Creating A Payments Hub In Real Life

David Jackson: IBM, Banking Industry Framework 

Gene Neyer: Fundtech, Product Management 

April 28, 2010 

Creating a Payments Hub in Real Life 

© 2010 IBM Corporation 

© 2010 Fundtech


Agenda 

• Payment hubs – analyst and industry view 

• Old versus new 

• Conceptual banking framework 

• Framework realized 

• Case studies 

• Payment hub myths and considerations 

• Wrap up 

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© 2010 Fundtech


Payment hubs – analyst and industry view 

• An intelligent messaging hub that includes business rules 

for processing multiple types of payments 

• An intelligent and central engine, enforcing the capture and 

mapping of payment information, as well as the rules for all 

the different workflows, clearing and settlement routes and 

risk mitigation procedures 

• A payment hub is a „middle-aware‟ financial IT orchestrator. 

Middle-aware is an integration solution that sits at the 

center of payment interactions, capable of invoking 

services and reacting to events that require other modules 

• Banks have a strong business rationale for reviewing their 

payment architectures. However, they must do so with the 

right architectural vision. The payment services hub is that 

vision. Not just another acronym, it is a critical innovation 

for bank payment operations modules 

• Not just a messaging component. 

• Not just a simple payment router. 

• Ongoing payments convergence and downward pressure 

on revenues make payments hubs more attractive - and 

more viable - than ever before. Institutions that do not 

invest in improving their payments capabilities risk being 

left behind by their competitors 

Sources: Financial Insights, Gartner, Celent, Tower 

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© 2010 Fundtech


Old versus new 

• Simple routers between payment silos 

• Multi-payment gateways 

• System consolidation 

• Protocol management 

Fundtech‟s HUB press release – October, 2004 

http://phx.corporate-ir.net/preview/phoenix.zhtml?c=89530&p=irol-newsArticle&ID=624275&highlight= 

Wasn‟t I here before? 

• Intelligent processing hub 

• business rules 

• multiple payment types 

• financial insights 

• process tracking 

• Broad and deep 

• From bit player to center stage 

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© 2010 Fundtech


Conceptual payments framework 

Business Model 

Process & Data Models 

SOA Solution Model 

Runtime 

Legacy Analysis & Discovery 

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© 2010 Fundtech


Conceptual payments framework 

• Organized business services 

• Managed process specialization 

• Standardized integration with 

third parties & back office 

• Process transparency & tracking 

• Process security & monitoring 

• Event driven 

• Enterprise rules 

• Enterprise process orchestration 

Partner / 

External 

AML / 

Anti- 

Terrorist 

Mobile 

Authentication 

Interaction 

User Interface 

Collaboration 

Fee 

Calculations 

iBAN & Message 

Validation 

Duplication 

Detection 

Load Customer 

Identification 

Accounting 

Payments Application 

Access 

Control 

Rules 

Engine 

AML Checking 

Message 

Formatting 

Contract 

Validation 

Value & Date 

Processing 

Set Payment 

Attributes 

Process 

Process Models 

Process Manager 

Enterprise Service Bus 

Cutoff Time 

Processing 

Message Entry 

And Repair 

Payment 

Actions 

Rule 

Invocation 

Security & Governance 

Services 

Management 

Service 

Availability & 

Performance 

Mgmt 

Service Registry 

& Repository 

Monitoring & 

Event 

Management 

State / Event 

Data 

Data 

Warehousing 

Auditing 

Information 

Data 

Models 

Reporting 

& 

Analytics 

Data Transformation 

Access 

External Gateways 

Data Integrity & 

Security 

Application 

Development 

Application 

Delivery 

Delivery & Implementation 

Business Process 

implementation 

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© 2010 Fundtech


Framework realized 

Customer User Operational 

Risk 

GPP SP Architecture 

• Mass customization 

• Personalization 

• Profiles/Mandates 

• Fees / FX / SLAs 

• Special Instructions 

• Specific Routing 

• UDFs 

Localization 

• Create 

• Repair 

• Templates 

• Verify 

• Release 

• Multiple Banks & Countries 

• High, Low, Alternative payments 

• Multi Currency 

• Centralised/Distributed Operations 

• Global Access 

• Multi-scheme 

• NLS (Local Language) Support 

• Screen Layouts 

• Account lookup 

• Balance Checking 

• Accounting Entries 

• MIS – Data 

Warehouse 

• FX Engine 

• Refer 

• Approve 

• Cancel 

• Force 

• Workflow 

Alerts 

•Cut-off times 

• Scheduling 

• Value Dates 

• Calendars/Holidays 

• Matching 

• Enrichment 

• STP 

Interfaces / Services 

•Channels 

• Inter Country 

• AML/Sanctions (OFAC) 

• Duplicate Check 

• Customer Liquidity 

• Bank Liquidity 

• Validations 

• 

Processing 

•SWIFT 

•Clearing 

Business Rules 

Your strongest link. 

BPEL 

XML 

WSDL 

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© 2010 Fundtech


Case studies 


© 2010 Fundtech


Bank A – develop a “PayPal” like account 

• Business Need –Create an account that can be funded from a regular account with this, 

through a credit card, from an account at another bank (get & pull), others as they develop. 

Account should be accessible 24x7x365 through all existing bank channels (from ATM to 

Mobile) and be very easy to use. 

• Solution – package existing services into new flows to support the new account concept. 

Orchestrate “stand in” processing during those times when the core systems are not 

available. Wrap exiting scheme gateways (e.g. Credit Card) in web services to facilitation 

integration and orchestration. 

• Benefits Realized / Expected - protect and grow retail franchise through offering 

innovative solutions. 

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© 2010 Fundtech


HSBC – the world‟s local bank 

• Business Need – execute global expansion strategy faster and cheaper than others 

• Solution – “There are no local data centers or servers, just access to the HSBC network ... 

five years ago, we ran 130 data centers because we had acquired 50 companies up to 2003. 

Today, we have 20 data centers, and in two years we will have 6 worldwide.” 

Implication to payments – Payment Hub 

• Benefits Realized / Expected – “We can move into a country with full service banking for 

under $10 million, which is a fraction of our competitors. We just open a building and sell, 

because everything is delivered through the network.” 

• Organizational Approach – top down, exhaustively planned 

• Time Frames – Still going 

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© 2010 Fundtech


Bank B – new online payments experience 

• Business Need - Enable a new online payments experience. Support consistent 

processing for all payments regardless of channel. Provide faster payment processing at a 

lower cost, enhance flexibility and improve response times to new opportunities, as well as 

allowing other advanced functions. 

• Solution – Extend base services, compose them into complex business services, expose 

composed services to the GUI team and other business lines (as well as for internal use in 

the payment HUB), 

• Benefits Realized / Expected – “We will be able to drive integration among common 

payments processes, react more swiftly to evolving standards and regulatory changes, and 

leverage our payments capabilities to gain efficiencies for both clients and the bank” 

• Time Frames – still going 

• Organizational Approach – Agile development, unique co-development methodology, 

Multiple parallel efforts 

• Service highlights – STP@Source, Payment Type management, Extensibility, “Fed Ex” 

model, Notifications 

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© 2010 Fundtech


A Large Canadian Bank – Case Study 

• Business Need - This large Canadian bank had legacy systems that created difficulties in 

meeting the ongoing challenge of responding to banking requirements in a timely manner. 

The bank also wanted to capitalize on the new XML SWIFT formats and allow clients to 

track payments through the system in real time. Transparency to the number of ways the 

bank interacted with enterprise clients was needed. 

• Solution – The bank built an enterprise payments hub based on standardized middleware. 

At the heart of the solution is the ISO messaging standard and a data model common to the 

back-office applications. A “canonical” view of the payments data that is held in the 

enterprise database. This data representation enabled a faster integration approach 

because of the a common definition of business services. 

• Benefits Realized / Expected – Gains an integrated view of transaction histories, 

including volumes and types of payments used. Provides customers with access to a realtime 

view of their transactions. Results in better understanding of product and payments 

platform utilization, resulting in improved efficiency. 

• Time Frames – still going 

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© 2010 Fundtech


Myths & Considerations 

Are all payments really the same? 

Staged 

RTGS 

Architecture 

SEDA 

Event 

ACH 

Driven 

13 

• General “framework” - highly concurrent services that handle massive 

loads gracefully. Fault-tolerant network of processing stages. 

http://en.wikipedia.org/wiki/Staged_event-driven_architecture 

Event-driven business 


© 2010 Fundtech


Wrap up 

• Time savings of 20 - 40% with more 

streamlined straight through processing 

• As much as 15 - 20% cost reduction in key 

payments areas 

• Faster time to market for new products and 

services 

• Flexibility to switch supply chain partners 

based on business need 

• Lowered compliance and risk exposures 

• Improved business monitoring and 

management capabilities 

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© 2010 Fundtech

David Jackson: djackso3@us.ibm.com 

Gene Neyer: gene.neyer@fundtech.com 


© 2010 Fundtech

Creating A Payments Hub In Real Life

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