges related to increasing volumes of payments and customer expectations as well as the new innovative developments in the payments atmosphere that caused fragmentation and complexity eventually. The currently used payments systems are mostly focused on single and different parts of the whole system and this fragmented order, which is called the Silo Approach, created a segmented transaction management that limited the flexibility, declined operational efficiency and raised cost-wise concerns within the financial institutions. The need for a change or transform of the existing multiple payment systems with the conception of integration in mind has become undeniable.

As a solution to the siloed structure and the fragmentation in the payments landscape, a centralized system which can provide a unified payments and banking platform to manage the payment transactions across different channels and businesses has emerged: Payments Hub. The aim is to consolidate separate payments systems in a controlled manner and to minimize the risks related to the migrations, costs of maintenance and time spent while at the same time  it helps institutions operate in a more agile and effective way.

Payments Hub is a concept that circles around the idea of creating a unified banking system for payments rather than a single product. It enables banks to deliver core payments functions as it also allows for managing any instrument types (cards, cheques and transfers etc.), global standards (ISO, Visa, SWIFT etc.), customers (corporate or retail), channels (online, branches, ATMs) and, transactions (incoming or outgoing payments, refunds etc.).

Challenges in the Payments Industry

Although the notion of Payments Hub is not completely new to the industry, the urge to incorporate it has never been this obvious because of the increasing digitalization and globalization. Banks have to renew and re-arrange their payments infrastructure together with their legacy systems in order to ensure to keep their risks and costs at a minimum level. The downsides of struggling to maintain and operate different payment platforms independently have bilateral results. First of all, it means the operational processes duplicating over and over again, higher risks, more money spent on operations and finally limitations on data analysis. On the other side, such segmentation hinders or slows down innovation, affects customer experience negatively and inhibits market segment growth in the long run.

These complications of the payments with silo approach compelled financial institutions to search for alternative options. They were looking for a payment system that ensures higher performance in managing big transaction volumes with lower cost, increased scalability, better compliance and higher transparency.

To summarize the key challenges faced by banks in relation to the payments:

  • Fragmentation in payment processes and lack of resilience to manage fast-moving payments ecosystem.
  • Increasing transaction volumes which result in outages, bottlenecks and therefore slow performance
  • Lack of transparency within different payment processes
  • Rising compliance-related costs

Benefits of Payments Hub Platform for Financial Institutions

  1. Increase in operational efficiency

In traditional payments systems, each payment application required a dedicated functionality; whereas the Payments Hub platforms offer a common set of services to be used by different payment applications at the same time. The processing time and the manual operational efforts are reduced to minimum as a result of this activation of STP (Straight-Trough-Processing). In addition to the amelioration of operational efficiency, Payments Hub diminishes the costs related to operational workload and technology innovation.

  1. Improvement in customer experience

Another feature of a Payments Hub is to store huge amount of data on the products preferred by customers. It enables banks to offer personalized and targeted payment options for their customers as well as to create more valuable and meaningful services and tailored cross-selling strategies. The idea of providing one interface regardless of the type of the payment or underlying infrastructure can actually boost customer satisfaction as it simplifies problems such as various file styles, diverse integration points and non-integrated point of view.

  1. Enhanced AML and risk management

The storage of, access to and monitoring more data and information about customers and their financial behavior provide banks with more power in identifying, taking precautions and fighting against fraud and other financial crimes. At the same time, data collected from multiple front-end systems are combined by the Payments Hub to be analyzed in the back-end systems in order to improve the overall risk management and compliance processes.

  1. Global payments streamlined and simplified

Globalization is one of the main drivers of the recognition of the need for a change in the payments framework. Payment Hub platforms offer maximum flexibility and lowest fares for cross-border payments by assuring accurate and efficient international transaction management regardless of the infrastructure or payment type.

  1. Reinforcement in reporting, liquidity management and decision-making

Most Payment Hubs can offer extremely detailed dashboards for reporting which helps financial institutions carry out a comprehensive analysis on the trends on the payments industry in the past and present with a consolidated perspective. Hence, decisions about daily activities or long-time projects can be made more properly and efficiently. Also, a payment hub is capable of providing visibility across all the bank accounts in a company which serves as an up-to-date information on the true cash position of the institution.


Payments Hub Platform by supporting different messaging standards and employing different business codes, enables transition between different messaging channels and therefore encourages the migration of the financial institutions to ISO 20022 with a smooth transition process.

The ISO 20022 is a financial messaging standard which provides a universal, open and ample dictionary for financial data transmissions among systems and financial institutions. It serves as a globally accepted prescription to create new financial messages ranging from executing payments, managing accounts or arbitrage of exchange. As opposed to its predecessor ISO 15022, the ISO 20022 is using XML (MX standard) syntax which helps create richer, more structured and automated data.

TARGET2 (T2) is a real-time gross settlement (RTGS) system of the European Union and it basically processes all the payments in relation to Eurosystem’s financial policy operations and transactions. In the messaging system of T2, the ISO 20022 will be used with the introduction of the consolidation project.

Currently, both for SWIFT and TARGET2, the same standard is being used; however, there might be some differences in the rules and areas of uses.

 Tuncay Çoruh, Product Manager