The Payoff (Or Cost) From Payments

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ORLANDO, Fla.-Aite Group's Gwen Bezard noted that two camps have formed around how to view PayPal: as a threat or as a potential partner. "Both have an upside and downside, but at the end of day I think there is value for FIs in having a payment branch."

Similarly, Jeanne Capachin of IDC Financial sees payments processing as the area where FIs need to pay more attention. "The focus has been on the back office, but what we haven't paid attention to is the user side. What is the front-office, POS side that are customers are looking for like? That's why PayPal has been able to come along. They have been able to leverage what we've done and create the value-added product that we haven't. We didn't see the opportunity, and I think for the most part still don't care about those transactions. But now that PayPal has built this foundation and network of consumers and business, we need to think about what is the next step for them? Are they to become a real competitor to us now?"

Harland Financial Solutions' Raju Shivdasani agreed, pointing to Harland's pending rollout of a person-to-person payment solution.

Focus On P2P
"We're aggressively working on the ability to make you the pay-through, P2P site. We have to help you become a better bank, and having this disintermediated is not in your interest. If you command the payments streams, you are going to retain the account. I do believe that if you give consumers the ability to move P2P payments through the bank versus PayPal, they are going to come your way. You need to step up and create a chink in the PayPal chain."

Added Cornerstone Advisors' Ken Proctor: "If you use PayPal now, they say 'You can take six months to pay.' So they have started to extend credit."

And Proctor pointed to another threat: "For whatever reason banks and credit unions seem to have fallen off the radar on (payment card industry standards for security or PCI), unless they've had a major breach. I don't understand why. You need to be PCI compliant."

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