Providers of transaction banking services may be consolidating and increasingly investing in their product lines, but neither trend has reversed the downward trajectory that the pricing of these banking services has followed for the past several years. Buyers were quick to seize upon improvements in the costs of processing from new technologies and have pressured providers to match one another.
But will buyers' demands result in what is best for them? In recent years, the fixation seems to have been on costs alone, regarding as less important the qualitative distinctions among providers. Motivated by market share pressures, providers too often accede to, and even actively promote, unit pricing that is not indicative of the complete end-to-end delivery cost–pricing that can best be described as irrational.
These pricing practices are simply not sustainable and corporate customers that base their business and strategies on them may expose themselves to a variety of expensive consequences. The risk of not evaluating pro-viders in the context of emerging requirements exposes buyers of payment services to redundant channels, low straight-through processing performance, payment delays, compliance issues, trapped liquidity, complex reconciliation and longer-than-necessary problem resolution.
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The payments product set is a current example of this behavior, and it is alarming to watch some providers and buyers promote commodity-type practices in an area where innovation will be critical–particularly as global real-time settlement is becoming a reality in the context of intraday liquidity management.
Efficiencies are within reach that will render pricing concessions secondary when compared to the genuine financial impact of an integrated payments solution that provides robust receivables, reporting and reconciliation, as well as liquidity and working capital management linkages. The continued evolution of dynamic payment management tools offers an attractive and unique value proposition, and the drivers of the process cut across all parts of the delivery chain, including multiple channels accommodating mixed transaction files; secure authentication and messaging management; automated account information-based repair functionality; real-time posting and reporting; and state-of-the-art regulatory and filtering applications. If the buying community is to achieve its objective of precisely managing funds flows on a real-time, intraday basis, credible providers must maintain an economic proposition that supports vital investments.
A classic market research question goes along the lines of, "When is the price of a product or service so inexpensive that you begin to question its quality?" With regards to transaction banking, the industry is at a point where it will either plateau–with innovation no longer economically feasible and stagnant commodity price points the norm–or it will evolve into a more rational pricing paradigm that will be achieved through recognition of the broad spectrum of value that is now attainable.
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