An Effective Payments Strategy

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It's a Good Time to Develop One

Virtually all community banks are now on board the Check 21 image exchange train. Congratulations! Take a few minutes to enjoy your successes. Now begin focusing on the next step-developing a payments strategy.

Why? The reasons for community banks to develop a long-term payments strategy are compelling. Now is the time for your bank to better understand and plan for changes taking place in payments technology and the evolving needs of your bank's retail and corporate customers.

Payments products are "sticky" because they tend to keep consumer and business customers glued to their banks. That's especially true given the inconvenience and complexity of moving pre-authorized transactions such as direct debit and direct deposit and re-configuring online banking applications. Payments also now clearand settle through multiple channels. Events in one payments application are far more likely to affect other payments applications and even other banking products such as loans.

Furthermore, these times of global economic stress and uncertainty present both challenges and opportunities for community banks in providing payments services as both banks and their customers grapple with fewer resources and narrowing margins of error. And just as important, companies today are just as interested in their bank's business banking or cash management product offerings as its loan offerings.

Fortunately, community banks generally fare well in payments management. The industry's unprecedented speedy migration from processing paper checks to check imaging further confirms that, as a whole, community banks are tactically nimble and able to radically re-engineer their operations to become more efficient and competitive. However, it is unclear to what degree community banks have focused on developing long-term payments strategies.

The Starting Point

Every community bank should have an employee specifically responsible for managing its payments operations and strategies. This individual should be held accountable to executive management for successful execution of these responsibilities.

The 2007 ICBA Community Bank Payments Survey revealed that more than half (54 percent) of senior level community bankers (senior vice presidents and above) manage payments. Vice presidents oversee payments more than any other position for banks with assets above $100 million. Cashiers are more likely to handle the job for community banks with less than $100 million in assets.

Ideally, the individual responsible for a community bank's payments strategies should develop a team to assist in the effort. Remember, collaboration typically yields better output. The team should include payments product managers, marketing professionals and even lending, accounting and IT staff.

This team composition fosters a holistic environment for readily identifying the consequences, intended or unintended, of various payments initiatives on payments service offerings, other banking product offerings and profitability. Additionally, including marketing and lending personnel opens doors for product bundling and special promotions. …